a) Where
tangible personal property is located in this State at the time of its sale (or
is subsequently produced in Illinois), and then delivered in Illinois to the
purchaser, the seller is taxable if the sale is at retail.
1) The sale is not deemed to be in interstate
commerce if the purchaser or his representative receives the physical
possession of the property in this State.
2) This is so notwithstanding the fact that
the purchaser may, after receiving physical possession of the property in this
State, transport or send the property out of the State for use outside the
State or for use in the conduct of interstate commerce.
3) The place at which the contract of sale or
contract to sell is negotiated and executed and the place at which title to the
property passes to the purchaser are immaterial. The place at which the
purchaser resides is also immaterial. It likewise makes no difference that the
purchaser is a carrier when that happens to be the case.
b) There are three exceptions to the rule
that the sale is not deemed to be a sale in interstate commerce if the
purchaser or his representative receives physical possession of the property in
Illinois.
1) Except as otherwise provided in
subsection (b)(1)(C), the tax is not imposed upon the sale of a motor vehicle
in this State
even though the motor vehicle is delivered in this
State, if all of the following conditions are met:
the motor
vehicle is sold to a nonresident;
the motor vehicle is not to
be titled in this
State;andeithera drive-away
permit for purposes of transporting the motor vehicle to a destination outside
of Illinois is issued to the motor vehicle as provided in Section 3-603 of the
Illinois Vehicle Code [
625 ILCS
5/3-603 ],
or the nonresident purchaser has
non-Illinois vehicle registration plates to transfer to the motor vehicle upon
transporting the vehicle outside of Illinois. The issuance of the drive-away
permit or having the out-of-state registration plates to be transferred is
prima facie evidence that the motor vehicle will not be titled in this
State. [
35 ILCS
120/2-5(25) ]
A) Documentation of nonresidency. The
exemption under subsection (b)(1) is available only to nonresidents. A vehicle
purchased by an Illinois resident is not eligible for the exemption (even if
the purchaser is only a part-time Illinois resident or has dual residency in
both Illinois and another state, and, in the case of more than one purchaser,
even if only one of the purchasers is an Illinois resident). Effective July 1,
2008, if a retailer claims the exemption under subsection (b)(1), the retailer
must keep evidence that the purchaser is not a resident of Illinois, along with
the records related to the sale (e.g., in the deal jacket).
i) When the purchaser is a natural person,
the best evidence of nonresidence is a non-Illinois driver's license. Retention
of a copy of the purchaser's permanent non-Illinois driver's license in the
records related to the sale is prima facie evidence that the purchaser is a
nonresident eligible for the exemption under this subsection (b)(1). In
addition, the retailer must also obtain and keep in the records related to the
sale a certification from the purchaser in substantially the following form:
"I, (purchaser), under applicable penalties, including
penalties for perjury and fraud, state that I am not an Illinois resident. I
understand that if I am a resident of Illinois or use the motor vehicle in
Illinois for more than 30 days in a calendar year, I am also liable for tax,
penalty and interest on this purchase."
ii) When the purchaser is a natural person,
failure to keep a copy of the purchaser's non-Illinois driver's license or the
presence of a copy of the purchaser's Illinois driver's license in the records
related to the sale creates a rebuttable presumption that the purchaser is an
Illinois resident ineligible for the exemption under this subsection (b)(1). To
rebut this presumption, the retailer must keep evidence of the nonresidency of
the purchaser in the records related to the sale, such as a voter registration
card listing a non-Illinois address, a copy of a purchase contract or lease
agreement for a new residence outside of Illinois, a copy of a tax return from
another state that declares residency in that other state, a credit report
listing the primary address as out-of-state, property tax records claiming a
homestead exemption for an out-of-state residence, or any other documentation
that clearly shows that the purchaser is not an Illinois resident. In addition,
the retailer must also obtain and keep in the records related to the sale a
certification from the purchaser in substantially the following form:
"I, (purchaser), under applicable penalties, including
penalties for perjury and fraud, state that I am not an Illinois resident. I
understand that if I am a resident of Illinois or use the motor vehicle in
Illinois for more than 30 days in a calendar year, I am also liable for tax,
penalty and interest on this purchase."
