Ill. Admin. Code tit. 86, § 130.330 - Manufacturing Machinery and Equipment
a) General Provisions Applicable to All Types
of Machinery and Equipment Under This Section
Notwithstanding the fact that the sales may be at retail, the Retailers' Occupation Tax Act does not apply to the sales of machinery and equipment that will be used by the purchaser, or a lessee of the purchaser, primarily in the process of manufacturing or assembling tangible personal property for wholesale or retail sale or lease, whether the sale or lease is made directly by the manufacturer or by some other person, whether the materials used in the process are owned by the manufacturer or some other person, or whether the sale or lease is made apart from or as an incident to the seller's engaging in the service occupation of producing machines, tools, dies, jigs, patterns, gauges, or other similar items of no commercial value on special order for a particular purchaser. [35 ILCS 120/2-5(14) ] The manufacturing and assembly machinery and equipment exemption includes machinery and equipment that replaces machinery and equipment in an existing manufacturing facility as well as machinery and equipment that are for use in an expanded or new manufacturing facility. [35 ILCS 120/2-45 ] In certain cases, purchases of machinery and equipment by a lessor will be exempt even though that lessor does not itself employ the machinery and equipment in an exempt manner. Initially, the exemption was for purchases of conventional machinery and equipment used or consumed primarily in the process of manufacturing or assembling tangible personal property for wholesale or retail sale or lease. The exemption has expanded over time to include not only conventional machinery and equipment used or consumed in a manufacturing or assembling process in a manufacturing facility (see subsection (c)) but also chemicals (see subsection (d)), computer software (see subsection (e)), machinery and equipment used primarily in graphic arts production (see subsection (g)), and production related tangible personal property (see subsection (h)). For purposes of this Section, unless otherwise provided, all the types of tangible personal property that qualify for the exemption under this Section will be referred to as "machinery and equipment". The following provisions apply to all items under this Section:
1) There may be instances in
which items of tangible personal property do not meet the definition of
conventional "machinery and equipment" under subsection (c), but do meet the
definition of "graphic arts production" in subsection (g) or "production
related tangible personal property" in subsection (h) and so would qualify for
the exemption.
2)
The
manufacturing and assembling machinery and equipment exemption is exempt from
the provisions of Section 2-70 of the Retailers' Occupation Tax Act.
[35 ILCS
120/2-45 ]
3) All items considered machinery and
equipment under this Section must be used primarily (over 50%) in manufacturing
or assembling. Therefore, machinery that is used primarily in an exempt process
and partially in a nonexempt manner would qualify for the exemption. However,
the purchaser must be able to establish through adequate records that the
machinery and equipment is used over 50% of the time in an exempt manner in
order to claim the exemption.
4) An
item of machinery and equipment that initially is used primarily in
manufacturing or assembling and, having been so used for less than one-half of
its useful life, is converted to primarily nonexempt uses will become subject
to tax at the time of the conversion, allowing for reasonable depreciation on
the machinery and equipment.
5) The
fact that particular machinery and equipment may be considered essential to the
conduct of the business of manufacturing or assembling because its use is
required by law or practical necessity does not, of itself, mean that machinery
and equipment is used primarily in manufacturing or assembling.
6) Machinery and equipment used in the
performance of a service, such as dry cleaning, is not used in the production
of tangible personal property for wholesale or retail sale or lease and is thus
taxable. However, a manufacturer or assembler who uses machinery and equipment
to produce goods for wholesale or retail sale or lease by itself or another, or
to perform assembly or fabricating work for a customer who retains the
manufacturer or assembler only for its services, will not be liable for tax on
the machinery and equipment it uses as long as the goods produced either for
itself or another are destined for wholesale or retail sale or lease, rather
than for use and consumption.
7)
The exemption requires that the product produced as a result of the
manufacturing or assembling process be tangible personal property for wholesale
or retail sale or lease. Accordingly, a manufacturer or assembler who uses any
significant portion of the output of its machinery and equipment, either for
internal consumption or any other nonexempt use, or a lessor who leases
otherwise exempt machinery and equipment to such a manufacturer or assembler,
will not be eligible to claim the exemption on that machinery and equipment. No
apportionment of production capacity between output for sale or lease and
output for self-use will be permitted and no partial exemption for any item of
machinery and equipment will be allowed. For example, the purchase of hot-mix
asphalt machinery would be taxable if the majority of the asphalt produced
(over 50%) was used to fulfill the purchaser's own construction contracts and
not sold at wholesale or retail.
