Sen. Sue Rezin

Adopted in Senate on Oct 29, 2019

 

 


 

 


 
10100HB3608sam001LRB101 10557 HLH 64090 a

1
AMENDMENT TO HOUSE BILL 3608

2    AMENDMENT NO. ______. Amend House Bill 3608 by replacing
3everything after the enacting clause with the following:
 
4    "Section 5. The Use Tax Act is amended by changing Section
53-50 as follows:
 
6    (35 ILCS 105/3-50)  (from Ch. 120, par. 439.3-50)
7    Sec. 3-50. Manufacturing and assembly exemption. The
8manufacturing and assembling machinery and equipment exemption
9includes machinery and equipment that replaces machinery and
10equipment in an existing manufacturing facility as well as
11machinery and equipment that are for use in an expanded or new
12manufacturing facility. The machinery and equipment exemption
13also includes machinery and equipment used in the general
14maintenance or repair of exempt machinery and equipment or for
15in-house manufacture of exempt machinery and equipment.
16Beginning on July 1, 2017, the manufacturing and assembling

 

 

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1machinery and equipment exemption also includes graphic arts
2machinery and equipment, as defined in paragraph (6) of Section
33-5. The machinery and equipment exemption does not include
4machinery and equipment used in (i) the generation of
5electricity for wholesale or retail sale; (ii) the generation
6or treatment of natural or artificial gas for wholesale or
7retail sale that is delivered to customers through pipes,
8pipelines, or mains; or (iii) the treatment of water for
9wholesale or retail sale that is delivered to customers through
10pipes, pipelines, or mains. The provisions of this amendatory
11Act of the 98th General Assembly are declaratory of existing
12law as to the meaning and scope of this exemption. For the
13purposes of this exemption, terms have the following meanings:
14        (1) "Manufacturing process" means the production of an
15    article of tangible personal property, whether the article
16    is a finished product or an article for use in the process
17    of manufacturing or assembling a different article of
18    tangible personal property, by a procedure commonly
19    regarded as manufacturing, processing, fabricating, or
20    refining that changes some existing material into a
21    material with a different form, use, or name. In relation
22    to a recognized integrated business composed of a series of
23    operations that collectively constitute manufacturing, or
24    individually constitute manufacturing operations, the
25    manufacturing process commences with the first operation
26    or stage of production in the series and does not end until

 

 

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

 

 

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1    acting as catalysts but only if the chemicals or chemicals
2    acting as catalysts effect a direct and immediate change
3    upon a product being manufactured or assembled for
4    wholesale or retail sale or lease.
5        (5) "Production related tangible personal property"
6    means all tangible personal property that is used or
7    consumed by the purchaser in a manufacturing facility in
8    which a manufacturing process takes place and includes,
9    without limitation, tangible personal property that is
10    purchased for incorporation into real estate within a
11    manufacturing facility, supplies and consumables used in a
12    manufacturing facility including fuels, coolants,
13    solvents, oils, lubricants, and adhesives, hand tools,
14    protective apparel, and fire and safety equipment used or
15    consumed within a manufacturing facility, and tangible
16    personal property that is used or consumed in activities
17    such as research and development, preproduction material
18    handling, receiving, quality control, inventory control,
19    storage, staging, and packaging for shipping and
20    transportation purposes. "Production related tangible
21    personal property" does not include (i) tangible personal
22    property that is used, within or without a manufacturing
23    facility, in sales, purchasing, accounting, fiscal
24    management, marketing, personnel recruitment or selection,
25    or landscaping or (ii) tangible personal property that is
26    required to be titled or registered with a department,

 

 

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1    agency, or unit of federal, State, or local government.
2    The manufacturing and assembling machinery and equipment
3exemption includes production related tangible personal
4property that is purchased on or after July 1, 2007 and on or
5before June 30, 2008 and on or after July 1, 2019. The
6exemption for production related tangible personal property
7purchased on or after July 1, 2007 and on or before June 30,
82008 is subject to both of the following limitations:
9        (1) The maximum amount of the exemption for any one
10    taxpayer may not exceed 5% of the purchase price of
11    production related tangible personal property that is
12    purchased on or after July 1, 2007 and on or before June
13    30, 2008. A credit under Section 3-85 of this Act may not
14    be earned by the purchase of production related tangible
15    personal property for which an exemption is received under
16    this Section.
17        (2) The maximum aggregate amount of the exemptions for
18    production related tangible personal property purchased on
19    or after July 1, 2007 and on or before June 30, 2008
20    awarded under this Act and the Retailers' Occupation Tax
21    Act to all taxpayers may not exceed $10,000,000. If the
22    claims for the exemption exceed $10,000,000, then the
23    Department shall reduce the amount of the exemption to each
24    taxpayer on a pro rata basis.
25The Department shall adopt rules to implement and administer
26the exemption for production related tangible personal

 

 

