Section 160.101  Nature of the Tax

 

a)         The Service Use Tax is a privilege tax imposed on the privilege of using, in this State, tangible personal property that is received anywhere as an incident to a purchase of service from a serviceman, as "serviceman" is defined in the Act.  However, if the serviceman would not be taxable under the Service Occupation Tax Act [35 ILCS 115] despite all elements of the sale of service occurring in Illinois, then the tax imposed by the Service Use Tax Act does not apply to the use of such property in this State.  Transfers of tangible personal property by de minimis servicemen who incur Use Tax as described in 86 Ill. Adm. Code 140.108 do not constitute sales of service under Section 2(g) of the Service Occupation Tax Act.  As a result, customers of such de minimis servicemen do not incur Service Use Tax liability on such transfers.

 

b)         Any evidence that property was sold by any person for delivery to a person residing in or engaged in business in this State shall be prima facie evidence that such property was sold for use in this State.

 

c)         Rate

 

1)         The rate of the Service Use Tax after December 31, 1989, is 6.25% of the serviceman's selling price of the tangible personal property transferred by the serviceman as an incident to a sale of service.

 

2)         On and after January 1, 2001, prepaid telephone calling arrangements shall be considered tangible personal property subject to the tax imposed under the Act regardless of the form in which those arrangements may be embodied, transmitted, or fixed by any method now known or hereafter developed. (Section 3 of the Act) "Prepaid telephone calling arrangements" means the right to exclusively purchase telephone or telecommunications services that must be paid for in advance and enable the origination of one or more intrastate, interstate, or international telephone calls or other telecommunications using an access number, an authorization code, or both, whether manually or electronically dialed, for which payment to a retailer must be made in advance, provided that, unless recharged, no further service is provided once that prepaid amount of service has been consumed. Prepaid telephone calling arrangements include the recharge of a prepaid calling arrangement.  For purposes of this Section, "recharge" means the purchase of additional prepaid telephone or telecommunications services whether or not the purchaser acquires a different access number or authorization code. For purposes of this Section, "telecommunications" means that term as defined in Section 2 of the Telecommunications Excise Tax Act [35 ILCS 630]. "Prepaid telephone calling arrangement" does not include an arrangement whereby the service provider reflects the amount of the purchase as a credit on an account for a customer under an existing subscription plan. (Section 3-27 of the Act)

 

d)         If the property that is purchased from a serviceman as an incident to a sale of service is acquired outside Illinois and used outside Illinois before being brought to Illinois for use here and is nevertheless taxable under the Service Use Tax Act, the tax base on which the tax is computed shall be reduced by an amount which represents a reasonable allowance for depreciation for the  period of such prior out-of-State use.  A "reasonable allowance for depreciation" is deemed by the Department to be the amount of depreciation determined by use of the straight line method of depreciation.

 

e)         The date of the purchase of service is deemed to be the date of the delivery, to the user, of the tangible personal property which the serviceman transfers as an incident to a sale of service.

 

f)         The Service Use Tax Act complements the Service Occupation Tax Act.  That is why the Service Use Tax is restricted to cases in which the property is purchased from a serviceman as an incident to a sale of service.

 

g)         If a serviceman incurring Service Occupation Tax Liability is required or authorized to collect the Service Use Tax (see Section 160.115 for further information), the purchaser must pay the tax to the serviceman. The Department will presume that a serviceman is required or authorized to collect the Service Use Tax if he bills tax to the service customer.  Stated conversely, if an invoice from a serviceman does not show the tax, the Department will presume that the serviceman is either registered and has included the Service Use Tax in the selling price of the tangible personal property transferred or is a de minimis serviceman incurring a Use Tax liability, in which case there is no collection obligation on the part of the purchaser.  This presumption will be overcome only where the Department has evidence that the serviceman and/or the service customer were both aware that the proper tax due was the Service Use Tax and that no action was taken to remit the Service Use Tax by either party to the Transaction.  A serviceman need not remit that part of any Service Use Tax collected by him to the extent that he is required to pay and does pay Service Occupation Tax to the Department on his sales of service involving the transfer by him of the same property, provided, however, that the amount paid to the Department is equal to or exceeds the amount collected from the service customer.

 

(Source:  Amended at 25 Ill. Reg. 5015, effective March 23, 2001)

 

Section 160.105  Definitions

 

For definitions of terms other than "Use", "Purchased from a Serviceman", "Purchaser", "Selling Price", and "Serviceman maintaining a place of business in this State", see Section 140.201 of the Service Occupation Tax Regulations (86 Ill. Adm. Code 140.201).

 

"Act" means the Service Use Tax Act [35 ILCS 110].

 

"Purchased from a serviceman" means the acquisition of the ownership of, or title to, tangible personal property through a sale of service.

 

"Purchaser" means any person who, through a sale of service, acquires the ownership of, or title to, any tangible personal property.

 

"Selling price" means the consideration for a sale valued in money whether received in money or otherwise, including cash, credits and service, and shall be determined without any deduction on account of the serviceman's cost of the property sold, the cost of materials used, labor or service cost or any other expense whatsoever, but does not include interest or finance charges that appear as separate items on the bill of sale or sales contract nor charges that are added to prices by sellers on account of the seller's duty to collect, from the purchaser, the tax that is imposed by the Act.  For purposes of calculating the serviceman's tax base, the selling price shall not be less than the cost price to the serviceman of the tangible personal property transferred to the service customer.

 

"Serviceman maintaining a place of business in this State", or any like term, means and includes any serviceman having or maintaining within this State, directly or by a subsidiary, an office, distribution house, sales house, warehouse or other place of business, or any agent or other representative operating within this State under the authority of the serviceman or its subsidiary, irrespective of whether such place of business or agent or other representative is located here permanently or temporarily, or whether such serviceman or subsidiary is licensed to do business in this State; soliciting orders for tangible personal property by means of a telecommunication or television shopping system (which utilizes toll free numbers) which is intended by the retailer to be broadcast by cable television or other means of broadcasting, to consumers located in this State; pursuant to a contract with a broadcaster or publisher located in this state, soliciting orders for tangible personal property by means of advertising which is disseminated primarily to consumers located in this State and only secondarily to bordering jurisdictions; soliciting orders for tangible personal property by mail if the solicitations are substantial and recurring and if the retailer benefits from any banking, financing, debt collection, telecommunication, or marketing activities occurring in this state or benefits from the location in this State of authorized installation, servicing, or repair facilities; being owned or controlled by the same interests which own or control any retailer engaging in business in the same or similar line of business in this State; having a franchisee or licensee operating under its trade name if the franchisee or licensee is required to collect the tax under this Section; pursuant to a contract with a cable television operator located in this State, soliciting orders for tangible personal property by means of advertising which is transmitted or distributed over a cable television system in this State, or engaging in activities in Illinois that would, in the state in which the service business engaging in these activities is located, constitute maintaining a place of business in that state [35 ILCS 110/2].  For the purpose of determining the state of location, the Department will look to the place at which the selling activity takes place.