8)
Machinery and equipment does not include foundations for, or special purpose
buildings to house or support, machinery and equipment.
b) Manufacturing and Assembling Processes
Described
1) The manufacturing process is the
production of any article of tangible personal property, whether the article is
a finished product or an article for use in the process of manufacturing or
assembling a different article of tangible personal property, by procedures
commonly regarded as manufacturing, processing, fabricating, or refining that
changes some existing material or materials into a material with a different
form, use, or name. These changes must result from the process in question and
be substantial and significant.
2)
The assembling process is the production of an article of tangible personal
property, whether the article is a finished product or an article for use in
the process of manufacturing or assembling a different article of tangible
personal property, by the combination of existing materials in a manner
commonly regarded as assembling that results in an article or material of a
different form, use, or name.
3)
The process or activity must be commonly regarded as manufacturing. To be so
regarded, it must be thought of as manufacturing by the general public.
Generally, the scale, scope, and character of a process or operation will be
considered to determine if the process or operation is commonly regarded as
manufacturing. Manufacturing includes such activities as processing,
fabricating, and refining.
4) The
use of machinery and equipment in any industrial, commercial, or business
activity that may be distinguished from manufacturing or assembling will not be
an exempt use and the machinery and equipment will be subject to tax.
5) Manufacturing generally does not include
extractive industrial activities. Logging and drilling for oil, gas, and water
neither produce articles of tangible personal property nor effect any
significant or substantial change in the form, use, or name of the materials or
resources upon which they operate. However, the extractive processes of mining
or quarrying may constitute manufacturing. (See Nokomis Quarry Co. v.
Department of Revenue, 295 Ill. App. 3d 264, 692 N.E.2d 855, 860 (5th Dist.
1998) (holding that a calculated blasting method that is performed with
specific desired results, which changes limestone deposits into materials with
a different form, possessing new qualities or combinations, constitutes
manufacturing)). Blasting agents, high explosives, detonators, lead-in line,
and blasting machines are examples of exempt tangible personal property that is
often used in the extractive process of quarrying. Equipment used primarily to
drill and load holes to place blasting material that fractures aggregate
qualifies as manufacturing machinery and equipment. Dredges that are used
primarily in a sand and gravel mining operation to pick up and sort materials
from a riverbed also qualify for the exemption. Equipment, such as crawler
dozers, used primarily to move shot rock after blasting, and wheel loaders,
used primarily to load the mined product into off-highway, haulage trucks for
transport to the crusher-sorter machine, will qualify for the exemption. In
addition, wheel loaders used to transport the mined product to the
crusher-sorter machine or onto a conveyor system will qualify for the
exemption. Machinery and equipment used primarily in activities such as
crushing, washing, sizing, and blending will qualify for the exemption if the
process results in the assembling of an article of tangible personal property
with a different form than the material extracted, which possesses new
qualities or combinations. Other types of mining and quarrying equipment may be
exempt under this subsection (b)(5) if used in qualifying activities.
6) Until July 1, 2017, the printing process
was not commonly regarded as manufacturing. Therefore, machinery and equipment
used in any printing application will not qualify for the exemption. This
includes graphic arts, newspapers, or books, as well as other industrial or
commercial applications. Beginning July 1, 2017, the exemption includes
machinery and equipment used in graphic arts production. (See subsection
(g)).
7) Agricultural,
horticultural, and related, similar, or comparable activities, including
commercial fishing, beekeeping, production of seedlings or seed corn, and
development of hybrid seeds, plants, or shoots, are not manufacturing or
assembling and, accordingly, machinery and equipment used in those activities
is subject to tax under this Section. (However, see Section
130.305 for the Farm Machinery
and Equipment Exemption.)
8) The
preparation of food and beverages by restaurants, food service establishments,
and other retailers that prepare food for immediate consumption is not
manufacturing.
