Current through Register Vol. 48, No. 38, September 20, 2024
a)
To prevent actual or likely multi
state taxation, the tax does not apply to the use of tangible personal property
in this State under the following circumstances:
1) the use, in this State, of
property acquired outside this State by a nonresident individual and brought
into this State by the individual for that individual's own
use while temporarily within this State or while passing through this
State;
2)
the use,
in this State, of property that is 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 to the sale, purchase or use of that property, to the extent of the
amount of the tax properly due and paid in the other state;
3)
the temporary storage, in this
State, of property that is acquired outside this State and that after being
brought into this State and stored here temporarily, is used solely outside
this State or is physically attached to or incorporated into other 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;
4)
the use, in this State, of
property that is acquired outside this State and that is moved into this State
for use as rolling stock moving in interstate commerce; and
5)
the use, in this State, of fuel
acquired outside this State and brought into this State in the fuel supply
tanks of locomotives engaged in freight hauling and passenger service for
interstate commerce. [35 ILCS 110/3-45]
b) Since the exemptions in
subsections (a)(1) through (5) immediately above, do not exist as far as the
Service Occupation Tax is concerned, and since it would therefore serve no
purpose to say that the exemptions exist for Service Use Tax purposes insofar
as the serviceman is merely collecting Service Use Tax to reimburse himself for
Service Occupation Tax on the same property, 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 Service Use Tax
liability. Therefore, the exemptions in subsections (a)(1) through (5) above
would not apply except when the tangible personal property is acquired outside
Illinois by the purchaser in such a way that there is no Service Occupation Tax
liability on the part of the serviceman in the same transaction.
c) The Service Use Tax does not apply
to the use, in this State, of property which is acquired outside this State by
a nonresident individual who then brings the property to this State for use
here, and who has used the property outside this State for at least 3 months
before bringing the property to this State. [35 ILCS
110/3-60]
d)
Where a business that is not
operated in Illinois, but is operated in another state, is moved to Illinois or
opens up an office, plant or other business facility in Illinois, that business
shall not be taxed on its use, in Illinois, of used property that the business
bought outside Illinois and used outside Illinois in the operation of the
business for at least 3 months before moving such used property to Illinois for
use in this State. [35 ILCS 110/3-60]
e) The Service Use Tax will not apply to the
following entities as long as such entities have an active exemption
identification number issued by the Department. "Sale of service" does not
include:
1)
a sale or transfer of
tangible personal property as an incident to the rendering of service for or by
any corporation, society, association, foundation or institution organized and
operated exclusively for charitable, religious or educational
purposes, in accordance with the provisions of 86 Ill. Adm. Code
130.2005, which is effective as
if fully set forth in this subsection (e)(1). A limited liability
company may qualify for the exemption under this paragraph only if the limited
liability company is organized and operated exclusively for educational
purposes;
2)
a
sale or transfer of tangible personal property as an incident to the rendering
of service for or by any not-for-profit corporation, society, association,
foundation, institution or organization which has no compensated officers and
employees and which is organized and operated primarily for the recreation of
persons 55 years of age or older, in accordance with the provisions of
86 Ill. Adm. Code 130.2005, which is effective as if fully set forth in this
subsection (e)(2); and
3)
a
sale or transfer of tangible personal property as an incident to the rendering
of service for or by any governmental body, in accordance with the
provisions of 86 Ill. Adm. Code
130.2055 and
130.2080, which are effective as
if fully set forth in this subsection (e)(3). [35 ILCS
110/2(3)]
f) The Service Use Tax does not apply to the
use of game or game birds purchased at a "game breeding and hunting
preserve area" as that term is used in the Wildlife Code
[520 ILCS
5/3.27] . [35 ILCS
110/3-5(19)]
g) Since transfers of tangible personal
property by de minimis servicemen who incur Use Tax as described in 86 Ill.
Adm. Code 140.108 do not constitute sales
of service under Section 2(g) of the Service Occupation Tax Act, customers of
such de minimis servicemen do not incur Service Use Tax liability on such
transfers.
h) The Service Use Tax
does not apply to a sale or transfer of machinery and equipment used
primarily in the process of the manufacturing or assembling, either in an
existing, an expanded or a new manufacturing facility, of tangible personal
property for wholesale or retail sale or lease, whether such 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 such sale or lease is made apart from or as an incident to
the seller's engaging in a service occupation and the applicable tax is a
Service Use Tax or Service Occupation Tax, rather than Use Tax or Retailers'
Occupation Tax, and includes production related tangible
personal property, as defined in Section 3-50 of the Use Tax Act, purchased on
or after July 1, 2019; but 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.
