Illinois DOR Issues Letter on Taxation of Goodwill Repairs by Franchisees

The Illinois Department of Revenue (DOR) issued a general information letter regarding the taxation of certain goodwill repairs performed by franchisees at franchisors’ direction. The Department states that when a dealer independently performs a no-charge goodwill repair, the transaction is not treated as a sale of service and the dealer incurs use tax on the parts used. However, when a manufacturer directs the repair and provides or reimburses the parts, the transaction is treated as a service transaction, with the dealer acting as the serviceperson and the manufacturer as the service customer. In that case, the applicable tax regime shifts ...