 

"Use" means the exercise by any person of any right or power over tangible personal property incident to the ownership of that property, but does not include the sale or use for demonstration by him or her of that property in any form as tangible personal property in the regular course of business.  "Use" does not mean the interim use of tangible personal property nor the physical incorporation of tangible personal property, as an ingredient or constituent, into other tangible personal property:

 

that is sold in the regular course of business; or

 

that the person incorporating the ingredient or constituent has undertaken at the time of purchase to cause to be transported in interstate commerce to destinations outside the State of Illinois.

 

(Source:  Amended at 38 Ill. Reg. 20034, effective October 1, 2014)

 

Section 160.110  Kinds of Uses And Users Not Taxed

 

a)         To prevent actual or likely multistate taxation, the tax shall not apply to the use of tangible personal property in this State under the following circumstances:

 

1)         The use, in this State, of property acquired outside this State by a nonresident individual and brought into this State by such individual for his or her own use while temporarily within this State or while passing through this State;

 

2)         the use, in this State, of property which is acquired outside this State and caused to be brought into this State by a person who has already paid a tax in another state in respect to the sale, purchase or use of such property, to the extent of the amount of such tax properly due and paid in such other state;

 

3)         the temporary storage, in this State, of property which is acquired outside this State and which, subsequent to being brought into this State and stored here temporarily, is used solely outside this State or is physically attached to or incorporated into other property that is used solely outside this State, or is altered by converting, fabricating, manufacturing, printing, processing or shaping, and, as altered, is used solely outside this State. (Section 3-45 of the Act)

 

b)         Since the exemptions in subsections (a)(1), (2) and (3), immediately above, do not exist as far as the Service Occupation Tax is concerned, and since it would therefore serve no purpose to say that the exemptions exist for Service Use Tax purposes insofar as the serviceman is merely collecting Service Use Tax to reimburse himself for Service Occupation Tax on the same property, the Department believes that the legislative intention in these references to the acquisition of tangible personal property outside this State was to make the references apply to cases in which the only tax liability that could be involved is Service Use Tax liability.  Therefore, the exemptions in subsections (a)(1), (2) and (3) above would not apply except when the tangible personal property is acquired outside Illinois by the purchaser in such a way that there is no Service Occupation Tax liability on the part of the serviceman in the same transaction.

 

c)         The Service Use Tax does not apply to the use, in this State, of property which is acquired outside this State by a nonresident individual who then brings the property to this State for use here, and who shall have used the property outside this State for at least 3 months before bringing the property to this State. (Section 3-60 of the Act)

 

d)         Where a business that is not operated in Illinois, but which does operate in another state, is moved to Illinois or opens up an office, plant or other business facility in Illinois, such business shall not be taxed on its use, in Illinois, of used property which such business bought outside Illinois and used outside Illinois in the operation of such business for at least 3 months before moving such used property to Illinois for use here. (Section 3-60 of the Act)

 

e)         The Service Use Tax does not apply to the use of tangible personal property by any corporation, society, association, foundation or institution, organized and operated exclusively for charitable, religious or educational purposes, or by any not-for-profit corporation, society, association, foundation, institution or organization which has no compensated officers and employees and which is organized and operated primarily for the recreation of persons 55 years of age or older, when purchased from a serviceman as an incident to a sale of service.  However, effective July 1, 1987, the Service Use Tax will apply to the entities noted above unless such entities have an active exemption identification number issued by the Department. (Section 2(3) of the Act)  Effective March 17, 1965, purchases by State chartered banks and by Federal and State savings and loan associations for use, when the purchase is made from a serviceman as an incident to his sale of service, are subject to the Service Use Tax.  Effective February 1, 1970, purchases by national banks for use, when the purchase is made from a serviceman as an incident to his sale of service, are also subject to the Service Use Tax, provided that such tax does not apply to property which is the subject matter of a written contract of purchase entered into by a national bank prior to September 1, 1969.

 

f)         Beginning July 1, 1999, the Service Use Tax does not apply to the use, in this State, of game or game birds purchased incident to a sale of service at:

 

1)         a game breeding and hunting preserve area licensed by the Department of Natural Resources (see Section 3.27 of the Wildlife Code [520 ILCS 5/3.27]),

 

2)         an exotic game hunting area licensed by the Department of Natural Resources (see Section 3.34 of the Wildlife Code [520 ILCS 5/3.34]), or

 

3)         a hunting enclosure approved through rules adopted by the Department of Natural Resources. (Section 3-5 of the Act)

 

g)         Beginning July 1, 1999, the Service Use Tax does not apply to the use, in this State, of fuel acquired outside of this State and brought into this State in the fuel supply tanks of locomotives engaged in freight hauling and passenger service for interstate commerce. (Section 3-5 of the Act)

 

h)         Since transfers of tangible personal property by de minimis servicemen who incur Use Tax as described in 86 Ill. Adm. Code 140.108 do not constitute sales of service under Section 2(g) of the Service Occupation Tax Act, customers of such de minimis servicemen do not incur Service Use Tax liability on such transfers.

 

i)          food for human consumption that is to be consumed off the premises where it is sold (other than alcoholic beverages, soft drinks, and food that has been prepared for immediate consumption) and prescription and nonprescription medicines, drugs, medical appliances, and insulin, urine testing materials, syringes, and needles used by diabetics, for human use, when purchased for use by a person receiving medical assistance under Article 5 of the Illinois Public Aid Code who resides in a licensed long-term care facility, as defined in the Nursing Home Care Act [35 ILCS 110/3-5].