9) Effective
September 1, 1988, manufacturing includes photoprocessing if the products of
photoprocessing are sold. Machinery and equipment that would qualify for
exemption includes, but is not limited to, developers, dryers, enlargers,
mounting machines, roll film splicers, film developing image makers, disc film
opening and spindling devices, film indexers, photographic paper exposure
equipment, photographic paper developing machines, densitometers, print
inspection devices, photo print/negative cut assembly stations, film sleeve
insertion machines, negative image producers, film coating equipment, photo
transparency mounters, processor rack sanitizers, photo print embossers, photo
print mounting presses, graphic slide generators, chemical mixing equipment,
and paper exposure positioning and holding devices. Cameras and equipment used
to take pictures or expose film are not eligible, as the photoprocessing begins
after the film is exposed. Retail/net price calculation equipment and chemical
reclamation equipment are not considered to be manufacturing machinery and
equipment.
c) Machinery
and Equipment. This subsection (c) describes "conventional" machinery and
equipment that qualify for the exemption as it was originally enacted.
Qualifying items that fall outside this definition of conventional machinery
and equipment are described more fully in other subsections.
1)
The exemption under this
subsection (c) applies to machinery and equipment that will be used by the
purchaser, or a lessee of the purchaser, primarily in the process of
manufacturing or assembling tangible personal property for wholesale or retail
sale or lease. The manufacturing and assembly machinery and equipment exemption
also includes machinery and equipment that replaces machinery and equipment in
an existing manufacturing facility as well as machinery and equipment that are
for use in an expanded or new manufacturing facility. The machinery and
equipment exemption also includes machinery and equipment used in the general
maintenance or repair of exempt machinery and equipment or for in-house
manufacture of exempt machinery and equipment.
2)
Equipment includes an independent
device or tool separate from any machinery but essential to an integrated
manufacturing or assembly process, including computers used primarily in a
manufacturer's computer assisted design, computer assisted manufacturing
(CAD/CAM) system; any subunit or assembly comprising a component of any
machinery or auxiliary, adjunct, or attachment parts of machinery, such as
tools, dies, jigs, fixtures, patterns, and molds; and any parts that require
periodic replacement in the course of normal operation. [35 ILCS
120/2-45 ]
3) By way of illustration and not limitation,
machinery and equipment used primarily in the following activities will
generally be considered exempt:
A) The use of
machinery and equipment to effect a direct and immediate physical change upon
the tangible personal property to be sold;
B) The use of machinery and equipment to
guide or measure a direct and immediate physical change upon the tangible
personal property to be sold, provided this function is an integral and
essential part of tuning, verifying or aligning the component parts of that
property;
C) The use of machinery
and equipment to inspect, test, or measure the tangible personal property to be
sold, when the function is an integral part of the production flow;
D) The use of machinery and equipment to
convey, handle, or transport the tangible personal property to be sold within
production stations on the production line or directly between the production
stations or buildings within the same plant;
E) The use of machinery and equipment to
place the tangible personal property to be sold into the container, package, or
wrapping in which this property is normally sold, when the machinery and
equipment is used as a part of an integrated manufacturing process;
F) The production or processing of food,
including the use of baking equipment such as ovens to bake bread or other
bakery items, whether that baking is performed by a central bakery or a retail
grocery store as long as the equipment is used primarily in the production or
processing of food that is not for immediate consumption; and
G) The use of machinery and equipment such as
buffers, builders, or vulcanizing equipment to retread tires, whether or not
the tire casing is provided by the purchaser.
