Ill. Admin. Code tit. 86, § 130.1954 - Sales of Building Materials Incorporated into Real Estate within River Edge Redevelopment Zones
a) River Edge Redevelopment Zone - In General
1) Effective July 12, 2006, each
retailer that makes a qualified sale of building materials to be
incorporated into real estate within a River Edge Redevelopment Zone in
accordance with the River Edge Redevelopment Zone Act by remodeling,
rehabilitating, or new construction may deduct receipts from those sales when
calculating the tax imposed by the Act. (Section 2-54 of the
Retailers' Occupation Tax Act [35
ILCS 120/2-54 ])
2) A "qualified sale" means a sale of
building materials that will be incorporated into real estate as part of an
industrial or commercial project for which a Certificate of Eligibility for
Sales Tax Exemption has been issued by the corporate authorities of the
municipality in which the building project is located before July 1, 2013, and
for which a River Edge Building Materials Exemption Certificate has been issued
by the Department on or after July 1, 2013. (Section 2-54 of the
Retailers' Occupation Tax Act [35 ILCS 120/2-54])
3) "Industrial project" means:
A) a capital project, including one or more
buildings and other structures, improvements, machinery and equipment, whether
or not on the same site or sites, suitable for use by any manufacturing,
industrial, research, transportation or commercial enterprise, including but
not limited to use as a factory, mill, processing plant, assembly plant,
packaging plant, fabricating plant, ethanol plant, office building, industrial
distribution center, warehouse, repair, overhaul or service facility, freight
terminal, research facility, test facility, railroad facility, port facility,
solid waste and wastewater treatment and disposal sites and other pollution
control facilities, resource or waste reduction, recovery, treatment and
disposal facilities, and:
i) the sites of any
of the facilities listed in this subsection (a)(3)(A) and other rights in land
for those facilities, whether improved or unimproved;
ii) site preparation and landscaping for
facilities listed in this subsection (a)(3)(A); and
iii) all appurtenances and facilities
incidental to the facilities listed in this subsection (a)(3)(A), such as
utilities, access roads, railroad sidings, truck docking and similar
facilities, parking facilities, dockage, wharfage, railroad roadbed, track,
trestle, depot, terminal, switching and signaling equipment or related
equipment, and other necessary or convenient improvements; or
B) any land, buildings, machinery
or equipment comprising an addition to or renovation, rehabilitation or
improvement of any existing capital project.
4) "Commercial project" means any project,
including but not limited to one or more buildings and other structures,
improvements, machinery and equipment, whether or not on the same site or
sites, suitable for use by any retail or wholesale concern, distributorship or
agency, any cultural facilities of a for-profit or not-for-profit type,
including but not limited to educational, theatrical, recreational and
entertainment, sports facilities, racetracks, stadiums, convention centers,
exhibition halls, arenas, opera houses and theaters, waterfront improvements,
swimming pools, boat storage, moorage, docking facilities, restaurants,
velodromes, coliseums, sports training facilities, parking facilities,
terminals, hotels and motels, gymnasiums, medical facilities and port
facilities.
5) Nothing in the
definitions of "industrial project" or "commercial project" is meant to imply
that the building materials exemption for an industrial project or commercial
project may extend beyond the borders of the River Edge Redevelopment Zone or
may extend beyond the exemption of sales of building materials incorporated
into an industrial project or commercial project.
b) Building Materials Purchased for Physical
Incorporation into Real Estate Located in a River Edge Redevelopment Zone
1) In order to qualify for the exemption, the
materials being purchased must be building materials. That is, they must be
purchased for physical incorporation into real estate. For example, gross
receipts from sales of the following items can qualify for the exemption:
A) common building materials such as lumber,
bricks, cement, windows, doors, insulation, roofing materials and sheet
metal;
B) plumbing systems and
components such as bathtubs, lavatories, sinks, faucets, garbage disposals,
water pumps, water heaters, water softeners and water pipes;
C) heating systems and components such as
furnaces, ductwork, vents, stokers, boilers, heating pipes and
radiators;
D) electrical systems
and components such as wiring, outlets and light fixtures that are physically
incorporated into the real estate;
E) central air conditioning systems,
ventilation systems and components that are physically incorporated into the
real estate;
F) built-in cabinets
and other woodwork that are physically incorporated into the real estate can
qualify for the deduction;
G)
built-in appliances such as refrigerators, stoves, ovens and trash compactors
that are physically incorporated into the real estate; and
H) floor coverings such as tile, linoleum and
carpeting that are glued or otherwise permanently affixed to the real estate by
use of tacks, staples, or wood stripping filled with nails that protrude upward
(sometimes referred to as tacking strips or tack-down strips).