iii) When the purchaser is not a natural
person (e.g., corporation, partnership, limited liability company, trust,
etc.), then the purchaser shall be deemed a resident of the state or foreign
country under whose laws the purchaser was incorporated, created or organized,
as well as the state or foreign country of the purchaser's commercial domicile,
if different. When the purchaser is a grantor trust or other entity that claims
it has no state or foreign country of incorporation, creation, organization and
commercial domicile, then the purchaser's state or foreign country of residence
shall be deemed to be the place of residency of the principal user of the
vehicle and a copy of the user's non-Illinois driver's license or other
evidence of non-Illinois residency must be kept by the retailer in the records
related to the sale. When the purchaser is not a natural person, the retailer
must obtain and keep in the records related to the sale a certificate from the
purchaser that states substantially the following:
"(Purchaser) states, under applicable penalties, including
penalties for perjury and fraud, that it is a (corporation, partnership, LLC,
trust, etc.), incorporated, organized or created under the laws of (state or
foreign country) and has its commercial domicile in (state or foreign country),
or alternatively that it has no state or foreign country of incorporation,
creation, organization and commercial domicile, but the principal user's state
or foreign country of residence is (state). The undersigned has authority to
sign this certification on behalf of the purchaser, and understands that in
doing so, if the purchaser is a resident of Illinois or uses the motor vehicle
in Illinois for more than 30 days in a calendar year, it will be liable for
tax, penalty and interest on this purchase."
iv) If the retailer meets the requirements of
subsection (b)(1)(A)(i), (ii) or (iii) to document the exemption, then, absent
fraud, the Department shall pursue any claim that the exemption does not apply
solely against the vehicle purchaser. If, however, the retailer does not meet
the requirements of subsection (b)(1)(A)(i), (ii) or (iii) to document the
exemption, then the exemption claimed by the retailer shall be disallowed
subject to further review by the Department.
B) When the motor vehicle is purchased for
lease and delivery to a lessee, the provisions of subsection (b)(1) shall apply
to the lessee as if the lessee is the purchaser of the motor vehicle.
C) The exemption under this subsection (b)(1)
does not apply if the state in which the motor vehicle will be titled does not
allow a reciprocal exemption for a motor vehicle sold and delivered in that
state to an Illinois resident but titled in Illinois. The tax collected under
the Retailers' Occupation Tax Act on the sale of a motor vehicle in this State
to a resident of another state that does not allow a reciprocal exemption shall
be imposed at a rate equal to the state's rate of tax on taxable property in
the state in which the purchaser is a resident, except that the tax shall not
exceed the tax that would otherwise be imposed under the Retailers' Occupation
Tax Act. (See
35 ILCS
120/2-5 (25-5).)
D) For purposes of this subsection (b)(1),
the term "motor vehicle" does not include (list not exhaustive):
i) "watercraft" or "personal watercraft" as
defined in the Boat Registration and Safety Act [625 ILCS 45 ] or any boat
equipped with an inboard motor, regardless of whether the watercraft, personal
watercraft or boat is sold individually or included with the sale of a trailer.
If the watercraft, personal watercraft or boat is included with the sale of a
trailer, the trailer may be an exempt "motor vehicle" under this subsection
(b)(1), but the watercraft, personal watercraft or boat is not an exempt motor
vehicle and tax is still owed on it. If the two items are sold together for one
non-itemized price, and the trailer is exempt under this subsection (b)(1),
only the gross receipts representing the selling price of the trailer are
exempt. Please note that Section
130.540
requires separate transaction returns to be filed with the Department for each
item of property sold by the retailer that is required to be titled or
registered with an agency of Illinois government;
ii) "all-terrain vehicles" as defined in
Section 1-101.8 of the Illinois Vehicle Code;
iii) "motorcycles", as defined in Section
1-147 of the Illinois Vehicle Code, that are not eligible for vehicle
registration because they are not properly manufactured or equipped for general
highway use;
iv) "motor driven
cycles", as defined in Section 1-145.001 of the Illinois Vehicle Code, that are
not eligible for vehicle registration because they are not properly
manufactured or equipped for general highway use;
v) "off-highway motorcycles" as defined in
Section 1-153.1 of the Illinois Vehicle Code; or
vi) "snowmobiles" as defined in Section
1-2.15 of the Snowmobile Registration and Safety Act [625 ILCS
40/1-2.15 ].
