Public Act 90-0166 of the 90th General Assembly

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Public Act 90-0166

HB2201 Enrolled                                LRB9000111KRpk

    AN ACT to amend the  Service  Use  Tax  Act  by  changing
Section 3-70.

    Be  it  enacted  by  the People of the State of Illinois,
represented in the General Assembly:

    Section  5.  The  Service  Use  Tax  Act  is  amended  by
changing Section 3-70 as follows:

    (35 ILCS 110/3-70)
    Sec. 3-70. Manufacturer's Purchase Credit. For  purchases
of machinery and equipment made on and after January 1, 1995,
a  purchaser  of  manufacturing  machinery and equipment that
qualifies for the exemption provided by Section 2 of this Act
earns a credit in an amount equal to a  fixed  percentage  of
the  tax  which  would  have  been incurred under this Act on
those purchases. For purchases of graphic arts machinery  and
equipment  made  on  or  after  July  1,  1996, a purchase of
graphic arts machinery and equipment that qualifies  for  the
exemption  provided  by  paragraph (5) of Section 3-5 of this
Act earns a credit in an amount equal to a  fixed  percentage
of  the  tax  that would have been incurred under this Act on
those purchases.  The  credit  earned  for  the  purchase  of
manufacturing   machinery  and  equipment  and  graphic  arts
machinery  and  equipment  shall  be  referred  to   as   the
Manufacturer's  Purchase Credit. A graphic arts producer is a
person engaged in  graphic  arts  production  as  defined  in
Section  3-30  of  the Service Occupation Tax Act.  Beginning
July 1, 1996, all references in this Section to manufacturers
or manufacturing shall also refer to graphic  arts  producers
or graphic arts production.
    The  amount  of  credit  shall be a percentage of the tax
that  would  have  been  incurred  on  the  purchase  of  the
manufacturing  machinery  and  equipment  or   graphic   arts
machinery and equipment if the exemptions provided by Section
2  or  paragraph  (5) of Section 3-5 of this Act had not been
applicable.
    All purchases of manufacturing  machinery  and  equipment
and graphic arts machinery and equipment that qualify for the
exemptions   provided  by  paragraph  (5)  of  Section  2  or
paragraph (5) of Section 3-5 of  this  Act  qualify  for  the
credit  without  regard to whether the serviceman elected, or
could have elected, under paragraph (7) of Section 2 of  this
Act  to  exclude  the  transaction  from  this  Act.   If the
serviceman's  billing  to  the  service  customer  separately
states a selling price for the exempt manufacturing machinery
or  equipment  or  the  exempt  graphic  arts  machinery  and
equipment, the  credit  shall  be  calculated,  as  otherwise
provided  herein,  based  on  that  selling  price.   If  the
serviceman's  billing  does  not  separately  state a selling
price for the exempt manufacturing machinery and equipment or
the exempt graphic arts machinery and equipment,  the  credit
shall  be  calculated, as otherwise provided herein, based on
50% of the entire billing.  If the  serviceman  contracts  to
design,  develop,  and  produce  special  order manufacturing
machinery  and  equipment  or  special  order  graphic   arts
machinery  and equipment, and the billing does not separately
state a selling price for such special  order  machinery  and
equipment,  the  credit  shall  be  calculated,  as otherwise
provided herein, based on 50% of  the  entire  billing.   The
provisions of this paragraph are effective for purchases made
on or after January 1, 1995.
    The percentage shall be as follows:
         (1)  15%  for  purchases  made on or before June 30,
    1995.
         (2)  25% for purchases made after June 30, 1995, and
    on or before June 30, 1996.
         (3)  40% for purchases made after June 30, 1996, and
    on or before June 30, 1997.
         (4)  50% for purchases made  on  or  after  July  1,
    1997.
    A  purchaser  of  production  related  tangible  personal
property  desiring  to use the Manufacturer's Purchase Credit
shall certify to the seller that the purchaser is  satisfying
all  or  part  of  the liability under the Use Tax Act or the
Service Use Tax Act that  is  due  on  the  purchase  of  the
production  related  tangible  personal  property by use of a
Manufacturer's Purchase Credit. The  Manufacturer's  Purchase
Credit certification must be dated and shall include the name
and  address  of  the purchaser, the purchaser's registration
number, if  registered,  the  credit  being  applied,  and  a
statement that the State Use Tax or Service Use Tax liability
is  being  satisfied  with the manufacturer's or graphic arts
producer's accumulated purchase credit. Certification may  be
incorporated   into   the   manufacturer's  or  graphic  arts
producer's purchase  order.  Manufacturer's  Purchase  Credit
certification  by  the  manufacturer or graphic arts producer
may  be  used  to  satisfy  the  retailer's  or  serviceman's
liability under the Retailers' Occupation Tax Act or  Service
Occupation  Tax  Act  for  the  credit claimed, not to exceed
6.25% of the  receipts  subject  to  tax  from  a  qualifying
purchase,  but only if the retailer or serviceman reports the
Manufacturer's Purchase Credit claimed  as  required  by  the
Department.  The  Manufacturer's  Purchase  Credit  earned by
