Illinois DOR Clarifies Non-Taxable Status of Cloud-Based AI Services

The Illinois Department of Revenue (DOR) issued a general information letter regarding the taxability of computer software provided by an out-of-state company through a cloud-based delivery system. The Department determined that the provision of generative AI services through a website or app, where customers cannot download the underlying software, is considered a non-taxable service like software as a service. Additionally, the Department advised that if customers can download a software development kit for free from an out-of-state company’s website to access the services via an API, there is no taxable use in Illinois. [Il. Dep’t of Revenue, ST-25-0050-GIL, 09/16/25]

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