Illinois Administrative Code
Title 86 - REVENUE
Part 130 - RETAILERS' OCCUPATION TAX
Subpart S - SPECIFIC APPLICATIONS
Section 130.2070 - Sales of Containers, Wrapping and Packing Materials and Related Products
Universal Citation: 86 IL Admin Code ยง 130.2070
Current through Register Vol. 48, No. 12, March 22, 2024
a) Definition
When used in this Section, the term "containers" includes all containers, wrapping and packing materials, bags, twines, container handles, wrapping papers, gummed tapes, cellophane, boxes, bottles, drums, cartons, sacks or other packing, packaging, containing and wrapping materials in which tangible personal property may be contained.
b) Sales for Resale
1) Sellers of containers to purchasers who
sell tangible personal property contained in such containers to others are
deemed to make sales of such containers to purchasers for purposes of resale,
the receipts from which sales are not subject to the Retailers' Occupation Tax,
if the purchasers of such containers transfer the ownership of the containers
to their customers together with the ownership of the tangible personal
property contained in such containers.
2) For example, a sale of fruit boxes to a
packer who fills the boxes with fruit and sells the fruit in such boxes is a
sale of the boxes to the packer for resale by him. If the packer places the
boxes upon pallets that are then transferred to purchasers and the ownership of
the pallets also passes to the purchasers, then the packer who purchases the
pallets would be making a purchase for resale. There is no difference between a
returnable container whose ownership is transferred with a deposit being taken
and a nonreturnable container. This means that if the seller charges purchasers
a deposit for pallets, or other containers, and there is an understanding that
the pallet or other container can be returned by purchasers for refund or
credit of the deposit amount, then the purchase of the pallets or other
containers by sellers are nontaxable purchases for resale. Although sales of
containers to purchasers who retransfer such containers to others as an
incident to engaging in a service occupation are not subject to the Retailers'
Occupation Tax, such transactions are governed by the Service Occupation Tax
Act (see Subpart A of Service Occupation Tax, 86 Ill. Adm. Code 140).
3) Effective August 1, 1997, nonreusable
tangible personal property sold to food and beverage vendors, including persons
engaged in the business of operating restaurants, cafeterias or drive-ins, is a
sale for resale when it is transferred to customers in the ordinary course of
business as part of the sale of food or beverages and is used to deliver,
package, or consume food or beverages, regardless of where consumption of the
food or beverage occurs. Examples of such items include, but are not limited
to, paper and plastic cups, plates, baskets, boxes, sleeves, buckets or other
containers, utensils, straws, placemats, napkins, doggie bags and wrapping or
packaging materials that cannot be reused by the food or beverage vendor and
which are transferred to customers as part of the sale of food or beverages.
Such items do not include items which are used by the food vendor in conducting
his business and which are not transferred to the customer, including, but not
limited to, paper products, serving trays, serving dishes, utensils or
condiment bottles.
c) Sales For Use or Consumption
1) Sellers of
containers to purchasers who do not transfer the ownership thereof to others,
but who intend such containers merely to provide a means of containing tangible
personal property while in the process of being delivered to their customers,
retaining and reusing or discarding the containers after such delivery is
completed, and sellers of containers to purchasers who use such containers as a
means of storing tangible personal property, are making sales for use or
consumption, and their receipts from such sales are subject to the Retailers'
Occupation Tax.
2) Also, paper
towels and toilet tissues are deemed to be sold for use or consumption when
sold to a purchaser for use in connection with the conduct of his business and
not for resale as such.
3) Sales of
paper napkins, drinking straws, paper cups and paper plates to operators of
office buildings, hotels and the like for the use of their employees, tenants
or guests are taxable retail sales.
4) Through July 31, 1997, sales of paper
napkins, drinking straws, paper cups and paper plates to restaurants (including
drive-in restaurants) and other vendors of food or beverages for use on the
premises as serving equipment in lieu of more durable kinds of serving
equipment (such as linen napkins, metal drinking straws, glass or porcelain
cups and plates) are taxable retail sales. Sales of paper napkins, drinking
straws, paper cups and paper plates to food or beverage vendors are nontaxable
sales for resale if the items are resold for a direct and specific charge, or
if the items are employed as containers for food or beverages contained therein
and are transferred with the food or beverages to the purchaser thereof either
by being delivered by the food or beverage vendor away from his premises to his
customers or by being delivered on the premises of the food or beverage vendor
to customers who take the packaged food or beverages away from such premises
with them for consumption elsewhere (i.e., the so-called "carry-out trade"). In
general, it may be assumed that paper sacks, boxes, cartons and paper cups with
lids, when sold to a food or beverage vendor, are for resale within the meaning
of this paragraph. The same is true of paper cups which are used in serving
beverages or other tangible personal property from a vending machine.
5) When nonreusable paper products such as
napkins, drinking straws, cups or plates are sold to a food or beverage vendor
who uses some of these products on his premises in conducting his business, but
who resells some of these products as hereinabove provided, and it is
impracticable, at the time of the sale to such food or beverage vendor, to
determine exactly how much of the purchase is for use and how much is for
resale, the purchaser may determine, from his experience, approximately what
percentage of his purchases of such paper products is for resale and may give
the supplier a blanket Certificate of Resale certifying that that percentage of
his purchases of such products in the future will be for resale. If the
Department goes behind such a Certificate of Resale to check its accuracy, the
Department will not disallow the Certificate of Resale if the percentage stated
is reasonably close to what the facts actually are. Such a purchaser should
redetermine and recertify such percentage to suppliers of such paper products
at least every 12 months. If the purchaser uses some of the paper products
which he has certified are for resale so that he does not pay tax to his
suppliers on his purchases of such products, the purchaser is liable to pay the
Use Tax directly to the Department on his cost price of such paper
products.
6) When containers are
sold to a purchaser for use or consumption, it is not material that the
purchaser, after such containers have been used by him until they no longer
have utility to him, sells such containers in order to recover as much as he
can of the amount which he has invested in such containers.
7) Pallets are taxable upon purchase by
sellers and do not qualify for the resale exemption where after sale and
delivery of the products contained on the pallets the seller retains and reuses
the pallets or discards them.
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