1) The exemption in subsection (h)
also includes machinery and equipment used in the general maintenance
or repair of such exempt machinery and equipment or for in-house manufacture of
exempt machinery and equipment. On and after July 1, 2017, the exemption also
includes graphic arts machinery and equipment, as defined in
35 ILCS
110/3-5(5).
2) For the purposes of the exemption in
subsection (h)
, each of these terms shall have the following
meanings:A)
"manufacturing
process" shall mean the production of any article of tangible personal
property, whether such 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 which changes some existing material or
materials into a material with a different form, use or name. In relation to a
recognized integrated business composed of a series of operations which
collectively constitute manufacturing, or individually constitute manufacturing
operations, the manufacturing process shall be deemed to commence with the
first operation or stage of production in the series, and shall not be deemed
to end until the completion of the final product in the last operation or stage
of production in the series; and further, for purposes this exemption,
photoprocessing is deemed to be a manufacturing process of tangible
personal property for wholesale or retail sale;
B)
"assembling process" shall mean
the production of any article of tangible personal property, whether such
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 which results in a material of a different form, use or
name;
C)
"machinery" shall mean major mechanical machines or major components of
such machines contributing to a manufacturing or assembling process;
and
D)
"equipment"
shall include any 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; or 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; or any
parts which require periodic replacement in the course of normal operation; but
shall not include hand tools. 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.
3)
The purchaser of such machinery
and equipment who has an active resale registration number shall furnish such
number to the seller at the time of purchase. The purchaser of such machinery
and equipment and tools without an active resale registration number shall
prepare a certificate of exemption stating facts establishing the exemption,
which certificate shall be available to the Department for inspection or audit.
The Department shall prescribe the form of the certificate.
[35 ILCS
110/2]
4)
For more information on the Manufacturing, Machinery, and Equipment Exemption,
see 86 Ill. Adm. Code
130.330.
i) The Service Use Tax does not apply to
farm machinery and equipment, both new and used, including that
manufactured on special order, certified by the purchaser to be used primarily
for production agriculture or State or federal agricultural programs, including
individual replacement parts for the machinery and equipment, including
machinery and equipment purchased for lease, and including implements of
husbandry defined in Section 1-130 of the Illinois Vehicle Code, farm machinery
and agricultural chemical and fertilizer spreaders, and nurse wagons required
to be registered under Section 3-809 of the Illinois Vehicle Code, but
excluding other motor vehicles required to be registered under the Illinois
Vehicle Code. Farm machinery and equipment shall include the
following:
1)
horticultural polyhouses
or hoop houses used for propagating, growing, or overwintering plants shall be
considered farm machinery and equipment;
2)
agricultural chemical tender tanks
and dry boxes including units sold separately from a motor
vehicle required to be licensed and units sold mounted on a motor vehicle
required to be licensed if the selling price of the tender is separately
stated;
3)
precision farming equipment that is installed or purchased to be
installed on farm machinery and equipment including, but not limited to,
tractors, harvesters, sprayers, planters, seeders, or spreaders. Precision
farming equipment includes, but is not limited to, soil testing sensors,
computers, monitors, software, global positioning and mapping systems, and
other such equipment;
4)
computers, sensors, software, and related equipment used primarily in
the computer-assisted operation of production agriculture facilities,
equipment, and activities such as, but not limited to, the collection,
monitoring, and correlation of animal and crop data for the purpose of
formulating animal diets and agricultural chemicals; and
5)
beginning on January 1, 2024, farm
machinery and equipment also includes electrical power generation equipment
used primarily for production agriculture. [35 ILCS
110/3-5(7)]
j) The Service Use Tax does not apply to
semen used for artificial insemination of livestock for direct
agricultural production. [35 ILCS 3-5(13)]
k) The Service Use Tax does not apply to
horses, or interests in horses, registered with and meeting the
requirements of any of the Arabian Horse Club Registry of America, Appaloosa
Horse Club, American Quarter Horse Association, United States Trotting
Association, or Jockey Club, as appropriate, used for purposes of breeding or