2) Items that are not physically
incorporated into the real estate cannot qualify for the exemption. For
example, gross receipts from sales of the following do not qualify:
A) tools, machinery, equipment, fuel, forms
and other items that may be used by a construction contractor at a River Edge
Redevelopment Zone site, but that are not physically incorporated into the real
estate;
B) free-standing appliances
such as stoves, oven, refrigerators, washing machines, portable ventilation
units, window air conditioning units, lamps, clothes washers, clothes dryers,
trash compactors and dishwashers that may be connected to and operate from a
building's electrical or plumbing system but that do not become a component of
those systems; and
C) floor
coverings that are area rugs or that are attached to the structure using only
two-sided tape.
3)
Building materials incorporated into stand-alone residential homes, residential
apartments, residential condominiums, residential townhouses, residential
duplexes, residential buildings or residential structures do not qualify for
the exemption. Building materials physically incorporated into a commercial
project, a portion of which is dedicated for residential purposes, shall be
allocated on a square-footage basis for common building materials (for example,
lumber, cement, bricks, insulation, air conditioning and heating equipment
serving an entire project and roofing materials) and directly allocated to
either the commercial portion or residential portion when direct allocation of
the building materials is possible (for example, bathtubs, sinks, lavatories,
cabinets, built-in appliances and air conditioning and heating equipment
serving individually owned or leased units or space). Only the building
materials allocated to the commercial portion of the project can qualify for
the exemption.
c)
Certificate of Eligibility for Sales Tax Exemption for Purchases Made through
June 30, 2013
1)
To document the
exemption, the retailer must obtain from the purchaser a copy of the
Certificate of Eligibility for Sales Tax Exemption issued by the corporate
authorities of the municipality in which the real estate into which the
building materials will be incorporated is located. The Certificate of
Eligibility for Sales Tax Exemption must be obtained by the retailer prior to
the sale.
2) The Certificate of
Eligibility for Sales Tax Exemption must contain all of the following:
A)
a statement that the commercial or
industrial project identified in the Certificate meets all the requirements of
the jurisdiction in which the project is located;
B)
the location or address of the
building project; and
C)
the signature of the chief executive officer of the municipality in
which the building project is located, or the chief executive officer's
delegate.
3) In
order to properly document this exemption, prior to the sale the
retailer must also obtain a certificate from the purchaser that contains all of
the following:
A)
a
statement that the building materials are being purchased for incorporation
into real estate located in a River Edge Redevelopment Zone included in a
redevelopment project area in accordance with the River Edge Redevelopment Zone
Act:
B)
the
location or address of the real estate into which the building materials will
be incorporated;
C)
the name of the River Edge Redevelopment Zone in which the real estate
is located;
D)
a
description of the building materials being purchased; and
E)
the purchaser's signature and date
of purchase. [35 ILCS 120/2-54]
d) Issuance of Exemption Certificates for
Purchases Made on and after July 1, 2013
1)
Upon request from the corporate authorities of the municipality in
which the building project is located, the Department shall issue a River Edge
Building Materials Exemption Certificate (Exemption Certificate)
for each construction contractor or other entity identified by the
corporate authorities of the municipality in which the building project is
located. The Department shall make the Exemption Certificates available to the
corporate authorities of the municipality in which the building project is
located and each construction contractor or other entity.