 

(Source:  Amended at 26 Ill. Reg. 4929, effective March 15, 2002)

 

Section 160.111  Commercial Distribution Fee Sales Tax Exemption

 

a)         Qualifications for exemption through June 30, 2004.  Beginning on July 1, 2003 through June 30, 2004, sales of certain motor vehicles are not subject to the tax imposed under this Part if they meet all of the following tests:

 

1)         The motor vehicle qualifies as a second division motor vehicle under Section 1-146 of the Illinois Vehicle Code.  First division motor vehicles, such as those motor vehicles that are designed for the carrying of not more than 10 persons, do not qualify for the exemption  (See 625 ILCS 5/1-146.);

 

2)         The motor vehicle has a gross vehicle weight in excess of 8,000 pounds; and

 

3)         The motor vehicle is subject to the Commercial Distribution Fee imposed under Section 3-815.1 of the Illinois Vehicle Code.  [35 ILCS 110/2]  The motor vehicle must be registered and remain registered in such a manner whereby it is subject to payment of the Commercial Distribution Fee imposed under Section 3-815.1 of the Illinois Vehicle Code [625 ILCS 5/3-815.1] and such fee is actually paid for any period in which the fee is in effect.

 

b)        Qualifications for exemption beginning July 1, 2004.  Beginning on July 1, 2004 through June 30, 2005, sales of certain motor vehicles are not subject to the tax imposed under this Part if they meet all of the following tests:

 

1)         The motor vehicle is a second division motor vehicle.  First division motor vehicles, such as those motor vehicles that are designed for the carrying of not more than 10 persons, do not qualify for the exemption  (See 625 ILCS 5/1-146.);

 

2)         The motor vehicle must have a gross vehicle weight rating in excess of 8,000 pounds.  For purposes of this Section, Gross Vehicle Weight Rating means the value specified by the manufacturer or manufacturers as the maximum loaded weight of a single vehicle  (See 625 ILCS 5/1-124.5.);

 

3)         The motor vehicle is subject to the Commercial Distribution Fee imposed under Section 3-815.1 of the Illinois Vehicle Code.  [35 ILCS 110/2] The motor vehicle must be registered and remain registered in such a manner whereby it is subject to payment of the Commercial Distribution Fee imposed under Section 3-815.1 of the Illinois Vehicle Code [625 ILCS 5/3-815.1] and such fee is actually paid for any period in which the fee is in effect; and

 

4)         The motor vehicle is used primarily for commercial purposes.  [35 ILCS 110/2]  For purposes of this Section, a motor vehicle used for commercial purposes means any motor vehicle used to transport persons or property in the furtherance of any commercial or industrial enterprise, whether for-hire or not-for-hire. 

 

COMMERCIAL PURPOSE EXAMPLE:  A motor vehicle that is used for transportation to work, school, or recreational activities would not be used for commercial purposes.

 

c)         Documentation of exemption.  To properly document the exemption, the seller must obtain a written certificate from the purchaser stating the following:

 

1)         the name, address, and telephone number of purchaser;

 

2)         the description and Vehicle Identification Number of the motor vehicle or motor vehicles being purchased;

 

3)         the name and address of seller;

 

4)         the date of purchase;

 

5)         a statement that the motor vehicle will be used primarily for commercial purposes and will be registered under Section 3-815(a) or 3-818(a) of the Illinois Vehicle Code or in such other manner whereby the registration of that motor vehicle will require the payment of the Commercial Distribution Fee imposed under Section 3-815.1 of the Illinois Vehicle Code and that such vehicle will remain validly registered in such a manner for subsequent registration years;

 

6)         the commercial purpose for which the vehicle will be used along with the purchaser's Illinois Business Tax (IBT) number or other business registration number; and

 

7)         the signature of purchaser.

 

d)         Liability for tax.  If a purchaser claims the exemption provided in this Section and the vehicle is not considered subject to the Commercial Distribution Fee as described in subsection (a)(3) or (b)(3) of this Section or otherwise does not qualify for this exemption, the purchaser will be liable for the tax based upon the purchase price of that vehicle and any applicable penalties and interest from the date of purchase.

 

e)         Repair and replacement parts.  The exemption provided in this Section may not be claimed for any repair part, replacement part, or other item attached or incorporated into the motor vehicle after the purchase of the motor vehicle.  Such items may qualify for exemption from sales tax if the motor vehicle or trailer is used in a manner that qualifies for the rolling stock exemption.  See 86 Ill. Adm. Code 130.340.

 

f)         Trailers.  For purposes of this Section, a trailer that is subject to the Commercial Distribution Fee imposed under Section 3-815.1 of the Illinois Vehicle Code will qualify as a second division motor vehicle under subsection (a)(1) or (b)(1) of this Section.  The term "trailer" includes a trailer as defined in Section 1-209 of the Illinois Vehicle Code, a semitrailer as defined in Section 1-187 of the Illinois Vehicle Code, and a pole trailer as defined in Section 1-161 of the Illinois Vehicle Code.

 

(Source:  Added at 29 Ill. Reg. 7088, effective April 26, 2005)

 

Section 160.115  Collection Of The Service Use Tax By Servicemen

 

a)         Servicemen who incur and remit Service Occupation Tax to the Department; or servicemen who come within the definition of a "Serviceman maintaining a place of business in this State" (as set out in Section 160.105(f) of this Part and in Section 2 of the Service Use Tax Act) and who have a Service Use Tax collection obligation; or other servicemen who are authorized to voluntarily collect the Service Use Tax, shall collect the tax from users.  The Service Use Tax shall be based on the selling price of the tangible personal property transferred incident to the sale of service if stated separately on the invoice from the serviceman. If not stated separately, then the tax will be imposed on 50% of the entire billing from the serviceman. However, the Service Use Tax which is collected by a de minimis serviceman who incurs Service Occupation Tax on his cost price of tangible personal property transferred incident to service, as provided at 86 Ill. Adm. Code 140.109, shall be based upon his cost price of tangible personal property transferred incident to his sales of service.  For purposes of this Part, "cost price" is defined as provided in 86 Ill. Adm. Code 140.201.

 

b)         Although not required unless requested by the service customer, the Service Use Tax may be separately stated as a distinct item on the service bill (Section 3a of the Act).

 

c)         If the serviceman collects the Service Use Tax as a separate item, he shall use the tax collection brackets prescribed in the Use Tax rules (86 Ill. Adm. Code 150.Table A) with respect to the 6.25% rate when it is impracticable to collect exactly 6.25% of the selling or cost price.