racing for prizes. [35 ILCS
110/3-5(14)]
l) The Service Use Tax does not apply to
computers and communications equipment utilized for any hospital
purpose and equipment used in the diagnosis, analysis, or treatment of hospital
patients purchased by a lessor who leases the equipment, under a lease of one
year or longer executed or in effect at the time the lessor would otherwise be
subject to the tax imposed by the Act, to a hospital that has
been issued an active tax exemption identification number by the Department
under Section 1g of the Retailers' Occupation Tax Act. [35 ILCS
110/3-5(24)]
m) The Service Use Tax does not apply to
personal property purchased by a lessor who leases the property, under
a lease of one year or longer executed or in effect at the time the lessor
would otherwise be subject to the tax imposed by the Act, to a
governmental body that has been issued an active tax exemption identification
number by the Department under Section 1g of the Retailers' Occupation Tax
Act. [35 ILCS
110/3-5(25)]
n) The Service Use Tax does not apply to
tangible personal property used in the construction or maintenance of a
community water supply, as defined under Section 3.145 of the Environmental
Protection Act, that is operated by a not-for-profit corporation that holds a
valid water supply permit issued under Title IV of the Environmental Protection
Act. [35 ILCS
110/3-5(26)]
o)
Beginning January 1, 2010 and
continuing through December 31, 2029, materials, parts, equipment, components,
and furnishings incorporated into or upon an aircraft as part of the
modification, refurbishment, completion, replacement, repair, or maintenance of
the aircraft. The exemption includes consumable supplies used
in the modification, refurbishment, completion, replacement, repair, and
maintenance of aircraft. However, until January 1, 2024, the exemption excludes
any materials, parts, equipment, components, and consumable supplies used in
the modification, replacement, repair, and maintenance of aircraft engines or
power plants, whether such engines or power plants are installed or uninstalled
upon any such aircraft. "Consumable supplies" include, but are not limited to,
adhesive, tape, sandpaper, general purpose lubricants, cleaning solution, latex
gloves, and protective films.
1)
Beginning January 1, 2010 and continuing through December 31, 2023, the
exemption applies only to the use of qualifying tangible personal property
transferred incident to the modification, refurbishment, completion,
replacement, repair, or maintenance of aircraft by persons who hold an Air
Agency Certificate and are empowered to operate an approved repair station by
the Federal Aviation Administration, have a Class IV Rating, and conduct
operations in accordance with Part 145 of the Federal Aviation Regulations. The
exemption does not include aircraft operated by a commercial air carrier
providing scheduled passenger air service pursuant to authority issued under
Part 121 or Part 129 of the Federal Aviation Regulations.
2)
From January 1, 2024 through
December 31, 2029, the exemption applies only to the use of qualifying tangible
personal property by:A)
persons who modify, refurbish, complete, repair, replace, or maintain
aircraft and who:i)
hold an
Air Agency Certificate and are empowered to operate an approved repair station
by the Federal Aviation Administration;
ii)
have a Class IV Rating;
and
iii)
conduct
operations in accordance with Part 145 of the Federal Aviation
Regulations ( 14 CFR 145); and
B)
persons who engage in the
modification, replacement, repair, and maintenance of aircraft engines or power
plants without regard to whether or not those persons meet the qualifications
of subsection (o)(2)(A).
3)
The exemption applies continuously
from January 1, 2010 through December 31, 2024; however, no claim for credit or
refund is allowed for taxes paid as a result of the disallowance of this
exemption on or after January 1, 2015 and prior to February 5, 2020,
the effective date of Public Act 101-629. [35 ILCS
110/3-5(27)]
p)
Tangible personal property
purchased by a public-facilities corporation, as described in Section 11-65-10
of the Illinois Municipal Code, for purposes of constructing or furnishing a
municipal convention hall, but only if the legal title to the municipal
convention hall is transferred to the municipality without any further
consideration by or on behalf of the municipality at the time of the completion
of the municipal convention hall or upon the retirement or redemption of any
bonds or other debt instruments issued by the public-facilities corporation in
connection with the development of the municipal convention hall. This
exemption includes existing public-facilities corporations as provided in
Section 11-65-25 of the Illinois Municipal Code. [35 ILCS
110/3-5(28)]
q)
Beginning January 1, 2017 and
through December 31, 2026, menstrual pads, tampons, and menstrual
cups. [35 ILCS 10/3-5(29)]
r)
The Service Use Tax does not apply
to tangible personal property transferred to a purchaser who is exempt from the
tax imposed by the Act by operation of federal law.