A)
The request for Exemption
Certificates from the corporate authorities of the municipality in which the
building project is located to the Department must include the following
information:
i)
the name,
address, telephone number and e-mail address of the
construction contractor or other entity;
ii)
the name and number of the River
Edge Redevelopment Zone in which the building project is
located;
iii)
the
name and location or address of the building project in the River Edge
Redevelopment Zone;
iv)
the estimated amount of the exemption for each construction contractor
or other entity for which a request for Exemption Certificate is made, based on
a stated estimated average tax rate and the percentage of the contract that
consists of materials;
v)
the period of time over which supplies for the project are expected to
be purchased; and
vi)
the FEIN of the construction contractor or other
entity.
B)
The Department shall issue the Exemption Certificates within 3 business
days after receipt of request from the corporate authorities of the
municipality in which the building project is located unless the Department,
for reasonable cause, is unable to issue the Exemption Certificate within 3
business days. Examples of "reasonable cause" include, but are not
limited to, receipt of a request lacking all the information required by
subsection (d)(1)(A), the receipt of a large number of requests for Exemption
Certificates from a zone administrator, or lack of sufficient staff to process
the number of existing requests.
C)
The Department may refuse to issue an Exemption Certificate if the
owner, any partner, or a corporate officer, and in the case of a limited
liability company, any manager or member, of the construction contractor or
other entity is or has been the owner, a partner, a corporate officer, and in
the case of a limited liability company, a manager or member, of a person that
is in default for moneys due to the Department under the Retailers' Occupation
Tax Act or any other tax or fee Act administered by the
Department.
D)
The
request for Exemption Certificates must be submitted
electronically.
E)
The Exemption Certificate shall be effective for no more than 2 years
after the date of issuance. At the request of the corporate authorities of the
municipality in which the building project is located, the Department may renew
an Exemption Certificate.
F)
After the Department issues
Exemption Certificates for a given River Edge building project, the corporate
authorities of the municipality in which the building project is located may
notify the Department of additional construction contractors or other entities
eligible for an Exemption Certificate. Upon notification by the corporate
authorities of the municipality in which the building project is located, and
subject to the other provisions of this subsection (d), the Department shall
issue an Exemption Certificate to each additional construction contractor or
other entity identified by the corporate authorities of the municipality in
which the building project is located.
G)
The corporate authorities of the
municipality in which the building project is located may notify the Department
to rescind an Exemption Certificate previously issued by the Department but
that has not yet expired. Upon notification by the corporate authorities of the
municipality in which the building project is located, and subject to the other
provisions of this subsection (d), the Department shall issue the rescission of
the Exemption Certificate to the construction contractor or other entity
identified by the corporate authorities of the municipality in which the
building project is located and provide a copy to the corporate authorities of
the municipality in which the building project is located.
2)
Notwithstanding
anything to the contrary in subsection (d), for River Edge
building projects already in existence and for which construction contracts are
already in place on July 1, 2013, the request for Exemption Certificates from
the corporate authorities of the municipality in which the building project is
located to the Department for these pre-existing construction contractors and
other entities must include the information required under subsection
(d)(1)(A), but not including the information listed
in subsections (d)(1)(A)(iv) and (v). For any new construction
contract entered into on or after July 1, 2013, however, all of the information
in subsection (d) must be provided. [35
ILCS 120/2-54(d) ]
e) Documentation of the Exemption
for Purchases Made on or after July 1, 2013
1)
On and after July 1, 2013, to document the exemption allowed under this
Section, the retailer must obtain from the purchaser the purchaser's Exemption
Certificate number issued by the Department. A construction contractor or other
entity shall not make tax-free purchases unless it has an active Exemption
Certificate issued by the Department at the time of purchase.
[35 ILCS
120/5
l(b)]
2) The retailer must obtain a certification
from the purchaser that contains:
A) a
statement that the building materials are being purchased for incorporation
into real estate located in a River Edge Redevelopment Zone;
B) the location or address of the real estate
into which the building materials will be incorporated;
C) the name of the River Edge Redevelopment
Zone in which that real estate is located;
D) a description of the building materials
being purchased;
E) the purchaser's
Exemption Certificate number issued by the Department; and
F) the purchaser's signature and date of
purchase.
