100TH GENERAL ASSEMBLY
State of Illinois
2017 and 2018
HB3430

 

Introduced , by Rep. Keith R. Wheeler

 

SYNOPSIS AS INTRODUCED:
 
35 ILCS 105/3-5
35 ILCS 105/3-50  from Ch. 120, par. 439.3-50
35 ILCS 110/2  from Ch. 120, par. 439.32
35 ILCS 115/2  from Ch. 120, par. 439.102
35 ILCS 120/2-45  from Ch. 120, par. 441-45

    Amends the Use Tax Act, the Service Use Tax Act, the Service Occupation Tax Act, and the Retailers' Occupation Tax Act to extend the Manufacturing Machinery and Equipment Exemption to production related tangible personal property. Provides that the term "production related tangible personal property" includes certain supplies and consumables used in a manufacturing facility. Effective immediately.


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FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

HB3430LRB100 10181 HLH 20362 b

1    AN ACT concerning revenue.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Use Tax Act is amended by changing Sections
53-5 and 3-50 as follows:
 
6    (35 ILCS 105/3-5)
7    Sec. 3-5. Exemptions. Use of the following tangible
8personal property is exempt from the tax imposed by this Act:
9    (1) Personal property purchased from a corporation,
10society, association, foundation, institution, or
11organization, other than a limited liability company, that is
12organized and operated as a not-for-profit service enterprise
13for the benefit of persons 65 years of age or older if the
14personal property was not purchased by the enterprise for the
15purpose of resale by the enterprise.
16    (2) Personal property purchased by a not-for-profit
17Illinois county fair association for use in conducting,
18operating, or promoting the county fair.
19    (3) Personal property purchased by a not-for-profit arts or
20cultural organization that establishes, by proof required by
21the Department by rule, that it has received an exemption under
22Section 501(c)(3) of the Internal Revenue Code and that is
23organized and operated primarily for the presentation or

 

 

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1support of arts or cultural programming, activities, or
2services. These organizations include, but are not limited to,
3music and dramatic arts organizations such as symphony
4orchestras and theatrical groups, arts and cultural service
5organizations, local arts councils, visual arts organizations,
6and media arts organizations. On and after the effective date
7of this amendatory Act of the 92nd General Assembly, however,
8an entity otherwise eligible for this exemption shall not make
9tax-free purchases unless it has an active identification
10number issued by the Department.
11    (4) Personal property purchased by a governmental body, by
12a corporation, society, association, foundation, or
13institution organized and operated exclusively for charitable,
14religious, or educational purposes, or by a not-for-profit
15corporation, society, association, foundation, institution, or
16organization that has no compensated officers or employees and
17that is organized and operated primarily for the recreation of
18persons 55 years of age or older. A limited liability company
19may qualify for the exemption under this paragraph only if the
20limited liability company is organized and operated
21exclusively for educational purposes. On and after July 1,
221987, however, no entity otherwise eligible for this exemption
23shall make tax-free purchases unless it has an active exemption
24identification number issued by the Department.
25    (5) Until July 1, 2003, a passenger car that is a
26replacement vehicle to the extent that the purchase price of

 

 

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1the car is subject to the Replacement Vehicle Tax.
2    (6) Until July 1, 2003 and beginning again on September 1,
32004 through August 30, 2014, graphic arts machinery and
4equipment, including repair and replacement parts, both new and
5used, and including that manufactured on special order,
6certified by the purchaser to be used primarily for graphic
7arts production, and including machinery and equipment
8purchased for lease. Equipment includes chemicals or chemicals
9acting as catalysts but only if the chemicals or chemicals
10acting as catalysts effect a direct and immediate change upon a
11graphic arts product.
12    (7) Farm chemicals.
13    (8) Legal tender, currency, medallions, or gold or silver
14coinage issued by the State of Illinois, the government of the
15United States of America, or the government of any foreign
16country, and bullion.
17    (9) Personal property purchased from a teacher-sponsored
18student organization affiliated with an elementary or
19secondary school located in Illinois.
20    (10) A motor vehicle that is used for automobile renting,
21as defined in the Automobile Renting Occupation and Use Tax
22Act.
23    (11) Farm machinery and equipment, both new and used,
24including that manufactured on special order, certified by the
25purchaser to be used primarily for production agriculture or
26State or federal agricultural programs, including individual

 

 

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1replacement parts for the machinery and equipment, including
2machinery and equipment purchased for lease, and including
3implements of husbandry defined in Section 1-130 of the
4Illinois Vehicle Code, farm machinery and agricultural
5chemical and fertilizer spreaders, and nurse wagons required to
6be registered under Section 3-809 of the Illinois Vehicle Code,
7but excluding other motor vehicles required to be registered
8under the Illinois Vehicle Code. Horticultural polyhouses or
9hoop houses used for propagating, growing, or overwintering
10plants shall be considered farm machinery and equipment under
11this item (11). Agricultural chemical tender tanks and dry
12boxes shall include units sold separately from a motor vehicle
13required to be licensed and units sold mounted on a motor
14vehicle required to be licensed if the selling price of the
15tender is separately stated.
16    Farm machinery and equipment shall include precision
17farming equipment that is installed or purchased to be
18installed on farm machinery and equipment including, but not
19limited to, tractors, harvesters, sprayers, planters, seeders,
20or spreaders. Precision farming equipment includes, but is not
21limited to, soil testing sensors, computers, monitors,
22software, global positioning and mapping systems, and other
23such equipment.
24    Farm machinery and equipment also includes computers,
25sensors, software, and related equipment used primarily in the
26computer-assisted operation of production agriculture

 

 

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1facilities, equipment, and activities such as, but not limited
2to, the collection, monitoring, and correlation of animal and
3crop data for the purpose of formulating animal diets and
4agricultural chemicals. This item (11) is exempt from the
5provisions of Section 3-90.
6    (12) Until June 30, 2013, fuel and petroleum products sold
7to or used by an air common carrier, certified by the carrier
8to be used for consumption, shipment, or storage in the conduct
9of its business as an air common carrier, for a flight destined
10for or returning from a location or locations outside the
11United States without regard to previous or subsequent domestic
12stopovers.
13    Beginning July 1, 2013, fuel and petroleum products sold to
14or used by an air carrier, certified by the carrier to be used
15for consumption, shipment, or storage in the conduct of its
16business as an air common carrier, for a flight that (i) is
17engaged in foreign trade or is engaged in trade between the
18United States and any of its possessions and (ii) transports at
19least one individual or package for hire from the city of
20origination to the city of final destination on the same
21aircraft, without regard to a change in the flight number of
22that aircraft.
23    (13) Proceeds of mandatory service charges separately
24stated on customers' bills for the purchase and consumption of
25food and beverages purchased at retail from a retailer, to the
26extent that the proceeds of the service charge are in fact

 

 

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1turned over as tips or as a substitute for tips to the
2employees who participate directly in preparing, serving,
3hosting or cleaning up the food or beverage function with
4respect to which the service charge is imposed.
5    (14) Until July 1, 2003, oil field exploration, drilling,
6and production equipment, including (i) rigs and parts of rigs,
7rotary rigs, cable tool rigs, and workover rigs, (ii) pipe and
8tubular goods, including casing and drill strings, (iii) pumps
9and pump-jack units, (iv) storage tanks and flow lines, (v) any
10individual replacement part for oil field exploration,
11drilling, and production equipment, and (vi) machinery and
12equipment purchased for lease; but excluding motor vehicles
13required to be registered under the Illinois Vehicle Code.
14    (15) Photoprocessing machinery and equipment, including
15repair and replacement parts, both new and used, including that
16manufactured on special order, certified by the purchaser to be
17used primarily for photoprocessing, and including
18photoprocessing machinery and equipment purchased for lease.
19    (16) Coal and aggregate exploration, mining, off-highway
20hauling, processing, maintenance, and reclamation equipment,
21including replacement parts and equipment, and including
22equipment purchased for lease, but excluding motor vehicles
23required to be registered under the Illinois Vehicle Code. The
24changes made to this Section by Public Act 97-767 apply on and
25after July 1, 2003, but no claim for credit or refund is
26allowed on or after August 16, 2013 (the effective date of

 

 