4) By way of illustration and not limitation,
the machinery and equipment used primarily in the following activities will
generally not be considered to be exempt:
A)
The use of machinery and equipment to transport work in process, or
semifinished goods, between plants;
B) The use of machinery or equipment in
managerial, sales, or other nonproduction, nonoperational activities, including
disposal of waste, scrap or residue, production scheduling, work routing,
purchasing, receiving, accounting, fiscal management, general communications,
plant security, sales, marketing, product exhibition and promotion, or
personnel recruitment, selection, or training;
C) The use of machinery and equipment
pursuant to a retail sale to combine ingredients in the preparation of food and
beverages or to dispense food and beverages by restaurants, vending machines,
convenience stores, and other food service establishments, such as fountain
drink machines, coffee machines, soft serve ice cream machines, and frozen
beverage machines;
D) The use of
machinery and equipment used in the last step of the retail sale. Examples are
embroidery or monogramming machines used by tee-shirt retailers or sewing
machines used to hem garments sold by a clothing store; and
E) The use of machinery and equipment for
general ventilation, heating, cooling, climate control, or general
illumination.
d) The exemption for equipment
includes chemicals or chemicals acting as catalysts but only if the chemicals
or chemicals acting as catalysts effect a direct and immediate change upon a
product being manufactured or assembled for wholesale or retail sale or
lease. [35 ILCS 120/2-45 ] Effective
July 1, 2019, chemicals that do not make a direct and immediate change or act
as a catalyst may qualify if they are production related. See subsection
(h)(2)(B). The following examples are illustrative:
EXAMPLE 1: A chemical acid is used to etch copper off the surface of a printed circuit board during the manufacturing process. The acid causes a direct and immediate change upon the product. The acid qualifies for the exemption.
EXAMPLE 2: An aluminum oxide catalyst is used in a catalytic cracking process to refine heavy gas oil into gasoline. In this process, large molecules of gas oil or feed are broken up into smaller molecules. After the catalyst is injected into the feed and used in the cracking process, it is drawn off and reused in subsequent manufacturing processes. The catalyst qualifies for the exemption.
e) The exemption includes computer
software used to operate exempt machinery and equipment used in the
process of manufacturing or assembling tangible personal property for wholesale
or retail sale or lease. [35 ILCS
120/2-25 ]
f) The exemption includes the sale of
materials to a purchaser who manufactures the materials into an exempted type
of machinery and equipment or tools that the purchaser uses in the
manufacturing of tangible personal property or leases to a manufacturer of
tangible personal property. However, the purchaser must maintain adequate
records clearly demonstrating the incorporation of these materials into exempt
machinery and equipment.
g)
Beginning July 1, 2017, the manufacturing machinery and equipment exemption
includes machinery and equipment used primarily in graphic arts production.
"Graphic arts production" means the production of tangible personal
property for wholesale or retail sale or lease by means of printing, including
ink jet printing, by one or more of the processes described in Groups 323110
through 323122 of Subsector 323, Groups 511110 through 511199 of Subsector 511,
and Group 512230 of Subsector 512 of the North American Industry Classification
System (NAICS) published by the U.S. Office of Management and
Budget, 1997 edition. Graphic arts production does not include the transfer of
images onto paper or other tangible personal property by means of photocopying
or final printed products in electronic or audio form, including the production
of software or audio-books. Persons engaged primarily in the business of
printing or publishing newspapers or magazines that qualify as newsprint and
ink, by one or more of the processes described in Groups 511110 through 511199
of Subsector 511 of the NAICS published by the U.S. Office of
Management and Budget, 1997 edition, are deemed to be engaged in graphic arts
production. [35 ILCS 120/2-30 ]
1) The manufacturing machinery and equipment
exemption applies to qualifying machinery and equipment used in graphic arts
production processes, as those processes are described in the NAICS and
includes repair and replacement parts, both new and used, and including
equipment that is manufactured on special order to be used primarily in graphic
arts production.
2) Manufacturing
includes printing by methods of engraving, letterpress, lithography, gravure,
flexography, and screen, quick, and digital printing. It also includes the
printing of manifold business forms, blankbooks, looseleaf binders, books,
periodicals, and newspapers. Included in graphic arts production are prepress
services described in Subsector 323122 of the NAICS (e.g., the creation and
preparation of negative or positive film from which plates are produced, plate
production, cylinder engraving, typesetting, and image setting). Also included
are trade binding and related printing support activities set forth in
Subsector 323121 of the NAICS (e.g., tradebinding, sample mounting, and
postpress services, such as book or paper bronzing, edging, embossing, folding,
gilding, gluing, die cutting, finishing, tabbing, and indexing).
