Current through Register Vol. 48, No. 12, March 22, 2024
a) To prevent actual or likely multi-state
taxation, the tax shall not apply to the use of tangible personal property in
this State under the following circumstances:
1) The use, in this State, of tangible
personal property acquired outside this State by a nonresident individual and
brought into this State by that individual for his or her own use while
temporarily within this State or while passing through this State;
2) the use, in this State, of tangible
personal property by an interstate carrier for hire as rolling stock moving in
interstate commerce; or by lessors under a lease of one year or longer executed
or in effect at the time of purchase of tangible personal property to
interstate carriers for hire for use as rolling stock moving in interstate
commerce, as long as so used by the interstate carriers for hire. When tangible
personal property is purchased by a lessor under a lease for one year or
longer, executed or in effect at the time of purchase to an interstate carrier
for hire who did not pay Use Tax to the retailer, the lessor (by the last day
of the month following the calendar month in which the property reverts to the
use of the lessor) shall file a return with the Department and pay the tax upon
the fair market value of the property on the date of the reversion. For more
details concerning this exemption, see 86 Ill. Adm. Code
130.340 of the
Retailers' Occupation Tax regulations; the same principles apply for Use Tax
purposes;
3)
the use, in
this State, of tangible personal
propertythatis acquired outside this State
and caused to be brought into this State by a person who has already paid a tax
in another state in respect tothesale,
purchase or use ofthatproperty, to the extent
of the amount ofthetax properly due and paid
intheother state; for this purpose,
"state" includes the District of Columbia [35
ILCS 105/3-55(d) ];
4) the temporary storage, in this State, of
tangible personal property acquired outside this State that, subsequent to
being brought into this State and stored here temporarily, is used solely
outside this State or is physically attached to or incorporated into other
tangible personal property that is used solely outside this State, or is
altered by converting, fabricating, manufacturing, printing, processing or
shaping, and, as altered, is used solely outside this State;
5) the temporary storage in this State of
building materials and fixtures acquired either in this State or outside this
State by an Illinois registered combination retailer and construction
contractor, and that the purchaser thereafter uses outside this State by
incorporating the property into real estate located outside this
State;
6)
beginning on
January 1, 2002 and through June 30, 2016, the use of tangible personal
property purchased from an Illinois retailer by a taxpayer engaged in
centralized purchasing activities in Illinois who will, upon receipt of the
property in Illinois, temporarily store the property in Illinois for the
purpose of subsequently transporting it outside this State for use or
consumption thereafter solely outside this State or for the purpose of being
processed, fabricated, or manufactured into, attached to, or incorporated into
other tangible personal property to be transported outside this State and
thereafter used or consumed solely outside this State. [35 ILCS
105/3-55(j) ]
A) "Centralized purchasing" means the
procurement of tangible personal property by persons who purchase tangible
personal property solely for use or consumption outside Illinois, who take
delivery of that tangible personal property in Illinois and who temporarily
store that tangible personal property in Illinois prior to transporting it
outside the State for use or consumption solely outside Illinois.
i) For example, a business that maintains
offices in several states and maintains storage facilities in Illinois
purchases office equipment from an Illinois retailer, takes delivery of those
items in Illinois and then stores them at its Illinois warehouse until they are
shipped to its offices outside Illinois for use there can qualify for the
exemption.
ii) For example, a
lessor that purchases an item from an Illinois retailer specifically to fulfill
its obligations under an existing lease with a lessee located outside Illinois,
takes delivery of that item in Illinois and then stores that item at an
Illinois warehouse until it is shipped to its lessee's out-of-State location
can qualify for the exemption so long as the item is used solely outside
Illinois.
iii) However, a lessor
who purchases an item that is not dedicated to an existing lease with an
out-of-State lessee, takes delivery of that item in Illinois and then places it
in an Illinois rental inventory cannot qualify for the exemption even if the
item is subsequently leased to an out-of-State lessee. This is true because, in
Illinois, lessors are deemed to be the users of items purchased for rental
inventories and placing an item in a rental inventory does not constitute
storage.