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1Public Act 98-456) for such taxes paid during the period
2beginning July 1, 2003 and ending on August 16, 2013 (the
3effective date of Public Act 98-456).
4    (17) Until July 1, 2003, distillation machinery and
5equipment, sold as a unit or kit, assembled or installed by the
6retailer, certified by the user to be used only for the
7production of ethyl alcohol that will be used for consumption
8as motor fuel or as a component of motor fuel for the personal
9use of the user, and not subject to sale or resale.
10    (18) Manufacturing and assembling machinery and equipment
11used primarily in the process of manufacturing or assembling
12tangible personal property for wholesale or retail sale or
13lease, whether that sale or lease is made directly by the
14manufacturer or by some other person, whether the materials
15used in the process are owned by the manufacturer or some other
16person, or whether that sale or lease is made apart from or as
17an incident to the seller's engaging in the service occupation
18of producing machines, tools, dies, jigs, patterns, gauges, or
19other similar items of no commercial value on special order for
20a particular purchaser. The exemption provided by this
21paragraph (18) includes production related tangible personal
22property, as defined in Section 3-50, purchased on or after
23July 1, 2017. The exemption provided by this paragraph (18)
24does not include machinery and equipment used in (i) the
25generation of electricity for wholesale or retail sale; (ii)
26the generation or treatment of natural or artificial gas for

 

 

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1wholesale or retail sale that is delivered to customers through
2pipes, pipelines, or mains; or (iii) the treatment of water for
3wholesale or retail sale that is delivered to customers through
4pipes, pipelines, or mains. The provisions of Public Act 98-583
5are declaratory of existing law as to the meaning and scope of
6this exemption.
7    (19) Personal property delivered to a purchaser or
8purchaser's donee inside Illinois when the purchase order for
9that personal property was received by a florist located
10outside Illinois who has a florist located inside Illinois
11deliver the personal property.
12    (20) Semen used for artificial insemination of livestock
13for direct agricultural production.
14    (21) Horses, or interests in horses, registered with and
15meeting the requirements of any of the Arabian Horse Club
16Registry of America, Appaloosa Horse Club, American Quarter
17Horse Association, United States Trotting Association, or
18Jockey Club, as appropriate, used for purposes of breeding or
19racing for prizes. This item (21) is exempt from the provisions
20of Section 3-90, and the exemption provided for under this item
21(21) applies for all periods beginning May 30, 1995, but no
22claim for credit or refund is allowed on or after January 1,
232008 for such taxes paid during the period beginning May 30,
242000 and ending on January 1, 2008.
25    (22) Computers and communications equipment utilized for
26any hospital purpose and equipment used in the diagnosis,

 

 

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1analysis, or treatment of hospital patients purchased by a
2lessor who leases the equipment, under a lease of one year or
3longer executed or in effect at the time the lessor would
4otherwise be subject to the tax imposed by this Act, to a
5hospital that has been issued an active tax exemption
6identification number by the Department under Section 1g of the
7Retailers' Occupation Tax Act. If the equipment is leased in a
8manner that does not qualify for this exemption or is used in
9any other non-exempt manner, the lessor shall be liable for the
10tax imposed under this Act or the Service Use Tax Act, as the
11case may be, based on the fair market value of the property at
12the time the non-qualifying use occurs. No lessor shall collect
13or attempt to collect an amount (however designated) that
14purports to reimburse that lessor for the tax imposed by this
15Act or the Service Use Tax Act, as the case may be, if the tax
16has not been paid by the lessor. If a lessor improperly
17collects any such amount from the lessee, the lessee shall have
18a legal right to claim a refund of that amount from the lessor.
19If, however, that amount is not refunded to the lessee for any
20reason, the lessor is liable to pay that amount to the
21Department.
22    (23) Personal property purchased by a lessor who leases the
23property, under a lease of one year or longer executed or in
24effect at the time the lessor would otherwise be subject to the
25tax imposed by this Act, to a governmental body that has been
26issued an active sales tax exemption identification number by

 

 

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1the Department under Section 1g of the Retailers' Occupation
2Tax Act. If the property is leased in a manner that does not
3qualify for this exemption or used in any other non-exempt
4manner, the lessor shall be liable for the tax imposed under
5this Act or the Service Use Tax Act, as the case may be, based
6on the fair market value of the property at the time the
7non-qualifying use occurs. No lessor shall collect or attempt
8to collect an amount (however designated) that purports to
9reimburse that lessor for the tax imposed by this Act or the
10Service Use Tax Act, as the case may be, if the tax has not been
11paid by the lessor. If a lessor improperly collects any such
12amount from the lessee, the lessee shall have a legal right to
13claim a refund of that amount from the lessor. If, however,
14that amount is not refunded to the lessee for any reason, the
15lessor is liable to pay that amount to the Department.
16    (24) Beginning with taxable years ending on or after
17December 31, 1995 and ending with taxable years ending on or
18before December 31, 2004, personal property that is donated for
19disaster relief to be used in a State or federally declared
20disaster area in Illinois or bordering Illinois by a
21manufacturer or retailer that is registered in this State to a
22corporation, society, association, foundation, or institution
23that has been issued a sales tax exemption identification
24number by the Department that assists victims of the disaster
25who reside within the declared disaster area.
26    (25) Beginning with taxable years ending on or after

 

 

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1December 31, 1995 and ending with taxable years ending on or
2before December 31, 2004, personal property that is used in the
3performance of infrastructure repairs in this State, including
4but not limited to municipal roads and streets, access roads,
5bridges, sidewalks, waste disposal systems, water and sewer
6line extensions, water distribution and purification
7facilities, storm water drainage and retention facilities, and
8sewage treatment facilities, resulting from a State or
9federally declared disaster in Illinois or bordering Illinois
10when such repairs are initiated on facilities located in the
11declared disaster area within 6 months after the disaster.
12    (26) Beginning July 1, 1999, game or game birds purchased
13at a "game breeding and hunting preserve area" as that term is
14used in the Wildlife Code. This paragraph is exempt from the
15provisions of Section 3-90.
16    (27) A motor vehicle, as that term is defined in Section
171-146 of the Illinois Vehicle Code, that is donated to a
18corporation, limited liability company, society, association,
19foundation, or institution that is determined by the Department
20to be organized and operated exclusively for educational
21purposes. For purposes of this exemption, "a corporation,
22limited liability company, society, association, foundation,
23or institution organized and operated exclusively for
24educational purposes" means all tax-supported public schools,
25private schools that offer systematic instruction in useful
26branches of learning by methods common to public schools and

 

 

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1that compare favorably in their scope and intensity with the
2course of study presented in tax-supported schools, and
3vocational or technical schools or institutes organized and
4operated exclusively to provide a course of study of not less
5than 6 weeks duration and designed to prepare individuals to
6follow a trade or to pursue a manual, technical, mechanical,
7industrial, business, or commercial occupation.
8    (28) Beginning January 1, 2000, personal property,
9including food, purchased through fundraising events for the
10benefit of a public or private elementary or secondary school,
11a group of those schools, or one or more school districts if
12the events are sponsored by an entity recognized by the school
13district that consists primarily of volunteers and includes
14parents and teachers of the school children. This paragraph
15does not apply to fundraising events (i) for the benefit of
16private home instruction or (ii) for which the fundraising
17entity purchases the personal property sold at the events from
18another individual or entity that sold the property for the
19purpose of resale by the fundraising entity and that profits
20from the sale to the fundraising entity. This paragraph is
21exempt from the provisions of Section 3-90.
22    (29) Beginning January 1, 2000 and through December 31,
232001, new or used automatic vending machines that prepare and
24serve hot food and beverages, including coffee, soup, and other
25items, and replacement parts for these machines. Beginning
26January 1, 2002 and through June 30, 2003, machines and parts

 

 

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1for machines used in commercial, coin-operated amusement and
2vending business if a use or occupation tax is paid on the
3gross receipts derived from the use of the commercial,
4coin-operated amusement and vending machines. This paragraph
5is exempt from the provisions of Section 3-90.
6    (30) Beginning January 1, 2001 and through June 30, 2016,
7food for human consumption that is to be consumed off the
8premises where it is sold (other than alcoholic beverages, soft
9drinks, and food that has been prepared for immediate
10consumption) and prescription and nonprescription medicines,
11drugs, medical appliances, and insulin, urine testing
12materials, syringes, and needles used by diabetics, for human
13use, when purchased for use by a person receiving medical
14assistance under Article V of the Illinois Public Aid Code who
15resides in a licensed long-term care facility, as defined in
16the Nursing Home Care Act, or in a licensed facility as defined
17in the ID/DD Community Care Act, the MC/DD Act, or the
18Specialized Mental Health Rehabilitation Act of 2013.
19    (31) Beginning on the effective date of this amendatory Act
20of the 92nd General Assembly, computers and communications
21equipment utilized for any hospital purpose and equipment used
22in the diagnosis, analysis, or treatment of hospital patients
23purchased by a lessor who leases the equipment, under a lease
24of one year or longer executed or in effect at the time the
25lessor would otherwise be subject to the tax imposed by this
26Act, to a hospital that has been issued an active tax exemption

 

 