 

(Source:  Amended at 25 Ill. Reg. 5015, effective March 23, 2001)

 

Section 160.116  Persons Who Lease Tangible Personal Property to Exempt Hospitals

 

a)         Effective January 1, 1996, computers and communications equipment utilized for any hospital purpose that are transferred incident to the sale of service to persons who lease those items to exempt hospitals are not subject to Service Use Tax providing:

 

1)         the computers and communications equipment described above must be leased to a tax exempt hospital under a lease that has been executed or is in effect at the time of purchase;

 

2)         the lease must be for a period of one year or longer; and

 

3)         the lease must be to a hospital that has an active tax exemption identification number issued by the Department under Section 1g of the Retailers' Occupation Tax Act (see 86 Ill. Adm. Code 130.2007).

 

b)         Effective January 1, 1996, equipment, other than that specified in subsection (a), used in the diagnosis, analysis, or treatment of hospital patients that is transferred incident to the sale of service to persons who lease that equipment to exempt hospitals is not subject to Service Use Tax providing:

 

1)         the equipment described above must all be purchased for lease to a tax exempt hospital under a lease that has been executed or is in effect at the time of purchase;

 

2)         the lease must be for a period of one year or longer; and

 

3)         the lease must be to a hospital that has an active tax exemption identification number issued by the Department under Section 1g of the Retailers' Occupation Tax Act (see 86 Ill. Adm. Code 130.2007).

 

c)         The service customer must provide the certification described below to the serviceman.

 

1)         When this exemption may be properly claimed for computer or other communications equipment, the service customer must give the serviceman  a certification stating that the computer or other communications equipment is for lease to a tax exempt hospital under a lease for a period of one year or longer executed or in effect at the time of the purchase.

 

2)         When this exemption may be properly claimed for equipment used in the diagnosis, analysis, or treatment of hospital patients, the service customer must give the serviceman a certification stating that the equipment is for lease to a tax exempt hospital under a lease for a period of one year or longer executed or in effect at the time of the purchase, and that the equipment is for use in the diagnosis, analysis, or treatment of hospital patients.

 

3)         The certification described in subsections (c)(1) and (c)(2) of this Section must also contain all of the following:

 

A)        The serviceman's name and address;

 

B)        The service customer's name and address;

 

C)        A description of the tangible personal property;

 

D)        The service customer's signature and date of signing;

 

E)        The name and address of the hospital and its tax exemption identification number issued by the Department; and

 

F)         The date the lease was executed and the lease period.

 

d)         For purposes of this Section, "hospital patients" means persons who seek any form of medical care including, but not limited to, medical treatment, testing, diagnosis, or therapy at a hospital or at another location under the control and supervision of a hospital.  For example, persons who are sent by doctors for X-rays or other tests at qualifying hospitals, even though those persons are not admitted to those hospitals, are considered hospital patients.

 

e)         If the computers or other equipment is used in a manner that does not qualify for the exemption or is used in any other non-exempt manner, the lessor is liable for the appropriate tax imposed under the Service Use Tax Act. In that event, the amount of Service Use Tax liability incurred is based on the fair market value of the computers or other equipment at the time the non-qualifying use occurred.

 

(Source:  Added at 20 Ill. Reg. 16219, effective December 16, 1996)

 

Section 160.117  Persons Who Lease Tangible Personal Property to Governmental Bodies

 

a)         Effective January 1, 1996, tangible personal property transferred incident to a sale of service to a lessor who leases that property to a governmental body is not subject to Service Use Tax provided that:

 

1)         the property must be leased to a governmental body under a lease that has been executed or is in effect at the time of purchase;

 

2)         the lease must be for a period of one year or longer; and

 

3)         the lease must be to a governmental body that has an active tax exemption identification number issued by the Department under Section 1g of the Retailers' Occupation Tax Act (see 86 Ill. Adm. Code 130.2007).

 

b)         When this exemption may be properly claimed, the service customer must give the serviceman a certification stating that the property is for lease to a governmental body, under a lease of one year or longer executed or in effect at the time of the purchase, and containing all of the following:

 

1)         The serviceman's name and address;

 

2)         The service customer's name and address;

 

3)         A description of the tangible personal property being purchased;

 

4)         The service customer's signature and date of signing;

 

5)         The name of the governmental body and its tax exemption identification number issued by the Department; and

 

6)         The date the lease was executed and the lease period.

 

c)         If the property is used in a manner that does not qualify for the exemption or is used in any other non-exempt manner, the lessor is liable for the appropriate tax imposed under the Service Use Tax Act.  In that event, the amount of Service Use Tax liability incurred is based on the fair market value of the property at the time the non-qualifying use occurred.

 

(Source:  Added at 20 Ill. Reg. 16219, effective December 16, 1996)

 

Section 160.120  Receipt For The Tax (Repealed)

 

(Source:  Repealed at 25 Ill. Reg. 5015, effective March 23, 2001)

 

Section 160.125  Special Information For Users

 

a)         Purchasers incurring Service Use Tax liability that is not paid to a serviceman authorized or required to collect the tax (see Section 160.101(g) of this Part) shall pay the Service Use Tax directly to the Department.  Such remittance to the Department shall be made by the last day of the month following the month in which the user makes any payment to the serviceman and shall be accompanied by a return which shall be made on a return form that the Department will provide on request.  On receipt of the tax, the Department will provide the user with a receipt if demanded by the user, but not otherwise.

 

b)         In general, the provisions of Subpart D of the Service Occupation Tax Regulations (86 Ill. Adm. Code 140) (including the authorization, under some circumstances, for quarterly tax returns and annual tax returns, but not the requirement of an annual information return) shall apply to returns of registered users under the Service Use Tax Act.

 

c)         Also, registered users under the Service Use Tax Act are subject to the provisions of Subpart F of the Service Occupation Tax Regulations.

 

d)         If the user who must remit the Service Use Tax to the Department is registered either under the Retailers' Occupation Tax Act [35 ILCS 120], the Use Tax Act [35 ILCS 105], the Service Occupation Tax Act [35 ILCS 115], and the Service Use Tax Act [35 ILCS 110], he shall report the Service Use Tax information in the space provided for that purpose on the return which he files under any such registration.

 

e)         Since transfers of tangible personal property by de minimis servicemen who incur Use Tax as described in 86 Ill. Adm. Code 140.108 do not constitute sale of service under Section 2(g) of the Service Occupation Tax Act, customers of such de minimis servicemen do not incur Service Use Tax liability on such transfers.