3) By way of illustration and not limitation,
the following activities will generally be considered graphic arts production:
A) Digital Printing and Quick Printing. This
means the printing of graphical text or images by a process utilizing digital
technology. It also includes the printing of what is commonly known as "digital
photography" (e.g., use of a qualifying integrated computer and printer system
to print a digital image). The exemption extends only to machinery and
equipment, including repair and replacement parts, used in the act of
production. Accordingly, no other type or kind of tangible personal property
will qualify for the exemption, even though it may be used primarily in the
graphic arts business.
B) Prepress
or Preliminary Processes. Prepress or preliminary processes include the steps
required to transform an original into a state that is ready for reproduction
by printing. Prepress or preliminary processes include typesetting, film
production, color separation, final photocomposition (e.g., image assembly and
imposition (stripping)), and platemaking. Prepress or preliminary processes
include the manipulation of images or text in preparation for printing for the
purpose of conforming those images to the specific requirements of the printing
process being utilized. For example, the images must be conformed for a
specific signature layout and formatted to a specific paper size. In addition,
colors must be calibrated to the specific type of paper or printing process
utilized, so that they conform to customer specifications. Prepress or
preliminary processes do not, however, include the creation or artistic
enhancement of images that will later be reproduced in printed form by a
graphic arts process. For example, the creation of an advertisement pursuant to
customer direction, or enhancement of a photograph received from a customer by
adding a border or text or rearranging the placement of images in the
photograph, is not the performance of a qualifying prepress or preliminary
process. Prepress or preliminary processes can be performed at the printing
facility, a separate prepress or preliminary facility, the customer's location,
or other location. The following are examples of equipment used in qualifying
prepress or preliminary activities:
i) Large
scale, fixed-position cameras used to photograph two-dimensional copy to
produce negatives or positives used in the production of plates; film
processors; scanners; imposetters; RIP (raster image processor) equipment;
proofing equipment; imagesetters; plate processors; helioklischographs; and
computer-to-plate and computer-to-press equipment.
ii) Computers that qualify include computers
used primarily to receive, store, and manipulate images to conform them to the
requirements of a specific printing process that will later be performed.
Computers used in connection with what is commonly referred to as "digital
photography" will qualify if used primarily to format the graphic image that
will be printed (e.g., used to format the size and layout of images to be
printed). If the computers are primarily used, however, to apply background
colors, borders, or other artistic enhancements, or to view and select
particular digital images to be printed, they will not qualify for the
exemption.
iii) Digital cameras do
not qualify if they are used primarily to create an original image that will
later be reproduced by a graphic arts process.
iv) Servers used primarily to transfer images
and text to qualifying equipment qualify, but do not qualify if used primarily
in a nonexempt activity (for example, servers used to maintain an in-house
email system).
v) Scanners used
primarily to input previously created images or text that will be reproduced by
a graphic arts process qualify for the exemption.
C) Transfer of Images or Text from Computers,
Plates, Cylinders, or Blankets to Paper or Other Stock to be Printed. This
process begins when paper is introduced on the press. Examples of qualifying
equipment used in this activity include printing plates, printing presses,
blankets and rollers, automatic blanket washers, scorers and dies, folders,
punchers, stackers, strappers used in the pressroom for signatures, dryers,
chillers, and cooling towers. Laser or ink jet printers used to print on paper
or other stock are also included in this exemption.
i) Equipment used primarily to handle or
convey printed materials between production stations in an integrated on-line
graphic arts process is included in the exemption (e.g., a forklift or bindery
cart will qualify for the exemption if it is primarily used to convey book
covers that have been printed and cut to binding and finishing
equipment).
ii) Computer equipment
used primarily to operate exempt graphic arts equipment also qualifies for the
exemption.
iii) Equipment, such as
transformers, used primarily to provide power to qualifying printing presses or
bindery lines qualifies for the exemption. Similarly, heating and cooling
machinery and equipment used to produce an environment necessary for the
production of printed material qualifies for the exemption. For example,
humidity-control equipment used to reduce static during the printing process
qualifies for the exemption.
