The Illinois Appellate Court affirmed the Illinois Tax Tribunal’s determination that aviation fuel sold to airlines and subsequently stored at O’Hare International Airport is not exempt from the Retailer’s Occupation Tax (ROT) because the fuel was not consumed solely outside of the state.

The taxpayer, an aviation fuel retailer, argued that its fuel was subject to an exemption for property temporarily stored in the state and subsequently used outside of the state because only 2% of the fuel was consumed in Illinois, with the remaining 98% of the fuel being consumed outside of the state. Relying on the statute’s plain language, the Court disagreed with the taxpayer and found that the entire use or consumption of the property at issue must be outside of Illinois. Accordingly, to qualify for the exemption, the purpose of the temporary storage must be for future transportation outside of Illinois for use or consumption solely and entirely outside of the state. The Court further explained that, pursuant to the Department’s regulation, it would have been proper to certify that a portion of the purchase of fuel qualifies for the exemption if the airlines were to have purchased the fuel, temporarily stored it in Illinois, transported a portion of it out of the state, and then used that portion in planes in another state. Because the taxpayer’s fuel was loaded on planes in Illinois and partly consumed in Illinois, the Court concluded that the fuel at issue did not qualify for the exemption.

American Aviation Supply, LLC v. Illinois Department of Revenue, 2024 IL App (1st) 230072.