 

(Source:  Amended at 25 Ill. Reg. 5015, effective March 23, 2001)

 

Section 160.130  Registration Of Servicemen

 

a)         A serviceman who is registered under the Retailers' Occupation Tax Act, Use Tax Act or Service Occupation Tax Act need not obtain a separate Certificate of Registration under the Service Use Tax Act.  However, any out-of-State serviceman maintaining a place of business in this State, if not registered under the Retailers' Occupation Tax Act, the Use Tax Act or the Service Occupation Tax Act, must apply to the Department for a Certificate of Registration on an application form furnished by the Department.  Each such serviceman shall list with the Department the names and addresses of all his agents operating in this State and the location of any and all of his distribution or sales houses, offices or other places of business in this State.  In general, the provisions of Subpart F of the Service Occupation Tax Regulations (86 Ill. Adm. Code 140) shall apply to such registration under the Service Use Tax Act.

 

b)         For a definition of "Serviceman maintaining a place of business in this State", see Section 160.105 of this Part.

 

c)         Every out-of-State serviceman maintaining a place of business in this State must register and collect Service Use Tax from service customers, unless such serviceman is authorized to pay Use Tax as provided in 86 Ill. Adm. Code 140.108.

 

d)         The Department may, in its discretion, upon application, authorize the collection of the Service Use Tax by any serviceman not maintaining a place of business within this State within the meaning of the Service Use Tax Act and Section 160.105 of this Part.  Such serviceman shall be issued, without charge, a permit to collect such tax.  When so authorized, it shall be the duty of such serviceman to collect the tax upon all tangible personal property sold, to his knowledge, as an incident to a sale of service for use within this State, in the same manner and subject to the same requirements, as a serviceman maintaining a place of business within this State.

 

(Source:  Amended at 25 Ill. Reg. 5015, effective March 23, 2001)

 

Section 160.135  Serviceman's Return

 

a)         Every serviceman required or authorized to collect the Service Use Tax must file a return each month by the twentieth day of the month covering the preceding calendar month except when the serviceman is authorized to file tax returns on a quarterly or annual basis as hereinafter provided.  The Department has combined the Service Use Tax return form, the Service Occupation Tax return form and the Use Tax return with the Retailers' Occupation Tax return form.

 

b)         Where the sale of service is made under a conditional sales contract, or under any other form of sale wherein the payment of the principal sum, or a part thereof, is extended beyond the close of the return period for which the return is filed, the serviceman, in collecting the tax, may collect, for each return period, only the tax applicable to that part of the selling price actually received during such return period.

 

c)         In his regular return, each serviceman shall also include the total amount of Service Use Tax due upon the selling price or cost price of tangible personal property transferred by him as an incident to a sale of service.  Such serviceman shall remit the amount of such tax to the Department when filing such return.

 

d)         In general, the provisions of Subpart D of the Service Occupation Tax (86 Ill. Adm. Code 140) (including the provisions pertaining to quarterly and annual tax returns, but not the provisions pertaining to annual information returns) shall apply to returns of servicemen under the Service Use Tax Act.

 

e)         The serviceman who collects the Service Use Tax from his purchaser and who remits, as Service Use Tax, the amount so collected is allowed to deduct the 1.75% collection allowance or $5 per calendar year, whichever is greater, in the same manner as the serviceman is allowed to do under Subpart D of the Service Occupation Tax.  (86 Ill. Adm. Code 150, Subpart D) Where a purchaser from a serviceman, however, does not pay the Service Use Tax to the serviceman, but pays it to the Department, that purchaser is not allowed to deduct any amount as a collection allowance.

 

(Source:  Amended at 25 Ill. Reg. 5015, effective March 23, 2001)

 

Section 160.140  Penalties, Interest, Statute of Limitations and Administrative Procedures

 

Civil penalties, provisions concerning interest and procedures (such as the making of assessments, the venue and mode of conducting hearings, subpoenas, matters pertaining to judicial review and other procedural subjects), together with statutes of limitation (except that in the case of a failure to file a return required by the Service Use Tax Act, no notice of tax liability shall be issued on and after July 1 and January 1 covering tax due with that return during any month or period more than 6 years before that July 1 or January 1, respectively) to the extent not inconsistent with the provisions of the Service Use Tax Act, are the same under the Service Use Tax Act as those imposed under the Retailers' Occupation Tax Act, and Section 3-7 of the Uniform Penalty and Interest Act.  (See 35 ILCS 110/12.)  For information concerning civil penalties and interest see the Uniform Penalty and Interest Act [35 ILCS 735] and 86 Ill. Adm. Code 700.  For information concerning criminal penalties, see Section 15 of the Service Use Tax Act.

 

(Source:  Amended at 26 Ill. Reg. 4929, effective March 15, 2002)

 

Section 160.145  Incorporation Of Illinois Service Occupation Tax Regulations By Reference

 

To avoid needless repetition, the substance and provisions of all Illinois Service Occupation Tax Regulations (86 Ill. Adm. Code 140), (whether characterized as Rules, Articles or by some other designation), which are now in effect or which may hereafter be amended or promulgated, and which are not incompatible with the Service Use Tax Act or any special Rules and Regulations that may be promulgated by the Department thereunder, are incorporated herein by reference and made a part hereof.

 

(Source:  Amended and effective May 21, 1962)

 

Section 160.150  Claims To Recover Erroneously Paid Tax – Limitations – Procedures

 

a)         Limitations Upon Claims

 

1)         If it shall appear that an amount of tax or penalty or interest has been paid in error under the Service Use Tax Act to the Department by a purchaser, as distinguished from the serviceman, whether the amount be paid through a mistake of fact or an error of law, the purchaser may file a claim for credit with the Department.

 

2)         If it shall appear that an amount of tax or penalty or interest has been paid in error to the Department under the Service Use Tax Act by a serviceman who is required or authorized to collect and remit the Service Use Tax, whether the amount be paid through a mistake of fact or an error of law, the serviceman may file a claim for credit with the Department, provided that no credit shall be allowed for any amount paid by any such serviceman unless it shall appear that he bore the burden of the amount and did not shift the burden to anyone else (as in the case of a duplicated tax payment which the serviceman made to the Department and did not collect from anyone else), or unless it shall appear that he or his legal representative has unconditionally repaid the amount to his vendee:

 

A)        Who bore the burden and has not shifted the burden directly or indirectly in any manner whatsoever;

 

B)        who, if he has shifted the burden, has repaid unconditionally the amount to his own vendee, and

 

C)        who is not entitled to receive any reimbursement therefor from any other source than from his vendor, nor to be relieved of the burden in any other manner whatsoever.