D) Activities Involving the Binding,
Collating, or Finishing of the Graphic Arts Product. Equipment used in these
activities includes, for instance, binders, packers, gatherers, joggers,
trimmers, selectronic equipment, blow-in card feeders, inserters, stitchers,
gluers, spiral binders, addressing machines, labelers, and ink-jet printers.
i) Machinery and equipment used to convey
materials to packaging areas after the graphic arts product has been printed,
bound, and finished qualifies for the exemption. That equipment includes, for
instance, conveyor systems, hoists, or other conveyance mechanisms used to
direct the final printed product into packaging areas.
ii) Machinery and equipment used to package
materials after the graphic arts product has been printed, bound, and finished
qualifies for the exemption. Packaging equipment includes, for instance,
cartoning systems, palletizers, stretch wrappers, strappers, shrink tunnels,
and similar equipment.
4) By way of illustration and not limitation,
machinery and equipment used primarily in the following activities will
generally not be considered exempt:
A) The use
of machinery and equipment primarily to produce graphic arts items not for
wholesale or retail sale or lease (e.g., items produced for internal
consumption or items produced and distributed without charge).
B) The use of machinery and equipment (e.g.,
forklifts, roll clamps, and roll grabbers) to convey raw materials to the
press.
C) The use of machinery and
equipment to convey materials to final storage or shipping areas. That
equipment includes, for instance, forklifts used primarily to place the
packaged printed product into final storage or shipping areas.
D) The use of machinery and equipment to
gather information, track jobs, or perform data-related functions prior to a
qualifying prepress activity (e.g., computers used primarily to edit or create
text, data, or other copy). That equipment includes items such as inventory
tracking devices and bar-code readers.
E) The use of machinery and equipment used
primarily to photocopy printed matter. A copier that is capable of printing
images or text transmitted to it in digital form may qualify if used primarily
in that manner. However, a copier that produces photocopies by means of
xerographic technology is subject to tax.
F) The use of machinery and equipment in
managerial, sales, or other nonproduction, nonoperational activities, including
production scheduling, purchasing, receiving, accounting, physical management,
general communications, plant security, marketing, or personnel recruitment,
selection, or training. Waste disposal equipment (e.g., equipment used to
contain and recapture paper dust) does not qualify for the exemption.
G) The use of machinery and equipment for
general ventilation, heating, cooling, climate control, or general
illumination, except when the machinery and equipment is used to produce an
environment necessary for the production of printed material.
5) An item of machinery or
equipment that initially is used primarily in graphic arts production and,
having been so used for less than one-half of its useful life, is converted to
primarily nonexempt uses will become subject to the tax at the time of the
conversion, allowing for reasonable depreciation on the item of machinery or
equipment.
h)
Beginning on July 1, 2019, the manufacturing and assembling machinery
and equipment exemption includes production related tangible personal
property. [35 ILCS 120/2-45 ]
1) Production related tangible personal
property means all tangible personal property used or consumed in a production
related process by a manufacturer in a manufacturing facility in which a
manufacturing process takes place or by a graphic arts producer in graphic arts
production. Production related tangible personal property also means all
tangible personal property that is used or consumed in research and development
regardless of use within or without a manufacturing or graphic arts production
facility.
2) By way of illustration
and not limitation, the following uses of tangible personal property by
manufacturers, including graphic arts producers, will be considered production
related:
A) Tangible personal property
purchased by a manufacturer for incorporation into real estate within a
manufacturing facility for use in a production related process, or tangible
personal property purchased by a construction contractor for incorporation into
real estate within a manufacturing facility for use in a production related
process.
B) Supplies and
consumables used in a manufacturing process in a manufacturing facility,
including fuels, coolants, solvents, oils, lubricants, and adhesives.
C) Hand tools, protective apparel, and fire
and safety equipment used or consumed within a manufacturing
facility.
D) Tangible personal
property used or consumed in a manufacturing facility for purposes of
pre-production and post-production material handling, receiving, quality
control, inventory control, storage, staging, and packing for shipping or
transportation.
E) Fuel used in a
ready-mix cement truck to rotate the mixing drum in order to manufacture
concrete or cement. However, only the amount of fuel used to rotate the drum
will qualify. The amount of fuel used or consumed in transportation of the
truck will not qualify as production related tangible personal property. The
amount of fuel used in a qualifying manner to rotate the drum may be stated as
a percentage of the entire amount of fuel used or consumed by the ready-mix
truck.