B) "Good
standing" means the taxpayer has no final liability that the taxpayer is
failing to pay. For purposes of this Section, final liability includes a notice
of tax liability that has become final, an admitted liability, or a math
error.
C) Persons who wish to take
advantage of this expanded temporary storage exemption must apply in writing to
the Department to obtain an Expanded Temporary Storage Permit. Expanded
Temporary Storage Permits cannot be assigned or transferred except when the
holder of the permit is purchasing from an unregistered de minimis serviceman
providing services as described in 86 Ill. Adm. Code
140.108.
Other than this, only the person to whom the Expanded Temporary Storage Permit
was issued by the Department may use that permit as described in this
Section.
D) Persons holding a valid
Expanded Temporary Storage Permit may claim the expanded temporary storage
exemption by providing their Illinois suppliers with a certification that the
tangible personal property received in Illinois will be temporarily stored in
Illinois for the purpose of being subsequently transported outside this State
for use or consumption thereafter solely outside this State or for the purpose
of being processed, fabricated, or manufactured into, attached to, or
incorporated into other tangible personal property to be transported outside
this State and thereafter used or consumed solely outside this State. The
certification must identify the seller, the purchaser, and the property, and
include the purchaser's Expanded Temporary Storage Permit number and signature.
i) If all of an Expanded Temporary Storage
Permit holder's purchases qualify for the expanded temporary storage exemption,
the Expanded Temporary Storage Permit holder may provide his or her supplier a
blanket certificate of expanded temporary storage.
ii) If an Expanded Temporary Storage Permit
holder knows that a certain percentage of all his or her purchases from a given
seller will qualify for the expanded temporary storage exemption, he or she may
provide a blanket certificate of expanded temporary storage stating that a
designated percentage of purchases qualify for the expanded temporary storage
exemption.
E) In the
event that tangible personal property for which the expanded temporary storage
exemption has been claimed is taken out of storage and not transported outside
this State for use or consumption, but is instead used or consumed in Illinois,
the purchaser shall pay the tax that would have been due, in the same form that
the retailer would have paid the tax (i.e., Retailers' Occupation Tax and local
Retailers' Occupation Tax, if applicable), at the rate applicable at the
location of the retailer from which the tangible personal property was
purchased. For example, if tangible personal property purchased from a retailer
in Naperville is temporarily stored in Illinois, then, instead of being
transported outside the State for use or consumption, is removed from inventory
and used in Illinois, tax will be due at the retailer's rate applicable in
Naperville. The permit holder must pay the tax directly to the Department on
forms prescribed by the Department, not later than the twentieth day of the
month following the month in which the property was removed from
inventory.
F) In the event that
tangible personal property for which the expanded temporary storage exemption
has been claimed is temporarily stored in Illinois and transported outside this
State for use or consumption, but subsequently returned to Illinois and used
here, the purchaser shall pay the tax that would have been due, in the same
form that the retailer would have paid the tax (i.e., Retailers' Occupation Tax
and local Retailers' Occupation Tax, if applicable), at the rate applicable at
the location of the retailer from which the tangible personal property was
purchased. For example, if tangible personal property purchased from a retailer
in Naperville is temporarily stored in Illinois and transported outside this
State for use or consumption, but subsequently returned to Illinois and used
here, tax will be due at the retailer's rate applicable in Naperville.
Depreciation will be allowed as provided in Section
150.105(a).
Also, credit shall be given for tax paid in another state in respect to the
sale, purchase or use of the property, to the extent of the amount of the tax
properly due and paid in the other state, as provided in subsection
(a)(3).
G) Permit holders who
assume the liability for the Retailers' Occupation Tax and any applicable local
Retailers' Occupation Tax are subject to the same rights, remedies, privileges,
immunities, powers and duties, and are subject to the same conditions,
restrictions, limitations, penalties, and definitions of terms and employ the
same modes of procedures as are prescribed for retailers under the Retailers'
Occupation Tax Act. For example, if a permit holder fails to timely file the
proper return or make the proper payment of tax, that permit holder is not
entitled to the
1.75 %
vendor discount applicable to the sales reported on that return and is subject
to penalties and interest under the Uniform Penalty and Interest Act [35 ILCS
735 ].