purchase of exempt manufacturing machinery and  equipment  or
graphic  arts  machinery  and equipment is a non-transferable
credit.  A manufacturer or graphic arts producer that  enters
into  a  contract  involving  the  installation  of  tangible
personal  property into real estate within a manufacturing or
graphic arts production facility may authorize a construction
contractor to utilize credit accumulated by the  manufacturer
or  graphic  arts  producer to purchase the tangible personal
property.  A manufacturer or graphic arts producer  intending
to  use accumulated credit to purchase such tangible personal
property shall execute a  written  contract  authorizing  the
contractor  to  utilize  a specified dollar amount of credit.
The  contractor  shall  furnish   the   supplier   with   the
manufacturer's  or graphic arts producer's name, registration
or resale number, and a statement that a specific  amount  of
the Use Tax or Service Use Tax liability, not to exceed 6.25%
of the selling price, is being satisfied with the credit. The
manufacturer  or graphic arts producer shall remain liable to
timely report all information required by the  annual  Report
of Manufacturer's Purchase Credit Used for credit utilized by
a construction contractor.
    The Manufacturer's Purchase Credit may be used to satisfy
liability  under  the  Use Tax Act or the Service Use Tax Act
due on the purchase of production related  tangible  personal
property (including purchases by a manufacturer, by a graphic
arts producer, or a lessor who rents or leases the use of the
property  to  a  manufacturer  or graphic arts producer) that
does not otherwise qualify for  the  manufacturing  machinery
and  equipment  exemption  or  the graphic arts machinery and
equipment exemption.  "Production related  tangible  personal
property"  means  (i)  all tangible personal property used or
consumed by the purchaser  in  a  manufacturing  facility  in
which  a  manufacturing  process described in Section 2-45 of
the Retailers' Occupation  Tax  Act  takes  place,  including
tangible  personal  property purchased for incorporation into
real estate within a manufacturing  facility  and  including,
but  not  limited  to,  tangible  personal  property  used or
consumed  in  activities  such  as  pre-production   material
handling,  receiving,  quality  control,  inventory  control,
storage,    staging,   and   packaging   for   shipping   and
transportation purposes; (ii) all tangible personal  property
used  or consumed by the purchaser in a graphic arts facility
in which graphic arts production as described in Section 2-30
of the Retailers' Occupation Tax Act takes  place,  including
tangible  personal  property purchased for incorporation into
real estate within a graphic arts facility and including, but
not limited  to,  all  tangible  personal  property  used  or
consumed  in  activities  such as graphic arts preliminary or
pre-press  production,   pre-production  material   handling,
receiving,   quality  control,  inventory  control,  storage,
staging, sorting, labeling,  mailing,  tying,  wrapping,  and
packaging;  and  (iii) all tangible personal property used or
consumed by  the  purchaser  for  research  and  development.
"Production  related  tangible  personal  property"  does not
include  (i)  tangible  personal  property  used,  within  or
without a manufacturing or graphic arts facility,  in  sales,
purchasing,   accounting,   fiscal   management,   marketing,
personnel  recruitment  or  selection, or landscaping or (ii)
tangible  personal  property  required  to   be   titled   or
registered  with  a  department,  agency, or unit of federal,
state, or  local  government.   The  Manufacturer's  Purchase
Credit may be used to satisfy the tax arising either from the
purchase  of  machinery  and equipment on or after January 1,
1995 for which  the  manufacturing  machinery  and  equipment
exemption  provided by Section 2  of this Act was erroneously
claimed, or the purchase of machinery  and  equipment  on  or
after  July  1,  1996  for  which  the  exemption provided by
paragraph (5) of Section 3-5  of  this  Act  was  erroneously
claimed,  but  not  in  satisfaction  of penalty, if any, and
interest for failure to pay the tax when due.  A purchaser of
production related tangible personal property who is required
to pay Illinois Use Tax or Service Use Tax  on  the  purchase
directly  to  the  Department  may utilize the Manufacturer's
Purchase Credit in satisfaction of the tax arising from  that
purchase,  but not in satisfaction of penalty and interest. A
purchaser who uses  the  Manufacturer's  Purchase  Credit  to
purchase  property  which  is  later  determined  not  to  be
production  related  tangible personal property may be liable
for tax, penalty,  and  interest  on  the  purchase  of  that
property  as of the date of purchase but shall be entitled to
use the disallowed Manufacturer's Purchase Credit, so long as
it has not expired, on  qualifying  purchases  of  production
related  tangible personal property not previously subject to
credit usage. The Manufacturer's Purchase Credit earned by  a
manufacturer or graphic arts producer expires the last day of
the second calendar year following the calendar year in which
the credit arose.
    A  purchaser earning Manufacturer's Purchase Credit shall
sign and file an annual  Report  of  Manufacturer's  Purchase