2)
Beginning July 1, 2007, the
Retailers' Occupation Tax is not imposed on the sale of an aircraft, as that
term is defined in Section 3 of the Illinois Aeronautics Act
[
620 ILCS
5/3 ]
, if all of the following three
conditions are met:
A)
the
aircraft leaves this State within 15 days after the later of either the
issuance of the final billing for the sale of the aircraft, or the authorized
approval for return to service, completion of the maintenance record entry, and
completion of the test flight and ground test for inspection, as required by
14
CFR 91.407;
B)
the aircraft is not based or
registered in this State after the sale of the aircraft; and
C)
the seller retains in his or her
books and records and provides to the Department a signed and dated
certification from the purchaser, on a form prescribed by the Department,
certifying that the requirements of this subsection (b)(2) are met. The
certificate must also include the name and address of the purchaser, the
address of the location where the aircraft is to be titled or registered, the
address of the primary physical location of the aircraft, and other information
that the Department may reasonably require. [35 ILCS 120/2-5(25-7)]
(See Section
130.120.)
D) For purposes of this subsection (b)(2):
i)
"Based in this State" means
hangared, stored, or otherwise used, excluding post-sale customizations, for 10
or more days in each 12-month period immediately following the date of the sale
of the aircraft.
ii)
"Registered in this State" means an aircraft registered with the
Department of Transportation, Aeronautics Division, or titled or registered
with the Federal Aviation Administration to an address located in this
State. [35 ILCS 120/2-5(25-7)]
3) The seller does not incur Retailers'
Occupation Tax liability with respect to the proceeds from the sale of
an item of tangible personal property to a common carrier by rail or motor that
receives physical possession of property in Illinois and that transports the
property, or shares with another common carrier in transporting the property,
out of Illinois on a standard uniform bill of lading showing the seller of the
property as the shipper or consignor of the property to a destination
outside Illinois, for use outside Illinois. [35 ILCS
120/2-5(17) ] The exception for sales
to common carriers by rail or motor, which is described in subsection (b)(3),
is also applicable to local occupation taxes administered by the
Department.
c) The tax
does not extend to gross receipts from sales in which the seller is obligated,
under the terms of his or her agreement with the purchaser, to make physical
delivery of the goods from a point in this State to a point outside this State,
not to be returned to a point within this State, provided that the delivery is
actually made.
d) Nor does the tax
apply to gross receipts from sales in which the seller, by carrier (when the
carrier is not also the purchaser) or by mail, under the terms of his or her
agreement with the purchaser, delivers the goods from a point in this State to
a point outside this State not to be returned to a point within this State. The
fact that the purchaser actually arranges for the common carrier or pays the
carrier that effects delivery does not destroy the exemption. However, it is
critical that the seller is shown as the consignor or shipper on the bill of
lading. If the purchaser is shown as either the consignor or the shipper, the
exemption will not apply.
e) Sales
of the type described in subsections (c) and (d) are deemed to be within the
protection of the Commerce Clause of the Constitution of the United
States.
f) To establish that the
gross receipts from any given sale are exempt because the tangible personal
property is delivered by the seller from a point within this State to a point
outside this State under the terms of an agreement with the purchaser, the
seller will be required to retain in his or her records, to support deductions
taken on his or her tax returns proof that satisfies the Department that there
was an agreement and a bona fide delivery outside this State of the property
that is sold. The most acceptable proof of this fact will be:
1) If shipped by common carrier, a waybill or
bill of lading requiring delivery outside this State;
2) if sent by mail, an authorized receipt
from the United States Post Office department for articles sent by registered
mail, parcel post, ordinary mail or otherwise, showing the name of the
addressee, the point outside Illinois to which the property is mailed and the
date of the mailing; if the receipt does not comply with these requirements,
other supporting evidence will be required;
3) if sent by seller's own transportation
equipment, a trip sheet signed by the person making delivery for the seller and
showing the name, address and signature of the person to whom the goods were
delivered outside this State; or, in lieu thereof, an affidavit signed by the
purchaser or his or her representative, showing the name and address of the
seller, the name and address of the purchaser and the time and place of the
delivery outside Illinois by the seller; together with other supporting data as
required by Section
130.810
of this Part and by Section 7 of the Act.
g) Retailers who ship property to freight
forwarders who take possession of the property in Illinois and ship the
property to foreign countries, not to be returned to the United States, are
making exempt sales in foreign commerce and do not incur Retailers' Occupation
Tax liability on the gross receipts from those sales. However, there is no
exemption for property delivered in Illinois to foreign vessels. If foreign
vessels purchase items of tangible personal property from Illinois retailers
and have those items delivered to the vessels in an Illinois port, the sale is
made in Illinois, the purchaser takes possession of the items in Illinois, and
therefore, the sale is taxable.