7) the use, in
this State, of a vehicle for which a drive-away decal has been issued under the
provisions of 86 Ill. Adm. Code
130.605(b)(1).
However, beginning July 1, 2008, if the purchaser of a motor vehicle claims the
exemption provided in Section
130.605(b)(1)
and the motor vehicle is then used in this State for more than 30 days in a
calendar year, the purchaser is liable for Use Tax on the purchase price of
that motor vehicle, subject to credit for tax properly due and paid to any
other state as provided in subsection (a)(3). The assessment of tax under this
subsection (a)(7) by the Department is limited to the period for which it may
issue a notice of tax liability under the Use Tax Act.
8)
beginning July 1, 2007, the use,
in this State, of an aircraft described in subsection (a)(8)(A), (B) or (C), as
defined in Section 3 of the Illinois Aeronautics Act.
A)
If the aircraft is purchased in
this State, all of the following three conditions must be met:
i)
the aircraft leaves this State
within 15 days after the later of either the issuance of the final billing for
the purchase 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;
ii)
the aircraft is not based or
registered in this State after the purchase of the aircraft;
and
iii)
the
purchaser provides the Department with a signed and dated certification, on a
form prescribed by the Department, certifying that the requirements of this
subsection (a)(8)(A) 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.
B)
If the aircraft is temporarily located in this State for the purpose of
a prepurchase evaluation, all of the following conditions must be met:
i)
the aircraft is not based or
registered in this State after the prepurchase evaluation;
and
ii)
the
purchaser provides the Department with a signed and dated certification, on a
form prescribed by the Department, certifying that the requirements of this
subsection (a)(8)(B) 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.
C)
If the aircraft is temporarily located in this State for the purpose of
a post-sale customization, all of the following conditions must be
met:
i)
the aircraft leaves
this State within 15 days after 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;
ii)
the aircraft is not based or
registered in this State either before or after the post-sale customization;
and
iii)
the
purchaser provides the Department with a signed and dated certification, on a
form prescribed by the Department, certifying that the requirements of this
subsection (a)(8)(C) 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
105/3-55 (h-2)]
D) The exemption provided under subsections
(a)(8)(B) and (C) does not apply to tax incurred on any service transactions
performed on the aircraft.
E) For
purposes of subsection (a)(8):
"Based in this State" means hangared, stored, or
otherwise used, excluding post-sale customizations as defined in this
subsection (a)(8)(E), for 10 or more days in each 12-month period immediately
following the date of the sale of the aircraft.
"Post-sale customization" means any improvement,
maintenance, or repair that is performed on an aircraft following a transfer of
ownership of the aircraft.
"Prepurchase evaluation" means an examination of an
aircraft to provide a potential purchaser with information relevant to the
potential purchase.
"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.
F)
If tax becomes due under this
subsection (a)(8) because of the purchaser's use of the aircraft in this State,
the purchaser shall file a return with the Department and pay the tax on the
fair market value of the aircraft. This return and payment of the tax must be
made no later than 30 days after the aircraft is used in a taxable manner in
this State. The tax is based on the fair market value of the aircraft on the
date that it is first used in a taxable manner in this State. [35 ILCS
105/3-55(h-2)]
b) Since exemptions described in subsections
(a)(1), (3) and (4) do not exist as far as the Retailers' Occupation Tax is
concerned, and since it would therefore serve no purpose to say that the
exemptions exist for Use Tax purposes insofar as the seller is merely
collecting Use Tax to reimburse himself or herself for Retailers' Occupation
Tax on the same transaction, the Department believes that the legislative
intention in these references to the acquisition of tangible personal property
outside this State was to make the references apply to cases in which the only
tax liability that could be involved is Use Tax liability.
c) Therefore, exemptions described in
subsections (a)(1), (3) and (4) would not apply except when the tangible
personal property is acquired outside Illinois by the purchaser in such a way
that there is no Retailers' Occupation Tax liability on the part of the seller
in the same transaction.
d) For
information as to when sellers do or do not incur Retailers' Occupation Tax
liability when shipping the tangible personal property from outside Illinois,
see 86 Ill. Adm. Code
130.610
of the Retailers' Occupation Tax regulations.