State Tax Day - Current, S.3, Illinois—Sales and Use Tax: Goodwill Repairs by Auto Dealers for Manufacturers Are Taxable, (May 20, 2026)

Illinois issued a general information letter on the tax treatment of goodwill repairs performed by automobile dealers under a service campaign directed by an automobile manufacturer. The dealers provide the repairs free of charge to owners of vehicles that are no longer under warranty and not subject to recall. If a dealer performs goodwill repairs themselves without the manufacturer's involvement, the dealer is the end user and owes use tax based on the cost price of the parts used in making the repair. If the dealer is making a goodwill repair at the direction of a manufacturer that provides the parts for the repair, a taxable service transaction exists. The dealer making the repairs is the service provider and the manufacturer is the service customer. Generally, if a dealer is de minimis and registered to collect and report Illinois sales tax, the dealer incurs sales tax liability based on the cost price of the parts transferred incident to the repair. The manufacturer, as the service customer, incurs use tax liability that the dealer collects.

General Information Letter ST 26-0008-GIL, Illinois Department of Revenue, March 11, 2026, released May 2026, ¶404-247