 

Claimant will be considered to have satisfied the unconditional repayment requirement where it provides its purchaser with an instrument upon which the customer can make a demand upon claimant for payment of the tax recovered if the claim is allowed.  The claimant's provision of unconditional promissory notes or irrevocable credit memoranda to its purchasers who paid tax in error would satisfy this requirement.  The purpose of requiring the claimant to make an unconditional repayment to its purchasers is to prevent unjust enrichment on the part of the claimant.  Therefore, in order to establish that it was not unjustly enriched, the claimant filing a claim for credit must be able to demonstrate that it gave unconditional promissory notes or irrevocable credit memoranda to its purchasers who paid tax in error to the claimant.

 

3)         If it shall appear that an amount of tax has been paid in error under the Service Use Tax Act by the purchaser to a serviceman, who retained the tax as reimbursement for his tax liability on the same sale under the Service Occupation Tax Act, and who remitted the amount involved to the Department under the Service Occupation Tax Act, whether the amount be paid through a mistake of fact or an error of law, the procedure for recovering the tax shall be that prescribed in Sections 17, 18 and 20 of the Service Occupation Tax Act.

 

4)         As to any claim for credit filed with the Department on and after January 1 but on or before June 30 of any given year, no amount of tax or penalty or interest erroneously paid (either in total or partial liquidation of a tax or penalty or amount of interest under the Service Use Tax Act) more than 3 years prior to such January 1 shall be credited, and as to any claim filed on and after July 1 but on or before December 31 of any given year, no amount of tax or penalty or interest erroneously paid (either in total or partial liquidation of a tax or penalty or amount of interest under the Service Use Tax Act) more than 3 years prior to the July 1 shall be credited.

 

5)         No claim shall be allowed for any amount paid to the Department, whether paid voluntarily or involuntarily, if paid in total or partial liquidation of an assessment which had become final before the claim for credit to recover the amount so paid is filed with the Department, or if paid in total or partial liquidation of a judgment, order or decree of court.

 

b)         Filing Of Claims

 

1)         Claims for credit shall be prepared and filed upon forms provided by the Department.  Where the claimant is a corporation, the claim filed on behalf of such corporation shall be signed by the president, vice-president, secretary or treasurer or by the properly accredited agent of the corporation.

 

2)         A claim for credit shall be considered to have been filed with the Department on the date upon which it is received by the Department.  Upon receipt of any claim for credit filed under the Act, any officer or employee of the Department, authorized in writing by the Director of Revenue to acknowledge receipt of such claims on behalf of the Department, shall execute on behalf of the Department, and shall deliver or mail to the claimant or his duly authorized agent, a written receipt, acknowledging that the claim has been filed with the Department, describing the claim in sufficient detail to identify it and stating the date upon which the claim was received by the Department.  The written receipt shall be prima facie evidence that the Department received the claim described in the receipt and shall be prima facie evidence of the date when the claim was received by the Department.

 

3)         In the absence of a written receipt, the records of the Department as to when the claim was received by the Department, or as to whether or not the claim was received at all by the Department, shall be deemed to be prima facie correct upon these questions in the event of any dispute between the claimant (or his legal representative) and the Department concerning these questions.  (See Section 17 of the Service Use Tax Act.)

 

c)         Procedure After Filing Of Claims

 

1)         The Department will examine each claim for credit as soon as practicable after the claim is filed and will notify the claimant (or his legal representative, if the claim is filed by the legal representative, or if the claimant has died or become incompetent and the legal representative has notified the Department of his appointment and qualification as such legal representative, or if the Department, on its own motion, has substituted the legal representative in the proceeding for the deceased or incompetent claimant) of its Tentative Determination of the amount of credit, if any, to which the claimant or his legal representative is entitled.

 

2)         If the claimant, or the legal representative of a deceased or incompetent taxpayer, shall, within 60 days after the Department's Notice of Tentative Determination of Claim, file a protest and request a hearing, the Department shall give notice to the claimant, or to the legal representative of a deceased or incompetent taxpayer, of the time and place fixed for the hearing, and shall hold a hearing in conformity with the provisions of the Act, and pursuant to that hearing shall issue its Final Determination of the amount of credit, if any, found to be due as a result of the hearing, to the claimant, or to the legal representative of a deceased or incompetent taxpayer.

 

3)         If a protest to the Department's Notice of Tentative Determination of Claim is not filed within 60 days and a request for a hearing is not made, the said Notice shall become and operate as a Final Determination.  (See Section 18 of the Act.)

 

d)         Use Of Credit Memoranda To Satisfy Prior Rights of Department

 

1)         If, following the above procedure, a credit is found to be due, as evidence thereof a credit memorandum for the amount shall be issued in the name of the claimant.  If there is an established unpaid assessment or an admitted unpaid liability under the Service Use Tax Act, the Service Occupation Tax Act, the Retailers' Occupation Tax Act, the Use Tax Act, any local occupation or use tax administered by the Department, Section 4 of the Water Commission Act of 1985 [70 ILCS 3720/4], subsections (b), (c) and (d) of Section 5.01 of the Local Mass Transit District Act [70 ILCS 3610/5.01], or subsections (e), (f) and (g) of Section 4.03 of the Regional Transportation Authority Act [70 ILCS 3615/4.03], or unpaid penalty, or interest, against the claimant, the amount of the credit shall be credited against the tax or penalty or interest due.  If the credit is in an amount less than that of the unpaid liability, it shall be applied pro tanto.

 

2)         If the amount of the credit exceeds that of the unpaid liability, after crediting an amount sufficient to liquidate or cancel out the unpaid liability, a new credit memorandum shall be issued for an amount representing the difference between that of the original credit found to be due and that of the liability liquidated or paid, and the new credit memorandum shall be delivered to the person entitled to receive delivery, provided that no proceeding is pending against the claimant to establish an unpaid liability under the Service Use Tax Act, the Service Occupation Tax Act, the Retailers' Occupation Tax Act, the Use Tax Act, any local occupation or use tax administered by the Department, Section 4 of the Water Commission Act of 1985, subsections (b), (c) and (d) of Section 5.01 of the Local Mass Transit District Act, or subsections (e), (f) and (g) of Section 4.03 of the Regional Transportation Authority Act.