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1identification number by the Department under Section 1g of the
2Retailers' Occupation Tax Act. If the equipment is leased in a
3manner that does not qualify for this exemption or is used in
4any other nonexempt manner, the lessor shall be liable for the
5tax imposed under this Act or the Service Use Tax Act, as the
6case may be, based on the fair market value of the property at
7the time the nonqualifying use occurs. No lessor shall collect
8or attempt to collect an amount (however designated) that
9purports to reimburse that lessor for the tax imposed by this
10Act or the Service Use Tax Act, as the case may be, if the tax
11has not been paid by the lessor. If a lessor improperly
12collects any such amount from the lessee, the lessee shall have
13a legal right to claim a refund of that amount from the lessor.
14If, however, that amount is not refunded to the lessee for any
15reason, the lessor is liable to pay that amount to the
16Department. This paragraph is exempt from the provisions of
17Section 3-90.
18    (32) Beginning on the effective date of this amendatory Act
19of the 92nd General Assembly, personal property purchased by a
20lessor who leases the property, under a lease of one year or
21longer executed or in effect at the time the lessor would
22otherwise be subject to the tax imposed by this Act, to a
23governmental body that has been issued an active sales tax
24exemption identification number by the Department under
25Section 1g of the Retailers' Occupation Tax Act. If the
26property is leased in a manner that does not qualify for this

 

 

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1exemption or used in any other nonexempt manner, the lessor
2shall be liable for the tax imposed under this Act or the
3Service Use Tax Act, as the case may be, based on the fair
4market value of the property at the time the nonqualifying use
5occurs. No lessor shall collect or attempt to collect an amount
6(however designated) that purports to reimburse that lessor for
7the tax imposed by this Act or the Service Use Tax Act, as the
8case may be, if the tax has not been paid by the lessor. If a
9lessor improperly collects any such amount from the lessee, the
10lessee shall have a legal right to claim a refund of that
11amount from the lessor. If, however, that amount is not
12refunded to the lessee for any reason, the lessor is liable to
13pay that amount to the Department. This paragraph is exempt
14from the provisions of Section 3-90.
15    (33) On and after July 1, 2003 and through June 30, 2004,
16the use in this State of motor vehicles of the second division
17with a gross vehicle weight in excess of 8,000 pounds and that
18are subject to the commercial distribution fee imposed under
19Section 3-815.1 of the Illinois Vehicle Code. Beginning on July
201, 2004 and through June 30, 2005, the use in this State of
21motor vehicles of the second division: (i) with a gross vehicle
22weight rating in excess of 8,000 pounds; (ii) that are subject
23to the commercial distribution fee imposed under Section
243-815.1 of the Illinois Vehicle Code; and (iii) that are
25primarily used for commercial purposes. Through June 30, 2005,
26this exemption applies to repair and replacement parts added

 

 

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1after the initial purchase of such a motor vehicle if that
2motor vehicle is used in a manner that would qualify for the
3rolling stock exemption otherwise provided for in this Act. For
4purposes of this paragraph, the term "used for commercial
5purposes" means the transportation of persons or property in
6furtherance of any commercial or industrial enterprise,
7whether for-hire or not.
8    (34) Beginning January 1, 2008, tangible personal property
9used in the construction or maintenance of a community water
10supply, as defined under Section 3.145 of the Environmental
11Protection Act, that is operated by a not-for-profit
12corporation that holds a valid water supply permit issued under
13Title IV of the Environmental Protection Act. This paragraph is
14exempt from the provisions of Section 3-90.
15    (35) Beginning January 1, 2010, materials, parts,
16equipment, components, and furnishings incorporated into or
17upon an aircraft as part of the modification, refurbishment,
18completion, replacement, repair, or maintenance of the
19aircraft. This exemption includes consumable supplies used in
20the modification, refurbishment, completion, replacement,
21repair, and maintenance of aircraft, but excludes any
22materials, parts, equipment, components, and consumable
23supplies used in the modification, replacement, repair, and
24maintenance of aircraft engines or power plants, whether such
25engines or power plants are installed or uninstalled upon any
26such aircraft. "Consumable supplies" include, but are not

 

 

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1limited to, adhesive, tape, sandpaper, general purpose
2lubricants, cleaning solution, latex gloves, and protective
3films. This exemption applies only to the use of qualifying
4tangible personal property by persons who modify, refurbish,
5complete, repair, replace, or maintain aircraft and who (i)
6hold an Air Agency Certificate and are empowered to operate an
7approved repair station by the Federal Aviation
8Administration, (ii) have a Class IV Rating, and (iii) conduct
9operations in accordance with Part 145 of the Federal Aviation
10Regulations. The exemption does not include aircraft operated
11by a commercial air carrier providing scheduled passenger air
12service pursuant to authority issued under Part 121 or Part 129
13of the Federal Aviation Regulations. The changes made to this
14paragraph (35) by Public Act 98-534 are declarative of existing
15law.
16    (36) Tangible personal property purchased by a
17public-facilities corporation, as described in Section
1811-65-10 of the Illinois Municipal Code, for purposes of
19constructing or furnishing a municipal convention hall, but
20only if the legal title to the municipal convention hall is
21transferred to the municipality without any further
22consideration by or on behalf of the municipality at the time
23of the completion of the municipal convention hall or upon the
24retirement or redemption of any bonds or other debt instruments
25issued by the public-facilities corporation in connection with
26the development of the municipal convention hall. This

 

 

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1exemption includes existing public-facilities corporations as
2provided in Section 11-65-25 of the Illinois Municipal Code.
3This paragraph is exempt from the provisions of Section 3-90.
4    (37) Beginning January 1, 2017, menstrual pads, tampons,
5and menstrual cups.
6(Source: P.A. 98-104, eff. 7-22-13; 98-422, eff. 8-16-13;
798-456, eff. 8-16-13; 98-534, eff. 8-23-13; 98-574, eff.
81-1-14; 98-583, eff. 1-1-14; 98-756, eff. 7-16-14; 99-180, eff.
97-29-15; 99-855, eff. 8-19-16.)
 
10    (35 ILCS 105/3-50)  (from Ch. 120, par. 439.3-50)
11    Sec. 3-50. Manufacturing and assembly exemption. The
12manufacturing and assembling machinery and equipment exemption
13includes machinery and equipment that replaces machinery and
14equipment in an existing manufacturing facility as well as
15machinery and equipment that are for use in an expanded or new
16manufacturing facility. The machinery and equipment exemption
17also includes machinery and equipment used in the general
18maintenance or repair of exempt machinery and equipment or for
19in-house manufacture of exempt machinery and equipment. The
20machinery and equipment exemption does not include machinery
21and equipment used in (i) the generation of electricity for
22wholesale or retail sale; (ii) the generation or treatment of
23natural or artificial gas for wholesale or retail sale that is
24delivered to customers through pipes, pipelines, or mains; or
25(iii) the treatment of water for wholesale or retail sale that

 

 

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1is delivered to customers through pipes, pipelines, or mains.
2The provisions of this amendatory Act of the 98th General
3Assembly are declaratory of existing law as to the meaning and
4scope of this exemption. For the purposes of this exemption,
5terms have the following meanings:
6        (1) "Manufacturing process" means the production of an
7    article of tangible personal property, whether the article
8    is a finished product or an article for use in the process
9    of manufacturing or assembling a different article of
10    tangible personal property, by a procedure commonly
11    regarded as manufacturing, processing, fabricating, or
12    refining that changes some existing material into a
13    material with a different form, use, or name. In relation
14    to a recognized integrated business composed of a series of
15    operations that collectively constitute manufacturing, or
16    individually constitute manufacturing operations, the
17    manufacturing process commences with the first operation
18    or stage of production in the series and does not end until
19    the completion of the final product in the last operation
20    or stage of production in the series. For purposes of this
21    exemption, photoprocessing is a manufacturing process of
22    tangible personal property for wholesale or retail sale.
23        (2) "Assembling process" means the production of an
24    article of tangible personal property, whether the article
25    is a finished product or an article for use in the process
26    of manufacturing or assembling a different article of

 

 