Credit  Earned  for each calendar year no later than the last
day of the sixth month following the calendar year in which a
Manufacturer's  Purchase  Credit  is  earned.   A  Report  of
Manufacturer's Purchase Credit Earned shall be filed on forms
as prescribed or approved by the Department and shall  state,
for  each  month of the calendar year: (i) the total purchase
price of all purchases of  exempt  manufacturing  or  graphic
arts machinery on which the credit was earned; (ii) the total
State Use Tax or Service Use Tax which would have been due on
those  items;  (iii)  the  percentage  used  to calculate the
amount of credit earned; (iv) the amount  of  credit  earned;
and   (v)  such  other  information  as  the  Department  may
reasonably  require.   A  purchaser  earning   Manufacturer's
Purchase  Credit shall maintain records which identify, as to
each purchase of manufacturing or graphic arts machinery  and
equipment   on  which  the  purchaser  earned  Manufacturer's
Purchase Credit, the vendor (including, if applicable, either
the  vendor's  registration  number   or   Federal   Employer
Identification Number), the purchase price, and the amount of
Manufacturer's Purchase Credit earned on each purchase.
    A  purchaser  using  Manufacturer's Purchase Credit shall
sign and file an annual  Report  of  Manufacturer's  Purchase
Credit Used for each calendar year no later than the last day
of  the  sixth  month  following the calendar year in which a
Manufacturer's  Purchase  Credit  is  used.   A   Report   of
Manufacturer's  Purchase  Credit Used shall be filed on forms
as prescribed or approved by the Department and shall  state,
for  each month of the calendar year:  (i) the total purchase
price  of  production  related  tangible  personal   property
purchased  from  Illinois  suppliers; (ii) the total purchase
price  of  production  related  tangible  personal   property
purchased from out-of-state suppliers; (iii) the total amount
of  credit  used  during  such  month;  and  (iv)  such other
information as the  Department  may  reasonably  require.   A
purchaser using Manufacturer's Purchase Credit shall maintain
records  that  identify,  as  to  each purchase of production
related tangible personal property  on  which  the  purchaser
used  Manufacturer's  Purchase Credit, the vendor (including,
if applicable, either the  vendor's  registration  number  or
Federal  Employer Identification Number), the purchase price,
and the amount of Manufacturer's Purchase Credit used on each
purchase.
    No annual report shall be filed before  May  1,  1996.  A
purchaser   that   fails   to   file   an  annual  Report  of
Manufacturer's Purchase Credit Earned or an annual Report  of
Manufacturer's  Purchase  Credit  Used by the last day of the
sixth month following the end  of  the  calendar  year  shall
forfeit  all Manufacturer's Purchase Credit for that calendar
year unless it establishes that its failure to file  was  due
to  reasonable  cause. Manufacturer's Purchase Credit reports
may be amended to  report  and  claim  credit  on  qualifying
purchases  not  previously  reported  at  any time before the
credit would have expired, unless both the Department and the
purchaser have agreed to  an  extension  of  the  statute  of
limitations  for the issuance of a notice of tax liability as
provided in Section 4 of the Retailers' Occupation  Tax  Act.
If  the time for assessment or refund has been extended, then
amended reports for a calendar year may be filed at any  time
prior to the date to which the statute of limitations for the
calendar  year  or  portion  thereof  has  been  extended. No
Manufacturer's  Purchase  Credit  report   filed   with   the
Department  for  periods  prior  to  January 1, 1995 shall be
approved.  Manufacturer's  Purchase  Credit  claimed  on   an
amended report may be used to satisfy tax liability under the
Use  Tax  Act  or  the  Service Use Tax Act (i) on qualifying
purchases of production related  tangible  personal  property
made  after  the  date  the  amended  report is filed or (ii)
assessed  by  the  Department  on  qualifying  purchases   of
production  related  tangible  personal  property made in the
case of manufacturers on or after January 1, 1995, or in  the
case of graphic arts producers on or after July 1, 1996.
    If  the  purchaser  is  not the manufacturer or a graphic
arts producer, but rents or leases the use of the property to
a manufacturer or a graphic arts producer, the purchaser  may
earn,  report,  and use Manufacturer's Purchase Credit in the
same manner as a manufacturer or graphic arts producer.
    A purchaser shall not be entitled to  any  Manufacturer's
Purchase  Credit  for  a  purchase  that  is  required  to be
reported and is not  timely  reported  as  provided  in  this
Section.  A purchaser remains liable for (i) any tax that was
satisfied  by  use of a Manufacturer's Purchase Credit, as of
the date of purchase, if that use is not timely  reported  as
required   in  this  Section  and  (ii)  for  any  applicable
penalties and interest for failing to pay the tax when due.
(Source: P.A. 88-547,  eff.  6-30-94;  89-89,  eff.  6-30-95;
89-235, eff. 8-4-95; 89-531, eff. 7-19-96.)

    Section  99.  Effective date.  This Act takes effect upon
becoming law.

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