[35 ILCS
110/3-5(30)]
s) The Service Use Tax does not apply to
qualified tangible personal property used in the construction or
operation of a data center that has been granted a certificate of exemption by
the Department of Commerce and Economic Opportunity, whether that tangible
personal property is purchased by the owner, operator, or tenant of the data
center or by a contractor or subcontractor of the owner, operator, or tenant.
Data centers that would have qualified for a certificate of exemption prior to
January 1, 2020, had P.A.101-31 been in effect, may apply for
and obtain an exemption for subsequent purchases of computer equipment or
enabling software purchased or leased to upgrade, supplement, or replace
computer equipment or enabling software purchased or leased in the original
investment that would have qualified. For the purposes of this
subsection:
1)
"Data center" means a
building or a series of buildings rehabilitated or constructed to house working
servers in one physical location or multiple sites within the State of
Illinois.
2)
"Qualified tangible personal property" means:
A)
Electrical systems and equipment;
climate control and chilling equipment and systems; mechanical systems and
equipment; monitoring and secure systems; emergency generators; hardware;
computers; servers; data storage devices; network connectivity equipment;
racks; cabinets; telecommunications cabling infrastructure; raised floor
systems; peripheral components or systems; software; mechanical, electrical, or
plumbing systems; battery systems; cooling systems and towers; temperature
control systems; other cabling; and other data center infrastructure equipment
and systems necessary to operate qualified tangible personal property,
including fixtures; and component parts of any of the foregoing, including
installation, maintenance, repair, refurbishment, and replacement of qualified
tangible personal property to generate, transform, transmit, distribute, or
manage electricity necessary to operate qualified tangible personal property;
and all other tangible personal property that is essential to the operations of
a computer data center.
B)
The term "qualified tangible personal property" also includes building
materials physically incorporated into the qualifying data
center.
3)
To document the exemption allowed under this
subsection, the retailer must obtain from the purchaser a copy of the
certificate of eligibility issued by the Department of Commerce and Economic
Opportunity, the agency responsible for granting certificates of
exemption to qualified data centers pursuant to Section 605-1025 of the
Department of Commerce and Economic Opportunity Law of the Civil Administrative
Code of Illinois [20 ILCS 605/605-1025] .
[35 ILCS
110/3-5(31)]
t)
Beginning July 1, 2022, breast
pumps, breast pump collection and storage supplies, and breast pump kits. As
used in this subsection (t):
1)
Breast pump" means an electrically
controlled or manually controlled pump device designed or marketed to be used
to express milk from a human breast during lactation, including the pump device
and any battery, AC adapter, or other power supply unit that is used to power
the pump device and is packaged and sold with the pump device at the time of
sale.
2)
"Breast
pump collection and storage supplies" means items of tangible personal property
designed or marketed to be used in conjunction with a breast pump to collect
milk expressed from a human breast and to store collected milk until it is
ready for consumption.
3)
"Breast pump collection and storage supplies" includes, but is not
limited to: breast shields and breast shield connectors; breast pump tubes and
tubing adapters; breast pump valves and membranes; backflow protectors and
backflow protector adaptors; bottles and bottle caps specific to the operation
of the breast pump; and breast milk storage bags.
4)
"Breast pump collection and
storage supplies" does not include: bottles and bottle caps not specific to the
operation of the breast pump; breast pump travel bags and other similar
carrying accessories, including ice packs, labels, and other similar products;
breast pump cleaning supplies; nursing bras, bra pads, breast shells, and other
similar products; and creams, ointments, and other similar products that
relieve breastfeeding-related symptoms or conditions of the breasts or nipples,
unless sold as part of a breast pump kit that is pre-packaged by the breast
pump manufacturer or distributor.
5)
"Breast pump kit" means a kit
that: contains no more than a breast pump, breast pump collection and storage
supplies, a rechargeable battery for operating the breast pump, a breastmilk
cooler, bottle stands, ice packs, and a breast pump carrying case; and is
pre-packaged as a breast pump kit by the breast pump manufacturer or
distributor. [35 ILCS
110/3-5(32)]
u)
Tangible personal property sold by
or on behalf of the State Treasurer pursuant to the Revised Uniform Unclaimed
Property Act. [35 ILCS
110/3-5(33)]
v)
If the serviceman would not be
taxable under the Service Occupation Tax Act despite all elements of his sale
of service occurring in Illinois, then the tax imposed by the
Act does not apply to the use in this State of the property transferred
as a necessary incident to the sale of service. [35 ILCS
110/3-55]