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1    tangible personal property, by the combination of existing
2    materials in a manner commonly regarded as assembling that
3    results in an article or material of a different form, use,
4    or name.
5        (3) "Machinery" means major mechanical machines or
6    major components of those machines contributing to a
7    manufacturing or assembling process.
8        (4) "Equipment" includes an independent device or tool
9    separate from machinery but essential to an integrated
10    manufacturing or assembly process; including computers
11    used primarily in a manufacturer's computer assisted
12    design, computer assisted manufacturing (CAD/CAM) system;
13    any subunit or assembly comprising a component of any
14    machinery or auxiliary, adjunct, or attachment parts of
15    machinery, such as tools, dies, jigs, fixtures, patterns,
16    and molds; and any parts that require periodic replacement
17    in the course of normal operation; but does not include
18    hand tools. Equipment includes chemicals or chemicals
19    acting as catalysts but only if the chemicals or chemicals
20    acting as catalysts effect a direct and immediate change
21    upon a product being manufactured or assembled for
22    wholesale or retail sale or lease.
23        (5) "Production related tangible personal property"
24    means all tangible personal property that is used or
25    consumed by the purchaser in a manufacturing facility in
26    which a manufacturing process takes place and includes,

 

 

HB3430- 21 -LRB100 10181 HLH 20362 b

1    without limitation, tangible personal property that is
2    purchased for incorporation into real estate within a
3    manufacturing facility, supplies and consumables used in a
4    manufacturing facility including fuels, coolants,
5    solvents, oils, lubricants, and adhesives, hand tools,
6    protective apparel, and fire and safety equipment used or
7    consumed within a manufacturing facility, and tangible
8    personal property that is used or consumed in activities
9    such as research and development, preproduction material
10    handling, receiving, quality control, inventory control,
11    storage, staging, and packaging for shipping and
12    transportation purposes. "Production related tangible
13    personal property" does not include (i) tangible personal
14    property that is used, within or without a manufacturing
15    facility, in sales, purchasing, accounting, fiscal
16    management, marketing, personnel recruitment or selection,
17    or landscaping or (ii) tangible personal property that is
18    required to be titled or registered with a department,
19    agency, or unit of federal, State, or local government.
20    The manufacturing and assembling machinery and equipment
21exemption includes production related tangible personal
22property that is purchased on or after July 1, 2007 and on or
23before June 30, 2008 and on or after July 1, 2017. The
24exemption for production related tangible personal property
25purchased on or after July 1, 2007 and on or before June 30,
262008 is subject to both of the following limitations:

 

 

HB3430- 22 -LRB100 10181 HLH 20362 b

1        (1) The maximum amount of the exemption for any one
2    taxpayer may not exceed 5% of the purchase price of
3    production related tangible personal property that is
4    purchased on or after July 1, 2007 and on or before June
5    30, 2008. A credit under Section 3-85 of this Act may not
6    be earned by the purchase of production related tangible
7    personal property for which an exemption is received under
8    this Section.
9        (2) The maximum aggregate amount of the exemptions for
10    production related tangible personal property awarded
11    under this Act and the Retailers' Occupation Tax Act to all
12    taxpayers purchased on or after July 1, 2007 and before
13    June 30, 2008 may not exceed $10,000,000. If the claims for
14    the exemption exceed $10,000,000, then the Department
15    shall reduce the amount of the exemption to each taxpayer
16    on a pro rata basis.
17The Department shall may adopt rules to implement and
18administer the exemption for production related tangible
19personal property.
20    The manufacturing and assembling machinery and equipment
21exemption includes the sale of materials to a purchaser who
22produces exempted types of machinery, equipment, or tools and
23who rents or leases that machinery, equipment, or tools to a
24manufacturer of tangible personal property. This exemption
25also includes the sale of materials to a purchaser who
26manufactures those materials into an exempted type of

 

 

HB3430- 23 -LRB100 10181 HLH 20362 b

1machinery, equipment, or tools that the purchaser uses himself
2or herself in the manufacturing of tangible personal property.
3This exemption includes the sale of exempted types of machinery
4or equipment to a purchaser who is not the manufacturer, but
5who rents or leases the use of the property to a manufacturer.
6The purchaser of the machinery and equipment who has an active
7resale registration number shall furnish that number to the
8seller at the time of purchase. A user of the machinery,
9equipment, or tools without an active resale registration
10number shall prepare a certificate of exemption for each
11transaction stating facts establishing the exemption for that
12transaction, and that certificate shall be available to the
13Department for inspection or audit. The Department shall
14prescribe the form of the certificate. Informal rulings,
15opinions, or letters issued by the Department in response to an
16inquiry or request for an opinion from any person regarding the
17coverage and applicability of this exemption to specific
18devices shall be published, maintained as a public record, and
19made available for public inspection and copying. If the
20informal ruling, opinion, or letter contains trade secrets or
21other confidential information, where possible, the Department
22shall delete that information before publication. Whenever
23informal rulings, opinions, or letters contain a policy of
24general applicability, the Department shall formulate and
25adopt that policy as a rule in accordance with the Illinois
26Administrative Procedure Act.

 

 

HB3430- 24 -LRB100 10181 HLH 20362 b

1(Source: P.A. 98-583, eff. 1-1-14.)
 
2    Section 10. The Service Use Tax Act is amended by changing
3Section 2 as follows:
 
4    (35 ILCS 110/2)  (from Ch. 120, par. 439.32)
5    Sec. 2. Definitions.
6    "Use" means the exercise by any person of any right or
7power over tangible personal property incident to the ownership
8of that property, but does not include the sale or use for
9demonstration by him of that property in any form as tangible
10personal property in the regular course of business. "Use" does
11not mean the interim use of tangible personal property nor the
12physical incorporation of tangible personal property, as an
13ingredient or constituent, into other tangible personal
14property, (a) which is sold in the regular course of business
15or (b) which the person incorporating such ingredient or
16constituent therein has undertaken at the time of such purchase
17to cause to be transported in interstate commerce to
18destinations outside the State of Illinois.
19    "Purchased from a serviceman" means the acquisition of the
20ownership of, or title to, tangible personal property through a
21sale of service.
22    "Purchaser" means any person who, through a sale of
23service, acquires the ownership of, or title to, any tangible
24personal property.

 

 

HB3430- 25 -LRB100 10181 HLH 20362 b

1    "Cost price" means the consideration paid by the serviceman
2for a purchase valued in money, whether paid in money or
3otherwise, including cash, credits and services, and shall be
4determined without any deduction on account of the supplier's
5cost of the property sold or on account of any other expense
6incurred by the supplier. When a serviceman contracts out part
7or all of the services required in his sale of service, it
8shall be presumed that the cost price to the serviceman of the
9property transferred to him or her by his or her subcontractor
10is equal to 50% of the subcontractor's charges to the
11serviceman in the absence of proof of the consideration paid by
12the subcontractor for the purchase of such property.
13    "Selling price" means the consideration for a sale valued
14in money whether received in money or otherwise, including
15cash, credits and service, and shall be determined without any
16deduction on account of the serviceman's cost of the property
17sold, the cost of materials used, labor or service cost or any
18other expense whatsoever, but does not include interest or
19finance charges which appear as separate items on the bill of
20sale or sales contract nor charges that are added to prices by
21sellers on account of the seller's duty to collect, from the
22purchaser, the tax that is imposed by this Act.
23    "Department" means the Department of Revenue.
24    "Person" means any natural individual, firm, partnership,
25association, joint stock company, joint venture, public or
26private corporation, limited liability company, and any

 

 

HB3430- 26 -LRB100 10181 HLH 20362 b

1receiver, executor, trustee, guardian or other representative
2appointed by order of any court.
3    "Sale of service" means any transaction except:
4        (1) a retail sale of tangible personal property taxable
5    under the Retailers' Occupation Tax Act or under the Use
6    Tax Act.
7        (2) a sale of tangible personal property for the
8    purpose of resale made in compliance with Section 2c of the
9    Retailers' Occupation Tax Act.
10        (3) except as hereinafter provided, a sale or transfer
11    of tangible personal property as an incident to the
12    rendering of service for or by any governmental body, or
13    for or by any corporation, society, association,
14    foundation or institution organized and operated
15    exclusively for charitable, religious or educational
16    purposes or any not-for-profit corporation, society,
17    association, foundation, institution or organization which
18    has no compensated officers or employees and which is
19    organized and operated primarily for the recreation of
20    persons 55 years of age or older. A limited liability
21    company may qualify for the exemption under this paragraph
22    only if the limited liability company is organized and
23    operated exclusively for educational purposes.
24        (4) a sale or transfer of tangible personal property as
25    an incident to the rendering of service for interstate
26    carriers for hire for use as rolling stock moving in

 

 