 

3)         If a proceeding to establish an unpaid liability is pending, the credit memorandum shall be held by the Department until the proceeding is concluded.  If the proceeding results in the issuance of an assessment which becomes final under any of these Acts, the credit shall be applied by the Department, to the extent which may be necessary, in liquidation of the assessment, and any interest that may accrue, and the balance of the credit, if any (after cancellation of the credit memorandum applied in liquidation of the liability), shall be issued in the form of a new credit memorandum and delivered to the person entitled to receive delivery.

 

(Source:  Amended at 27 Ill. Reg. 822, effective January 03, 2003)

 

Section 160.151  Verified Credit

 

a)         Verified credit.  A verified credit is a specific type of credit arising under Section 3 of the Retailers' Occupation Tax Act, which states:

 

If any payment provided for in this Section exceeds the taxpayer's liabilities under this Act, the use Tax Act, the Service Occupation Tax Act and the Service Use Tax Act, as shown on an original monthly return, the Department shall, if requested by the taxpayer, issue to the taxpayer a credit memorandum no later than 30 days after the date of payment.  The credit evidenced by such credit memorandum may be assigned by the taxpayer to a similar taxpayer under this Act, the Use Tax Act, the Service Occupation Tax Act or the Service Use Tax Act, in accordance with reasonable rules and regulations to be prescribed by the Department. If no such request is made, the taxpayer may credit such excess payment against tax liability subsequently to be remitted to the Department under this Act, the Use Tax Act, the Service Occupation Tax Act or the Service Use Tax Act, in accordance with reasonable rules and regulations prescribed by the Department.  If the Department subsequently determined that all or any part of the credit taken was not actually due to the taxpayer, the taxpayer's 2.1% and 1.75% vendor's discount shall be reduced by 2.1% or 1.75% of the difference between the credit taken and that actually due, and that taxpayer shall be liable for penalties and interest on such difference.  [35 ILCS 120/3]

 

b)         Verified credit – explanation – no interest paid.  A verified credit is an amount of tax overpaid in a prior period that may be rolled over and applied to subsequent tax liabilities without the need to comply with the formalities involved in submitting a claim for credit.  Since the taxpayer has the immediate use of the verified credit to apply against its liability without the need to file a claim for credit and prove the overpayment, interest is not paid on verified credits (See also, 86 Ill. Adm. Code 700.230(a)(2)).  Verified credits appear on a Taxpayer Statement listing a taxpayer's unpaid balance, available credits or returns not filed.

 

c)         Verified credit − How used.  A verified credit may be used by a taxpayer in only 3 ways:

 

1)         It can be used to offset liability of the taxpayer that arises under this Act, the Service Occupation Tax Act, the Retailers’ Occupation Tax Act or the Use Tax Act, subsequent to the origination of the verified credit;

 

2)         It can be converted to a credit memorandum no later than 30 days after the date of overpayment, by making a request made to the Department using forms prescribed by the Department and available at www.tax.illinois.gov.  See 35 ILCS 120/6a, for information to be included.  Interest is not paid on verified credits that are converted to credit memoranda in accordance with this subsection (c)(2); and

 

3)         It can be converted to a credit memorandum at any time, starting 30 days after the date of overpayment, by making a request to the Department using forms prescribed by the Department and available at www.tax.illinois.gov, and without regard to the limitations on claims for refund.  See also 86 Ill. Adm. Code 160.150 for information on limitations and procedures.  Interest is not paid on verified credits that are converted to credit memoranda in accordance with this subsection (c)(3).

 

d)         A verified credit that is converted to a credit memorandum under this subsection (d) may be assigned to another taxpayer in the same manner as other credit memoranda issued to taxpayers by the Department.

 

(Source:  Added at 46 Ill. Reg. 18861, effective November 1, 2022)

 

Section 160.155  Disposition Of Credit Memoranda By Holders Thereof

 

a)         Assignment Of Credit Memoranda

 

1)         Credit memoranda issued hereunder may be assigned or transferred only after a request for that purpose is filed with the Department upon forms prescribed and furnished by it, and subject to the following conditions:

 

A)        That the assignment is made to a person who is subject to the Service Use Tax Act, the Service Occupation Tax Act, the Retailers' Occupation Tax Act, the Use Tax Act, any local occupation or use tax administered by the Department, Section 4 of the Water Commission Act of 1985, subsections (b), (c) and (d) of Section 5.01 of the Local Mass Transit District Act, or subsections (e), (f) and (g) of Section 4.03 of the Regional Transportation Authority Act;

 

B)        that there is no proceeding pending to establish an unpaid liability against the assignor pursuant to notice given of the Department's proposal to assess an amount against him either under the Service Occupation Tax Act, or under the Service Use Tax Act, the Retailers' Occupation Tax Act, the Use Tax Act, any local occupation or use tax administered by the Department, Section 4 of the Water Commission Act of 1985, subsections (b), (c) and (d) of Section 5.01 of the Local Mass Transit District Act, or subsections (e), (f) and (g) of Section 4.03 of the Regional Transportation Authority Act and

 

C)        that there is no established assessment or admitted liability or interest or penalty unpaid by the assignor, either under the Retailers' Occupation Tax Act, or under the Use Tax Act, the Service Occupation Tax Act, the Service Use Tax Act, any local occupation or use tax administered by the Department, Section 4 of the Water Commission Act of 1985, subsections (b), (c) and (d) of Section 5.01 of the Local Mass Transit District Act, or subsections (e), (f) and (g) of Section 4.03 of the Regional Transportation Authority Act: Provided, that if the amount of the credit memorandum must first be applied, in whole or in part, against an established unpaid assessment which has been issued to the claimant-assignor, or in total or partial liquidation of an unpaid admitted tax liability, or unpaid penalty, or unpaid amount of interest, due from the claimant-assignor, notice to this effect shall be given the claimant-assignor by the Department.