3) By way of
illustration and not limitation, the following uses of tangible personal
property by manufacturers, including graphic arts producers, will not be
considered production related:
A) The use of
trucks, trailers, and motor vehicles that are required to be titled or
registered pursuant to the Illinois Motor Vehicle Code [625 ILCS 5], and
aircraft or watercraft required to be registered with an agency of State or
federal government.
B) The use of
office supplies, computers, desks, copiers, and equipment for sales,
purchasing, accounting, fiscal management, marketing, and personnel recruitment
or selection activities, even if the use takes place within a manufacturing or
graphic arts production facility.
C) The use or consumption of tangible
personal property for aesthetic or decorative purposes, including landscaping
and artwork.
i)
Sales to Lessors
1) For the exemption to
apply, the purchaser need not itself employ the exempt machinery and equipment
in manufacturing. If the purchaser leases that machinery and equipment to a
lessee-manufacturer who uses it in an exempt manner, the sale to the
purchaser-lessor will be exempt from tax. A vendor may exclude these sales from
its taxable gross receipts provided the purchaser-lessor provides the vendor
with a properly completed exemption certificate and this Section would support
an exemption if the sale were made directly to the
lessee-manufacturer.
2) If a
purchaser-lessor subsequently leases the machinery and equipment to a lessee
who does not use it in a manner that would qualify directly for the exemption,
the purchaser-lessor will become liable for the tax, allowing for reasonable
depreciation on the machinery and equipment.
j) Exemption Certificates
1) A vendor that makes sales of machinery and
equipment to a manufacturer or lessor of a manufacturer incurs retailers'
occupation tax on that sale and must collect use tax unless the purchaser
certifies the exempt nature of the purchase to the vendor as set out in this
subsection (j). The use of blanket certificates of exemption will be
permitted.
2)
The purchaser
of the machinery and equipment who has an active resale registration number
shall furnish that number to the seller at the time of purchase. A purchaser of
the machinery, equipment, and tools without an active resale registration
number shall furnish to the seller a certificate of exemption stating facts
establishing the exemption, and that certificate shall be available to the
Department for inspection or audit. [35 ILCS
120/2-45 ] Certificates shall be retained by the
vendor and shall be made available to the Department for inspection or audit.
The Department shall prescribe the form of the certificate.
3) If a manufacturer or lessor purchases at
retail from a vendor who is not registered to collect Illinois Use Tax, the
purchaser must prepare the completed exemption certificate and retain it in its
files. The exemption certificate shall be available to the Department for
inspection or audit.
4) In the case
of a vendor who makes sales of qualifying machinery and equipment to a
contractor who will incorporate it into real estate so that the contractor,
itself, would be the taxable user (see Sections
130.1940 and
130.2075), the purchasing
contractor should provide the vendor with a certification that the machinery
and equipment will be transferred to a manufacturer as manufacturing machinery
and equipment in the performance of a construction contract for the
manufacturer. The purchasing contractor should include the manufacturer's name
and registration number on the certification when claiming the
exemption.
k)
The
exemption does not include machinery and equipment used in the generation of
electricity for wholesale or retail sale; the generation or treatment of
natural or artificial gas for wholesale or retail sale that is delivered to
customers through pipes, pipelines, or mains; or the treatment of water for
wholesale or retail sale that is delivered to customers through pipes,
pipelines, or mains. [35 ILCS 120/2-45 ] (The
provisions of this subsection (k) were established by
P.A. 098-0583 ,
which states that the provisions are declaratory of existing law as to the
meaning and scope of this exemption.)
l) Opinions and Rulings
Informal ruling and opinion letters issued by the Department regarding the coverage and applicability of this exemption to specific devices will be maintained by the Department in Springfield. They are available for public inspection on the Department's website, https://tax.illinois.gov/, and may be copied or reproduced at taxpayer's expense. Trade secrets or other confidential information in these letters will be deleted prior to release to public access files.
Notes
Amended at 32 Ill. Reg. 19128, effective December 1, 2008
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No prior version found.