HB3430- 27 -LRB100 10181 HLH 20362 b

1    interstate commerce or by lessors under a lease of one year
2    or longer, executed or in effect at the time of purchase of
3    personal property, to interstate carriers for hire for use
4    as rolling stock moving in interstate commerce so long as
5    so used by such interstate carriers for hire, and equipment
6    operated by a telecommunications provider, licensed as a
7    common carrier by the Federal Communications Commission,
8    which is permanently installed in or affixed to aircraft
9    moving in interstate commerce.
10        (4a) a sale or transfer of tangible personal property
11    as an incident to the rendering of service for owners,
12    lessors, or shippers of tangible personal property which is
13    utilized by interstate carriers for hire for use as rolling
14    stock moving in interstate commerce so long as so used by
15    interstate carriers for hire, and equipment operated by a
16    telecommunications provider, licensed as a common carrier
17    by the Federal Communications Commission, which is
18    permanently installed in or affixed to aircraft moving in
19    interstate commerce.
20        (4a-5) on and after July 1, 2003 and through June 30,
21    2004, a sale or transfer of a motor vehicle of the second
22    division with a gross vehicle weight in excess of 8,000
23    pounds as an incident to the rendering of service if that
24    motor vehicle is subject to the commercial distribution fee
25    imposed under Section 3-815.1 of the Illinois Vehicle Code.
26    Beginning on July 1, 2004 and through June 30, 2005, the

 

 

HB3430- 28 -LRB100 10181 HLH 20362 b

1    use in this State of motor vehicles of the second division:
2    (i) with a gross vehicle weight rating in excess of 8,000
3    pounds; (ii) that are subject to the commercial
4    distribution fee imposed under Section 3-815.1 of the
5    Illinois Vehicle Code; and (iii) that are primarily used
6    for commercial purposes. Through June 30, 2005, this
7    exemption applies to repair and replacement parts added
8    after the initial purchase of such a motor vehicle if that
9    motor vehicle is used in a manner that would qualify for
10    the rolling stock exemption otherwise provided for in this
11    Act. For purposes of this paragraph, "used for commercial
12    purposes" means the transportation of persons or property
13    in furtherance of any commercial or industrial enterprise
14    whether for-hire or not.
15        (5) a sale or transfer of machinery and equipment used
16    primarily in the process of the manufacturing or
17    assembling, either in an existing, an expanded or a new
18    manufacturing facility, of tangible personal property for
19    wholesale or retail sale or lease, whether such sale or
20    lease is made directly by the manufacturer or by some other
21    person, whether the materials used in the process are owned
22    by the manufacturer or some other person, or whether such
23    sale or lease is made apart from or as an incident to the
24    seller's engaging in a service occupation and the
25    applicable tax is a Service Use Tax or Service Occupation
26    Tax, rather than Use Tax or Retailers' Occupation Tax. The

 

 

HB3430- 29 -LRB100 10181 HLH 20362 b

1    exemption provided by this paragraph (5) includes
2    production related tangible personal property, as defined
3    in Section 3-50 of the Use Tax Act, purchased on or after
4    July 1, 2017. The exemption provided by this paragraph (5)
5    does not include machinery and equipment used in (i) the
6    generation of electricity for wholesale or retail sale;
7    (ii) the generation or treatment of natural or artificial
8    gas for wholesale or retail sale that is delivered to
9    customers through pipes, pipelines, or mains; or (iii) the
10    treatment of water for wholesale or retail sale that is
11    delivered to customers through pipes, pipelines, or mains.
12    The provisions of this amendatory Act of the 98th General
13    Assembly are declaratory of existing law as to the meaning
14    and scope of this exemption.
15        (5a) the repairing, reconditioning or remodeling, for
16    a common carrier by rail, of tangible personal property
17    which belongs to such carrier for hire, and as to which
18    such carrier receives the physical possession of the
19    repaired, reconditioned or remodeled item of tangible
20    personal property in Illinois, and which such carrier
21    transports, or shares with another common carrier in the
22    transportation of such property, out of Illinois on a
23    standard uniform bill of lading showing the person who
24    repaired, reconditioned or remodeled the property to a
25    destination outside Illinois, for use outside Illinois.
26        (5b) a sale or transfer of tangible personal property

 

 

HB3430- 30 -LRB100 10181 HLH 20362 b

1    which is produced by the seller thereof on special order in
2    such a way as to have made the applicable tax the Service
3    Occupation Tax or the Service Use Tax, rather than the
4    Retailers' Occupation Tax or the Use Tax, for an interstate
5    carrier by rail which receives the physical possession of
6    such property in Illinois, and which transports such
7    property, or shares with another common carrier in the
8    transportation of such property, out of Illinois on a
9    standard uniform bill of lading showing the seller of the
10    property as the shipper or consignor of such property to a
11    destination outside Illinois, for use outside Illinois.
12        (6) until July 1, 2003, a sale or transfer of
13    distillation machinery and equipment, sold as a unit or kit
14    and assembled or installed by the retailer, which machinery
15    and equipment is certified by the user to be used only for
16    the production of ethyl alcohol that will be used for
17    consumption as motor fuel or as a component of motor fuel
18    for the personal use of such user and not subject to sale
19    or resale.
20        (7) at the election of any serviceman not required to
21    be otherwise registered as a retailer under Section 2a of
22    the Retailers' Occupation Tax Act, made for each fiscal
23    year sales of service in which the aggregate annual cost
24    price of tangible personal property transferred as an
25    incident to the sales of service is less than 35%, or 75%
26    in the case of servicemen transferring prescription drugs

 

 

HB3430- 31 -LRB100 10181 HLH 20362 b

1    or servicemen engaged in graphic arts production, of the
2    aggregate annual total gross receipts from all sales of
3    service. The purchase of such tangible personal property by
4    the serviceman shall be subject to tax under the Retailers'
5    Occupation Tax Act and the Use Tax Act. However, if a
6    primary serviceman who has made the election described in
7    this paragraph subcontracts service work to a secondary
8    serviceman who has also made the election described in this
9    paragraph, the primary serviceman does not incur a Use Tax
10    liability if the secondary serviceman (i) has paid or will
11    pay Use Tax on his or her cost price of any tangible
12    personal property transferred to the primary serviceman
13    and (ii) certifies that fact in writing to the primary
14    serviceman.
15    Tangible personal property transferred incident to the
16completion of a maintenance agreement is exempt from the tax
17imposed pursuant to this Act.
18    Exemption (5) also includes machinery and equipment used in
19the general maintenance or repair of such exempt machinery and
20equipment or for in-house manufacture of exempt machinery and
21equipment. The machinery and equipment exemption does not
22include machinery and equipment used in (i) the generation of
23electricity for wholesale or retail sale; (ii) the generation
24or treatment of natural or artificial gas for wholesale or
25retail sale that is delivered to customers through pipes,
26pipelines, or mains; or (iii) the treatment of water for

 

 

HB3430- 32 -LRB100 10181 HLH 20362 b

1wholesale or retail sale that is delivered to customers through
2pipes, pipelines, or mains. The provisions of this amendatory
3Act of the 98th General Assembly are declaratory of existing
4law as to the meaning and scope of this exemption. For the
5purposes of exemption (5), each of these terms shall have the
6following meanings: (1) "manufacturing process" shall mean the
7production of any article of tangible personal property,
8whether such article is a finished product or an article for
9use in the process of manufacturing or assembling a different
10article of tangible personal property, by procedures commonly
11regarded as manufacturing, processing, fabricating, or
12refining which changes some existing material or materials into
13a material with a different form, use or name. In relation to a
14recognized integrated business composed of a series of
15operations which collectively constitute manufacturing, or
16individually constitute manufacturing operations, the
17manufacturing process shall be deemed to commence with the
18first operation or stage of production in the series, and shall
19not be deemed to end until the completion of the final product
20in the last operation or stage of production in the series; and
21further, for purposes of exemption (5), photoprocessing is
22deemed to be a manufacturing process of tangible personal
23property for wholesale or retail sale; (2) "assembling process"
24shall mean the production of any article of tangible personal
25property, whether such article is a finished product or an
26article for use in the process of manufacturing or assembling a

 

 

HB3430- 33 -LRB100 10181 HLH 20362 b

1different article of tangible personal property, by the
2combination of existing materials in a manner commonly regarded
3as assembling which results in a material of a different form,
4use or name; (3) "machinery" shall mean major mechanical
5machines or major components of such machines contributing to a
6manufacturing or assembling process; and (4) "equipment" shall
7include any independent device or tool separate from any
8machinery but essential to an integrated manufacturing or
9assembly process; including computers used primarily in a
10manufacturer's computer assisted design, computer assisted
11manufacturing (CAD/CAM) system; or any subunit or assembly
12comprising a component of any machinery or auxiliary, adjunct
13or attachment parts of machinery, such as tools, dies, jigs,
14fixtures, patterns and molds; or any parts which require
15periodic replacement in the course of normal operation; but
16shall not include hand tools. Equipment includes chemicals or
17chemicals acting as catalysts but only if the chemicals or
18chemicals acting as catalysts effect a direct and immediate
19change upon a product being manufactured or assembled for
20wholesale or retail sale or lease. The purchaser of such
21machinery and equipment who has an active resale registration
22number shall furnish such number to the seller at the time of
23purchase. The user of such machinery and equipment and tools
24without an active resale registration number shall prepare a
25certificate of exemption for each transaction stating facts
26establishing the exemption for that transaction, which

