Illinois – Consignee Not Liable for Use Tax

SALT Report 1773 – An Illinois administrative law Judge ruled that a company that acted as a consignee for its parent company was not liable for use tax on fabrics that were imported into the United States.

The Judge determined that the designation of the Taxpayer as “consignee” in the customs documents was insufficient to establish that the Taxpayer was the purchaser of the imported fabrics. Since a shipment to a “consignee” does not suggest a right of ownership or make the consignee an owner or purchaser of the consigned property, it cannot be implied that the Taxpayer was the purchaser and owner of the property in dispute.

Further, General Information Letter ST 08-0143-GIL states that; “Under common law, a consignment is a special type of bailment in which property is transferred by the consignor to the consignee …. The initial transfer to the consignee …generally is not considered a sale for sales tax purposes. The transaction is more in the nature of a transfer to an agent or bailee to act on behalf of the principal or bailor for the purpose of transferring title to a purchaser.”

Therefore, based on the above, the Judge ruled that the Department’s Notice of Use Tax Liability in this case be cancelled.

For Further Information:

Illinois Department of Revenue – Administrative Hearing Decision UT 12-04