3) The
retailer may comply with this subsection (e) certification requirement by
securing from the purchaser a completed and signed Form EZ-1.
f) Penalties - Revocation -
Protest Procedures
1)
If the
Department of Revenue determines that a construction contractor or other entity
that was issued an Exemption Certificate under subsection (d)
made a tax-exempt purchase, as described in this Section, that was not
eligible for exemption under subsection (d), or allowed
another person to make a tax-exempt purchase, as described in
subsection (d), that was not eligible for exemption under
subsection (d), then, in addition to any tax or other penalty imposed,
the construction contractor or other entity is subject to a penalty equal to
the tax that would have been paid by the retailer under the Retailers'
Occupation Tax Act as well as any applicable local retailers' occupation tax on
the purchase that was not eligible for the exemption. [35 ILCS
120/5l(b)]
2)
Each contractor or other entity that has been issued an Exemption
Certificate under Section 2-54 of the Retailers' Occupation Tax Act shall
annually report to the Department the total tax benefits for taxes imposed by
the State that are received under River Edge building materials exemption.
Reports shall contain information reasonably required by the Department to
enable it to verify and calculate the total tax benefits for taxes imposed by
the State, and shall be broken down by River Edge Redevelopment Zone. Reports
are due no later than May 31 of each year and shall cover the previous calendar
year. Failure to report data may result in revocation of the River Edge
Building Materials Exemption Certificate issued to the contractor or other
entity. [65 ILCS
115/10-10.2(a-5)]
3) Suspension of Exemption Certificate for
Failure to Report Data: A contractor or other entity that fails to comply with
the reporting requirements or deadlines provided in subsection (f)(2) shall
have the Exemption Certificate for which it failed to report suspended.
A) First Offense: A contractor or other
entity that fails to comply with the reporting requirements or deadlines
provided in subsection (f)(2) shall have the Exemption Certificate suspended
until the contractor or other entity complies with the reporting requirements
of subsection (f)(2).
B) Second
Offense: A contractor or other entity that fails to comply with the reporting
requirements or deadlines provided in subsection (f)(2) for two reporting
periods within a five-year period shall have all Exemption Certificates issued
to it suspended until 30 days after the contractor or other entity complies
with the reporting requirements of subsection (f)(2).
C) Subsequent Offenses: A contractor or other
entity that fails to comply with the reporting requirements or deadlines of
subsection (g)(2) for more than two reporting periods within a five-year period
shall have all Exemption Certificates issued to it suspended until 180 days
after the contractor or other entity complies with the reporting requirements
of subsection (f)(2).
4)
Suspension or Revocation of Exemption Certificate for Both Failure to Report
Data and Unlawful Use of Exemption Certificate. Use by a contractor or other
entity of its Exemption Certificate in violation of subsection (f)(1) and
failure to comply with the reporting requirements of subsection (f)(2) for the
same certificate shall result in the suspension or revocation of the
contractor's or other entity's Exemption Certificates.
A) First Offense: In addition to all other
penalties provided by law, a first offense shall result in the suspension of
all Exemption Certificates issued to a contractor or other entity for 1
year.
B) Second Offense: In
addition to all other penalties provided by law, a second offense shall result
in permanent revocation of all Exemption Certificates issued to the contractor
or other entity.
5)
Ineligibility. A contractor or other entity is not eligible to receive
additional Exemption Certificates during the period that one or more Exemption
Certificates issued to it are subject to suspension or revocation.
6) Protest Procedures. Any person aggrieved
by any decision of the Department under subsections (f)(3) through (f)(4) may,
within 20 days after notice of the decision, protest and request a hearing,
whereupon the Department shall give notice to that person of the time and place
fixed for a hearing and shall hold a hearing and then issue its final
administrative decision in the matter to that person. In the absence of a
protest within 20 days, the Department's decision shall become final without
any further determination being made or notice given.
Notes
Added at 33 Ill. Reg. 16711, effective November 20, 2009
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