 

 

HB3430- 34 -LRB100 10181 HLH 20362 b

1certificate shall be available to the Department for inspection
2or audit. The Department shall prescribe the form of the
3certificate.
4    Any informal rulings, opinions or letters issued by the
5Department in response to an inquiry or request for any opinion
6from any person regarding the coverage and applicability of
7exemption (5) to specific devices shall be published,
8maintained as a public record, and made available for public
9inspection and copying. If the informal ruling, opinion or
10letter contains trade secrets or other confidential
11information, where possible the Department shall delete such
12information prior to publication. Whenever such informal
13rulings, opinions, or letters contain any policy of general
14applicability, the Department shall formulate and adopt such
15policy as a rule in accordance with the provisions of the
16Illinois Administrative Procedure Act.
17    On and after July 1, 1987, no entity otherwise eligible
18under exemption (3) of this Section shall make tax free
19purchases unless it has an active exemption identification
20number issued by the Department.
21    The purchase, employment and transfer of such tangible
22personal property as newsprint and ink for the primary purpose
23of conveying news (with or without other information) is not a
24purchase, use or sale of service or of tangible personal
25property within the meaning of this Act.
26    "Serviceman" means any person who is engaged in the

 

 

HB3430- 35 -LRB100 10181 HLH 20362 b

1occupation of making sales of service.
2    "Sale at retail" means "sale at retail" as defined in the
3Retailers' Occupation Tax Act.
4    "Supplier" means any person who makes sales of tangible
5personal property to servicemen for the purpose of resale as an
6incident to a sale of service.
7    "Serviceman maintaining a place of business in this State",
8or any like term, means and includes any serviceman:
9        1. having or maintaining within this State, directly or
10    by a subsidiary, an office, distribution house, sales
11    house, warehouse or other place of business, or any agent
12    or other representative operating within this State under
13    the authority of the serviceman or its subsidiary,
14    irrespective of whether such place of business or agent or
15    other representative is located here permanently or
16    temporarily, or whether such serviceman or subsidiary is
17    licensed to do business in this State;
18        1.1. having a contract with a person located in this
19    State under which the person, for a commission or other
20    consideration based on the sale of service by the
21    serviceman, directly or indirectly refers potential
22    customers to the serviceman by providing to the potential
23    customers a promotional code or other mechanism that allows
24    the serviceman to track purchases referred by such persons.
25    Examples of mechanisms that allow the serviceman to track
26    purchases referred by such persons include but are not

 

 

HB3430- 36 -LRB100 10181 HLH 20362 b

1    limited to the use of a link on the person's Internet
2    website, promotional codes distributed through the
3    person's hand-delivered or mailed material, and
4    promotional codes distributed by the person through radio
5    or other broadcast media. The provisions of this paragraph
6    1.1 shall apply only if the cumulative gross receipts from
7    sales of service by the serviceman to customers who are
8    referred to the serviceman by all persons in this State
9    under such contracts exceed $10,000 during the preceding 4
10    quarterly periods ending on the last day of March, June,
11    September, and December; a serviceman meeting the
12    requirements of this paragraph 1.1 shall be presumed to be
13    maintaining a place of business in this State but may rebut
14    this presumption by submitting proof that the referrals or
15    other activities pursued within this State by such persons
16    were not sufficient to meet the nexus standards of the
17    United States Constitution during the preceding 4
18    quarterly periods;
19        1.2. beginning July 1, 2011, having a contract with a
20    person located in this State under which:
21            A. the serviceman sells the same or substantially
22        similar line of services as the person located in this
23        State and does so using an identical or substantially
24        similar name, trade name, or trademark as the person
25        located in this State; and
26            B. the serviceman provides a commission or other

 

 

HB3430- 37 -LRB100 10181 HLH 20362 b

1        consideration to the person located in this State based
2        upon the sale of services by the serviceman.
3    The provisions of this paragraph 1.2 shall apply only if
4    the cumulative gross receipts from sales of service by the
5    serviceman to customers in this State under all such
6    contracts exceed $10,000 during the preceding 4 quarterly
7    periods ending on the last day of March, June, September,
8    and December;
9        2. soliciting orders for tangible personal property by
10    means of a telecommunication or television shopping system
11    (which utilizes toll free numbers) which is intended by the
12    retailer to be broadcast by cable television or other means
13    of broadcasting, to consumers located in this State;
14        3. pursuant to a contract with a broadcaster or
15    publisher located in this State, soliciting orders for
16    tangible personal property by means of advertising which is
17    disseminated primarily to consumers located in this State
18    and only secondarily to bordering jurisdictions;
19        4. soliciting orders for tangible personal property by
20    mail if the solicitations are substantial and recurring and
21    if the retailer benefits from any banking, financing, debt
22    collection, telecommunication, or marketing activities
23    occurring in this State or benefits from the location in
24    this State of authorized installation, servicing, or
25    repair facilities;
26        5. being owned or controlled by the same interests

 

 

HB3430- 38 -LRB100 10181 HLH 20362 b

1    which own or control any retailer engaging in business in
2    the same or similar line of business in this State;
3        6. having a franchisee or licensee operating under its
4    trade name if the franchisee or licensee is required to
5    collect the tax under this Section;
6        7. pursuant to a contract with a cable television
7    operator located in this State, soliciting orders for
8    tangible personal property by means of advertising which is
9    transmitted or distributed over a cable television system
10    in this State; or
11        8. engaging in activities in Illinois, which
12    activities in the state in which the supply business
13    engaging in such activities is located would constitute
14    maintaining a place of business in that state.
15(Source: P.A. 98-583, eff. 1-1-14; 98-1089, eff. 1-1-15.)
 
16    Section 15. The Service Occupation Tax Act is amended by
17changing Section 2 as follows:
 
18    (35 ILCS 115/2)  (from Ch. 120, par. 439.102)
19    Sec. 2. "Transfer" means any transfer of the title to
20property or of the ownership of property whether or not the
21transferor retains title as security for the payment of amounts
22due him from the transferee.
23    "Cost Price" means the consideration paid by the serviceman
24for a purchase valued in money, whether paid in money or

 

 

HB3430- 39 -LRB100 10181 HLH 20362 b

1otherwise, including cash, credits and services, and shall be
2determined without any deduction on account of the supplier's
3cost of the property sold or on account of any other expense
4incurred by the supplier. When a serviceman contracts out part
5or all of the services required in his sale of service, it
6shall be presumed that the cost price to the serviceman of the
7property transferred to him by his or her subcontractor is
8equal to 50% of the subcontractor's charges to the serviceman
9in the absence of proof of the consideration paid by the
10subcontractor for the purchase of such property.
11    "Department" means the Department of Revenue.
12    "Person" means any natural individual, firm, partnership,
13association, joint stock company, joint venture, public or
14private corporation, limited liability company, and any
15receiver, executor, trustee, guardian or other representative
16appointed by order of any court.
17    "Sale of Service" means any transaction except:
18    (a) A retail sale of tangible personal property taxable
19under the Retailers' Occupation Tax Act or under the Use Tax
20Act.
21    (b) A sale of tangible personal property for the purpose of
22resale made in compliance with Section 2c of the Retailers'
23Occupation Tax Act.
24    (c) Except as hereinafter provided, a sale or transfer of
25tangible personal property as an incident to the rendering of
26service for or by any governmental body or for or by any

 

 

HB3430- 40 -LRB100 10181 HLH 20362 b

1corporation, society, association, foundation or institution
2organized and operated exclusively for charitable, religious
3or educational purposes or any not-for-profit corporation,
4society, association, foundation, institution or organization
5which has no compensated officers or employees and which is
6organized and operated primarily for the recreation of persons
755 years of age or older. A limited liability company may
8qualify for the exemption under this paragraph only if the
9limited liability company is organized and operated
10exclusively for educational purposes.
11    (d) A sale or transfer of tangible personal property as an
12incident to the rendering of service for interstate carriers
13for hire for use as rolling stock moving in interstate commerce
14or lessors under leases of one year or longer, executed or in
15effect at the time of purchase, to interstate carriers for hire
16for use as rolling stock moving in interstate commerce, and
17equipment operated by a telecommunications provider, licensed
18as a common carrier by the Federal Communications Commission,
19which is permanently installed in or affixed to aircraft moving
20in interstate commerce.
21    (d-1) A sale or transfer of tangible personal property as
22an incident to the rendering of service for owners, lessors or
23shippers of tangible personal property which is utilized by
24interstate carriers for hire for use as rolling stock moving in
25interstate commerce, and equipment operated by a
26telecommunications provider, licensed as a common carrier by