 

2)         If any balance is due such claimant-assignor, after application of the credit memorandum in the manner and to the purposes aforesaid, such balance may be assigned upon receipt by the Department of instructions to that effect.  If there are no unpaid established assessments or unpaid admitted tax liabilities, or unpaid penalties, or unpaid amounts of interest, due from the claimant-assignor, and if there are no pending proceedings as herein outlined, pending against the claimant-assignor, and if the contemplated assignee is a person who is subject to the Service Occupation Tax Act, the Service Use Tax Act, Retailers' Occupation Tax Act, Use Tax Act, any local occupation or use tax administered by the Department, Section 4 of the Water Commission Act of 1985, subsections (b), (c) and (d) of Section 5.01 of the Local Mass Transit District Act, or subsections (e), (f) and (g) of Section 4.03 of the Regional Transportation Authority Act, the request for leave to assign shall be approved.  The original credit memorandum shall be cancelled, and a new credit memorandum shall be issued to the assignee in the amount shown on the cancelled memorandum.

 

3)         However, before a credit is issued to the assignee, the amount of such credit shall be applied, to the extent that may be necessary, in liquidation of any established unpaid assessment which has been issued to such assignee, or in liquidation of any unpaid penalty, or amount of interest due from such assignee, or in liquidation of any unpaid admitted liability due from the assignee under the Service Occupation Tax Act, the Service Use Tax Act, the Retailers' Occupation Tax Act, the Use Tax Act, any local occupation or use tax administered by the Department, Section 4 of the Water Commission Act of 1985, subsections (b), (c) and (d) of Section 5.01 of the Local Mass Transit District Act, or subsections (e), (f) and (g) of Section 4.03 of the Regional Transportation Authority Act, and a credit memorandum for the balance of the credit, if any, shall then be issued to the assignee: Provided, that there is no proceeding pending against the assignee to establish an unpaid liability against him.

 

4)         If a proceeding to establish such an unpaid liability is pending, the credit memorandum shall be held by the Department until such proceeding is concluded.  If such proceeding results in the issuance of an assessment which becomes final under any of the said Acts, the credit shall be applied by the Department, to the extent which may be necessary, in liquidation of such assessment, and any interest that may accrue thereon, and the balance of the credit, if any (after cancellation of the credit memorandum applied in liquidation of such liability), shall be issued in the form of a new credit memorandum and delivered to the person entitled to receive delivery thereof.

 

b)         Submission of Credit Memoranda With Tax Returns

 

1)         Credit memoranda, in the hands either of the original claimant or of his assignee, may be submitted to the Department, along with Service Occupation Tax returns, Service Use Tax returns, Retailers' Occupation Tax returns or Use Tax returns, in payment of any tax liability or penalty or interest under the Service Occupation Tax Act, the Service Use Tax Act, the Retailers' Occupation Tax Act, the Use Tax Act, any local occupation or use tax administered by the Department, Section 4 of the Water Commission Act of 1985, subsections (b), (c) and (d) of Section 5.01 of the Local Mass Transit District Act, or subsections (e), (f) and (g) of Section 4.03 of the Regional Transportation Authority Act, incurred by the holder of such credit memoranda.

 

2)         If, after applying any such credit memorandum against the amount of tax shown to be due by the tax return with which the credit memorandum is submitted, there is a balance of the credit memorandum in favor of the taxpayer, the Department will cancel the credit memorandum which the taxpayer submits with his return and will issue and deliver to the taxpayer a new credit memorandum for such balance.  This process will be followed until the credit, to which such taxpayer is entitled, is exhausted.

 

3)         However, any new credit memorandum, which is issued for a balance of credit due the taxpayer after applying the amount of a credit memorandum to the payment of current taxes, is subject to the prior rights of the Department to the same extent that such prior rights take precedence when a credit memorandum is first issued (see Section 160.150(d) of this Part) or when leave to assign a credit memorandum is requested (see Subsection (a) of this Section).

 

(Source:  Amended at 25 Ill. Reg. 5015, effective March 23, 2001)

 

Section 160.160  Refunds

 

In case the Department determines that the claimant is entitled to a refund, such refund shall be made only from such appropriation as may be available for that purpose.  If it appears unlikely that the amount appropriated would permit everyone having a claim allowed during the period covered by such appropriation to elect to receive a cash refund, the Department will make such refunds only in hardship cases (i.e., in cases in which the claimant cannot use a credit memorandum).  The two most likely situations where this would be the case are the situation in which the claimant has discontinued business and the situation in which the claimant will have a small volume of liability to the Department in the foreseeable future, but receives a large credit memorandum which it therefore might take the claimant a long time to liquidate by using it to pay current taxes.  In these instances, the claimant probably would have to sell the credit memorandum at a loss in order to realize anything from it within any reasonable period of time.

 

(Source:  Amended and effective August 26, 1971)

 

Section 160.165  Interest

 

a)         Any credit or refund that is allowed under the Act shall bear interest at the rate of 1% per month or fraction thereof from the date when the erroneous payment for which the credit or refund is being allowed was made to the Department until the credit memorandum is issued or the refund is paid until January 1, 1994. Interest shall not be paid on claims filed after the effective date of the Uniform Penalty and Interest Act and 86 Ill. Adm. Code 700 except such interest which is paid in accordance with the Act. (Section 3-9 of the Uniform Penalty and Interest Act) [35 ILCS 735/3-9]

 

EXAMPLE:  A taxpayer files a claim for credit with the Department on January 15, 1994 for an overpayment of Service Use Tax.  The overpayment occurred in October 1992 when the taxpayer, an out-of-state registered serviceman, made a sale of service to an Illinois service customer, collected Service Use Tax on 50% of the total bill to the service customer and remitted the tax to the Department.  The sale of service involved the repair of a piece of graphic arts machinery and equipment.  The serviceman determined that the repair should have been made tax-free, refunded the tax to the service customer and filed a claim for credit with the Department.  The credit memorandum is issued on June 15, 1994.  Interest shall be paid at the rate of 1% per month for the period from October 1992 through December 31, 1993; and at the semiannually adjusted interest rate imposed pursuant to the Uniform Penalty and Interest Act from January 1, 1994 until June 15, 1994, the date on which the credit memorandum was issued by the Department.

 

b)         No interest will be allowed if the overpayment is found by the Department to have been made deliberately for the purpose of drawing interest, or if the overpayment is ascertained not to have been bona fide for some other reason.

 

c)         When a claim that is allowed is paid by means of a credit memorandum instead of by means of a cash refund, the claim will be considered to have been paid when the credit memorandum is issued by the Department to the claimant, and no interest will be allowed or paid by the Department for any period subsequent to that, even if the claimant does not use or assign the credit memorandum immediately after it is issued.

 

(Source:  Amended at 18 Ill. Reg. 1557, effective January 13, 1994)