 

 

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1the Federal Communications Commission, which is permanently
2installed in or affixed to aircraft moving in interstate
3commerce.
4    (d-1.1) On and after July 1, 2003 and through June 30,
52004, a sale or transfer of a motor vehicle of the second
6division with a gross vehicle weight in excess of 8,000 pounds
7as an incident to the rendering of service if that motor
8vehicle is subject to the commercial distribution fee imposed
9under Section 3-815.1 of the Illinois Vehicle Code. Beginning
10on July 1, 2004 and through June 30, 2005, the use in this
11State of motor vehicles of the second division: (i) with a
12gross vehicle weight rating in excess of 8,000 pounds; (ii)
13that are subject to the commercial distribution fee imposed
14under Section 3-815.1 of the Illinois Vehicle Code; and (iii)
15that are primarily used for commercial purposes. Through June
1630, 2005, this exemption applies to repair and replacement
17parts added after the initial purchase of such a motor vehicle
18if that motor vehicle is used in a manner that would qualify
19for the rolling stock exemption otherwise provided for in this
20Act. For purposes of this paragraph, "used for commercial
21purposes" means the transportation of persons or property in
22furtherance of any commercial or industrial enterprise whether
23for-hire or not.
24    (d-2) The repairing, reconditioning or remodeling, for a
25common carrier by rail, of tangible personal property which
26belongs to such carrier for hire, and as to which such carrier

 

 

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1receives the physical possession of the repaired,
2reconditioned or remodeled item of tangible personal property
3in Illinois, and which such carrier transports, or shares with
4another common carrier in the transportation of such property,
5out of Illinois on a standard uniform bill of lading showing
6the person who repaired, reconditioned or remodeled the
7property as the shipper or consignor of such property to a
8destination outside Illinois, for use outside Illinois.
9    (d-3) A sale or transfer of tangible personal property
10which is produced by the seller thereof on special order in
11such a way as to have made the applicable tax the Service
12Occupation Tax or the Service Use Tax, rather than the
13Retailers' Occupation Tax or the Use Tax, for an interstate
14carrier by rail which receives the physical possession of such
15property in Illinois, and which transports such property, or
16shares with another common carrier in the transportation of
17such property, out of Illinois on a standard uniform bill of
18lading showing the seller of the property as the shipper or
19consignor of such property to a destination outside Illinois,
20for use outside Illinois.
21    (d-4) Until January 1, 1997, a sale, by a registered
22serviceman paying tax under this Act to the Department, of
23special order printed materials delivered outside Illinois and
24which are not returned to this State, if delivery is made by
25the seller or agent of the seller, including an agent who
26causes the product to be delivered outside Illinois by a common

 

 

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1carrier or the U.S. postal service.
2    (e) A sale or transfer of machinery and equipment used
3primarily in the process of the manufacturing or assembling,
4either in an existing, an expanded or a new manufacturing
5facility, of tangible personal property for wholesale or retail
6sale or lease, whether such sale or lease is made directly by
7the manufacturer or by some other person, whether the materials
8used in the process are owned by the manufacturer or some other
9person, or whether such sale or lease is made apart from or as
10an incident to the seller's engaging in a service occupation
11and the applicable tax is a Service Occupation Tax or Service
12Use Tax, rather than Retailers' Occupation Tax or Use Tax. The
13exemption provided by this paragraph (e) includes production
14related tangible personal property, as defined in Section 3-50
15of the Use Tax Act, purchased on or after July 1, 2017. The
16exemption provided by this paragraph (e) does not include
17machinery and equipment used in (i) the generation of
18electricity for wholesale or retail sale; (ii) the generation
19or treatment of natural or artificial gas for wholesale or
20retail sale that is delivered to customers through pipes,
21pipelines, or mains; or (iii) the treatment of water for
22wholesale or retail sale that is delivered to customers through
23pipes, pipelines, or mains. The provisions of this amendatory
24Act of the 98th General Assembly are declaratory of existing
25law as to the meaning and scope of this exemption.
26    (f) Until July 1, 2003, the sale or transfer of

 

 

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1distillation machinery and equipment, sold as a unit or kit and
2assembled or installed by the retailer, which machinery and
3equipment is certified by the user to be used only for the
4production of ethyl alcohol that will be used for consumption
5as motor fuel or as a component of motor fuel for the personal
6use of such user and not subject to sale or resale.
7    (g) At the election of any serviceman not required to be
8otherwise registered as a retailer under Section 2a of the
9Retailers' Occupation Tax Act, made for each fiscal year sales
10of service in which the aggregate annual cost price of tangible
11personal property transferred as an incident to the sales of
12service is less than 35% (75% in the case of servicemen
13transferring prescription drugs or servicemen engaged in
14graphic arts production) of the aggregate annual total gross
15receipts from all sales of service. The purchase of such
16tangible personal property by the serviceman shall be subject
17to tax under the Retailers' Occupation Tax Act and the Use Tax
18Act. However, if a primary serviceman who has made the election
19described in this paragraph subcontracts service work to a
20secondary serviceman who has also made the election described
21in this paragraph, the primary serviceman does not incur a Use
22Tax liability if the secondary serviceman (i) has paid or will
23pay Use Tax on his or her cost price of any tangible personal
24property transferred to the primary serviceman and (ii)
25certifies that fact in writing to the primary serviceman.
26    Tangible personal property transferred incident to the

 

 

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1completion of a maintenance agreement is exempt from the tax
2imposed pursuant to this Act.
3    Exemption (e) also includes machinery and equipment used in
4the general maintenance or repair of such exempt machinery and
5equipment or for in-house manufacture of exempt machinery and
6equipment. The machinery and equipment exemption does not
7include machinery and equipment used in (i) the generation of
8electricity for wholesale or retail sale; (ii) the generation
9or treatment of natural or artificial gas for wholesale or
10retail sale that is delivered to customers through pipes,
11pipelines, or mains; or (iii) the treatment of water for
12wholesale or retail sale that is delivered to customers through
13pipes, pipelines, or mains. The provisions of this amendatory
14Act of the 98th General Assembly are declaratory of existing
15law as to the meaning and scope of this exemption. For the
16purposes of exemption (e), each of these terms shall have the
17following meanings: (1) "manufacturing process" shall mean the
18production of any article of tangible personal property,
19whether such article is a finished product or an article for
20use in the process of manufacturing or assembling a different
21article of tangible personal property, by procedures commonly
22regarded as manufacturing, processing, fabricating, or
23refining which changes some existing material or materials into
24a material with a different form, use or name. In relation to a
25recognized integrated business composed of a series of
26operations which collectively constitute manufacturing, or

 

 

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1individually constitute manufacturing operations, the
2manufacturing process shall be deemed to commence with the
3first operation or stage of production in the series, and shall
4not be deemed to end until the completion of the final product
5in the last operation or stage of production in the series; and
6further for purposes of exemption (e), photoprocessing is
7deemed to be a manufacturing process of tangible personal
8property for wholesale or retail sale; (2) "assembling process"
9shall mean the production of any article of tangible personal
10property, whether such article is a finished product or an
11article for use in the process of manufacturing or assembling a
12different article of tangible personal property, by the
13combination of existing materials in a manner commonly regarded
14as assembling which results in a material of a different form,
15use or name; (3) "machinery" shall mean major mechanical
16machines or major components of such machines contributing to a
17manufacturing or assembling process; and (4) "equipment" shall
18include any independent device or tool separate from any
19machinery but essential to an integrated manufacturing or
20assembly process; including computers used primarily in a
21manufacturer's computer assisted design, computer assisted
22manufacturing (CAD/CAM) system; or any subunit or assembly
23comprising a component of any machinery or auxiliary, adjunct
24or attachment parts of machinery, such as tools, dies, jigs,
25fixtures, patterns and molds; or any parts which require
26periodic replacement in the course of normal operation; but

 

 

HB3430- 47 -LRB100 10181 HLH 20362 b

1shall not include hand tools. Equipment includes chemicals or
2chemicals acting as catalysts but only if the chemicals or
3chemicals acting as catalysts effect a direct and immediate
4change upon a product being manufactured or assembled for
5wholesale or retail sale or lease. The purchaser of such
6machinery and equipment who has an active resale registration
7number shall furnish such number to the seller at the time of
8purchase. The purchaser of such machinery and equipment and
9tools without an active resale registration number shall
10furnish to the seller a certificate of exemption for each
11transaction stating facts establishing the exemption for that
12transaction, which certificate shall be available to the
13Department for inspection or audit.
14    Except as provided in Section 2d of this Act, the rolling
15stock exemption applies to rolling stock used by an interstate
16carrier for hire, even just between points in Illinois, if such
17rolling stock transports, for hire, persons whose journeys or
18property whose shipments originate or terminate outside
19Illinois.
20    Any informal rulings, opinions or letters issued by the
21Department in response to an inquiry or request for any opinion
22from any person regarding the coverage and applicability of
23exemption (e) to specific devices shall be published,
24maintained as a public record, and made available for public
25inspection and copying. If the informal ruling, opinion or
26letter contains trade secrets or other confidential

 

 

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1information, where possible the Department shall delete such
2information prior to publication. Whenever such informal
3rulings, opinions, or letters contain any policy of general
4applicability, the Department shall formulate and adopt such
5policy as a rule in accordance with the provisions of the
6Illinois Administrative Procedure Act.
7    On and after July 1, 1987, no entity otherwise eligible
8under exemption (c) of this Section shall make tax free
9purchases unless it has an active exemption identification
10number issued by the Department.
11    "Serviceman" means any person who is engaged in the
12occupation of making sales of service.
13    "Sale at Retail" means "sale at retail" as defined in the
14Retailers' Occupation Tax Act.
15    "Supplier" means any person who makes sales of tangible
16personal property to servicemen for the purpose of resale as an
17incident to a sale of service.
18(Source: P.A. 98-583, eff. 1-1-14.)
 
19    Section 20. The Retailers' Occupation Tax Act is amended by
20changing Section 2-45 as follows:
 
21    (35 ILCS 120/2-45)  (from Ch. 120, par. 441-45)
22    Sec. 2-45. Manufacturing and assembly exemption. The
23manufacturing and assembly machinery and equipment exemption
24includes machinery and equipment that replaces machinery and

 

 

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1equipment in an existing manufacturing facility as well as
2machinery and equipment that are for use in an expanded or new
3manufacturing facility.
4    The machinery and equipment exemption also includes
5machinery and equipment used in the general maintenance or
6repair of exempt machinery and equipment or for in-house
7manufacture of exempt machinery and equipment. The machinery
8and equipment exemption does not include machinery and
9equipment used in (i) the generation of electricity for
10wholesale or retail sale; (ii) the generation or treatment of
11natural or artificial gas for wholesale or retail sale that is
12delivered to customers through pipes, pipelines, or mains; or
13(iii) the treatment of water for wholesale or retail sale that
14is delivered to customers through pipes, pipelines, or mains.
15The provisions of this amendatory Act of the 98th General
16Assembly are declaratory of existing law as to the meaning and
17scope of this exemption. For the purposes of this exemption,
18terms have the following meanings:
19        (1) "Manufacturing process" means the production of an
20    article of tangible personal property, whether the article
21    is a finished product or an article for use in the process
22    of manufacturing or assembling a different article of
23    tangible personal property, by a procedure commonly
24    regarded as manufacturing, processing, fabricating, or
25    refining that changes some existing material or materials
26    into a material with a different form, use, or name. In

 

 

HB3430- 50 -LRB100 10181 HLH 20362 b

1    relation to a recognized integrated business composed of a
2    series of operations that collectively constitute
3    manufacturing, or individually constitute manufacturing
4    operations, the manufacturing process commences with the
5    first operation or stage of production in the series and
6    does not end until the completion of the final product in
7    the last operation or stage of production in the series.
8    For purposes of this exemption, photoprocessing is a
9    manufacturing process of tangible personal property for
10    wholesale or retail sale.
11        (2) "Assembling process" means the production of an
12    article of tangible personal property, whether the article
13    is a finished product or an article for use in the process
14    of manufacturing or assembling a different article of
15    tangible personal property, by the combination of existing
16    materials in a manner commonly regarded as assembling that
17    results in a material of a different form, use, or name.
18        (3) "Machinery" means major mechanical machines or
19    major components of those machines contributing to a
20    manufacturing or assembling process.
21        (4) "Equipment" includes an independent device or tool
22    separate from machinery but essential to an integrated
23    manufacturing or assembly process; including computers
24    used primarily in a manufacturer's computer assisted
25    design, computer assisted manufacturing (CAD/CAM) system;
26    any subunit or assembly comprising a component of any

 

 

HB3430- 51 -LRB100 10181 HLH 20362 b

1    machinery or auxiliary, adjunct, or attachment parts of
2    machinery, such as tools, dies, jigs, fixtures, patterns,
3    and molds; and any parts that require periodic replacement
4    in the course of normal operation; but does not include
5    hand tools. Equipment includes chemicals or chemicals
6    acting as catalysts but only if the chemicals or chemicals
7    acting as catalysts effect a direct and immediate change
8    upon a product being manufactured or assembled for
9    wholesale or retail sale or lease.
10        (5) "Production related tangible personal property"
11    means all tangible personal property that is used or
12    consumed by the purchaser in a manufacturing facility in
13    which a manufacturing process takes place and includes,
14    without limitation, tangible personal property that is
15    purchased for incorporation into real estate within a
16    manufacturing facility, supplies and consumables used in a
17    manufacturing facility including fuels, coolants,
18    solvents, oils, lubricants, and adhesives, hand tools,
19    protective apparel, and fire and safety equipment used or
20    consumed within a manufacturing facility, and tangible
21    personal property that is used or consumed in activities
22    such as research and development, preproduction material
23    handling, receiving, quality control, inventory control,
24    storage, staging, and packaging for shipping and
25    transportation purposes. "Production related tangible
26    personal property" does not include (i) tangible personal

 

 

HB3430- 52 -LRB100 10181 HLH 20362 b

1    property that is used, within or without a manufacturing
2    facility, in sales, purchasing, accounting, fiscal
3    management, marketing, personnel recruitment or selection,
4    or landscaping or (ii) tangible personal property that is
5    required to be titled or registered with a department,
6    agency, or unit of federal, State, or local government.
7    The manufacturing and assembling machinery and equipment
8exemption includes production related tangible personal
9property that is purchased on or after July 1, 2007 and on or
10before June 30, 2008 and on or after July 1, 2017. The
11exemption for production related tangible personal property
12purchased on or after July 1, 2007 and before June 30, 2008 is
13subject to both of the following limitations:
14        (1) The maximum amount of the exemption for any one
15    taxpayer may not exceed 5% of the purchase price of
16    production related tangible personal property that is
17    purchased on or after July 1, 2007 and on or before June
18    30, 2008. A credit under Section 3-85 of this Act may not
19    be earned by the purchase of production related tangible
20    personal property for which an exemption is received under
21    this Section.
22        (2) The maximum aggregate amount of the exemptions for
23    production related tangible personal property awarded
24    under this Act and the Use Tax Act to all taxpayers may not
25    exceed $10,000,000. If the claims for the exemption exceed
26    $10,000,000, then the Department shall reduce the amount of

 

 

HB3430- 53 -LRB100 10181 HLH 20362 b

1    the exemption to each taxpayer on a pro rata basis.
2The Department shall may adopt rules to implement and
3administer the exemption for production related tangible
4personal property.
5    The manufacturing and assembling machinery and equipment
6exemption includes the sale of materials to a purchaser who
7produces exempted types of machinery, equipment, or tools and
8who rents or leases that machinery, equipment, or tools to a
9manufacturer of tangible personal property. This exemption
10also includes the sale of materials to a purchaser who
11manufactures those materials into an exempted type of
12machinery, equipment, or tools that the purchaser uses himself
13or herself in the manufacturing of tangible personal property.
14The purchaser of the machinery and equipment who has an active
15resale registration number shall furnish that number to the
16seller at the time of purchase. A purchaser of the machinery,
17equipment, and tools without an active resale registration
18number shall furnish to the seller a certificate of exemption
19for each transaction stating facts establishing the exemption
20for that transaction, and that certificate shall be available
21to the Department for inspection or audit. Informal rulings,
22opinions, or letters issued by the Department in response to an
23inquiry or request for an opinion from any person regarding the
24coverage and applicability of this exemption to specific
25devices shall be published, maintained as a public record, and
26made available for public inspection and copying. If the

 

 

HB3430- 54 -LRB100 10181 HLH 20362 b

1informal ruling, opinion, or letter contains trade secrets or
2other confidential information, where possible, the Department
3shall delete that information before publication. Whenever
4informal rulings, opinions, or letters contain a policy of
5general applicability, the Department shall formulate and
6adopt that policy as a rule in accordance with the Illinois
7Administrative Procedure Act.
8(Source: P.A. 98-583, eff. 1-1-14.)
 
9    Section 99. Effective date. This Act takes effect upon
10becoming law.