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1property.
2    The manufacturing and assembling machinery and equipment
3exemption includes the sale of materials to a purchaser who
4produces exempted types of machinery, equipment, or tools and
5who rents or leases that machinery, equipment, or tools to a
6manufacturer of tangible personal property. This exemption
7also includes the sale of materials to a purchaser who
8manufactures those materials into an exempted type of
9machinery, equipment, or tools that the purchaser uses himself
10or herself in the manufacturing of tangible personal property.
11This exemption includes the sale of exempted types of machinery
12or equipment to a purchaser who is not the manufacturer, but
13who rents or leases the use of the property to a manufacturer.
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 user of the
17machinery, equipment, or tools without an active resale
18registration number shall prepare 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. The Department shall
22prescribe the form of the certificate. Informal rulings,
23opinions, or letters issued by the Department in response to an
24inquiry or request for an opinion from any person regarding the
25coverage and applicability of this exemption to specific
26devices shall be published, maintained as a public record, and

 

 

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1made available for public inspection and copying. If the
2informal ruling, opinion, or letter contains trade secrets or
3other confidential information, where possible, the Department
4shall delete that information before publication. Whenever
5informal rulings, opinions, or letters contain a policy of
6general applicability, the Department shall formulate and
7adopt that policy as a rule in accordance with the Illinois
8Administrative Procedure Act.
9    The manufacturing and assembling machinery and equipment
10exemption is exempt from the provisions of Section 3-90.
11(Source: P.A. 100-22, eff. 7-6-17; 101-9, eff. 6-5-19.)
 
12    Section 10. The Service Use Tax Act is amended by changing
13Section 2 as follows:
 
14    (35 ILCS 110/2)  (from Ch. 120, par. 439.32)
15    Sec. 2. Definitions. In this Act:
16    "Use" means the exercise by any person of any right or
17power over tangible personal property incident to the ownership
18of that property, but does not include the sale or use for
19demonstration by him of that property in any form as tangible
20personal property in the regular course of business. "Use" does
21not mean the interim use of tangible personal property nor the
22physical incorporation of tangible personal property, as an
23ingredient or constituent, into other tangible personal
24property, (a) which is sold in the regular course of business

 

 

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1or (b) which the person incorporating such ingredient or
2constituent therein has undertaken at the time of such purchase
3to cause to be transported in interstate commerce to
4destinations outside the State of Illinois.
5    "Purchased from a serviceman" means the acquisition of the
6ownership of, or title to, tangible personal property through a
7sale of service.
8    "Purchaser" means any person who, through a sale of
9service, acquires the ownership of, or title to, any tangible
10personal property.
11    "Cost price" means the consideration paid by the serviceman
12for a purchase valued in money, whether paid in money or
13otherwise, including cash, credits and services, and shall be
14determined without any deduction on account of the supplier's
15cost of the property sold or on account of any other expense
16incurred by the supplier. When a serviceman contracts out part
17or all of the services required in his sale of service, it
18shall be presumed that the cost price to the serviceman of the
19property transferred to him or her by his or her subcontractor
20is equal to 50% of the subcontractor's charges to the
21serviceman in the absence of proof of the consideration paid by
22the subcontractor for the purchase of such property.
23    "Selling price" means the consideration for a sale valued
24in money whether received in money or otherwise, including
25cash, credits and service, and shall be determined without any
26deduction on account of the serviceman's cost of the property

 

 

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1sold, the cost of materials used, labor or service cost or any
2other expense whatsoever, but does not include interest or
3finance charges which appear as separate items on the bill of
4sale or sales contract nor charges that are added to prices by
5sellers on account of the seller's duty to collect, from the
6purchaser, the tax that is imposed by this Act.
7    "Department" means the Department of Revenue.
8    "Person" means any natural individual, firm, partnership,
9association, joint stock company, joint venture, public or
10private corporation, limited liability company, and any
11receiver, executor, trustee, guardian or other representative
12appointed by order of any court.
13    "Sale of service" means any transaction except:
14        (1) a retail sale of tangible personal property taxable
15    under the Retailers' Occupation Tax Act or under the Use
16    Tax Act.
17        (2) a sale of tangible personal property for the
18    purpose of resale made in compliance with Section 2c of the
19    Retailers' Occupation Tax Act.
20        (3) except as hereinafter provided, a sale or transfer
21    of tangible personal property as an incident to the
22    rendering of service for or by any governmental body, or
23    for or by any corporation, society, association,
24    foundation or institution organized and operated
25    exclusively for charitable, religious or educational
26    purposes or any not-for-profit corporation, society,

 

 

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1    association, foundation, institution or organization which
2    has no compensated officers or employees and which is
3    organized and operated primarily for the recreation of
4    persons 55 years of age or older. A limited liability
5    company may qualify for the exemption under this paragraph
6    only if the limited liability company is organized and
7    operated exclusively for educational purposes.
8        (4) (blank).
9        (4a) a sale or transfer of tangible personal property
10    as an incident to the rendering of service for owners,
11    lessors, or shippers of tangible personal property which is
12    utilized by interstate carriers for hire for use as rolling
13    stock moving in interstate commerce so long as so used by
14    interstate carriers for hire, and equipment operated by a
15    telecommunications provider, licensed as a common carrier
16    by the Federal Communications Commission, which is
17    permanently installed in or affixed to aircraft moving in
18    interstate commerce.
19        (4a-5) on and after July 1, 2003 and through June 30,
20    2004, a sale or transfer of a motor vehicle of the second
21    division with a gross vehicle weight in excess of 8,000
22    pounds as an incident to the rendering of service if that
23    motor vehicle is subject to the commercial distribution fee
24    imposed under Section 3-815.1 of the Illinois Vehicle Code.
25    Beginning on July 1, 2004 and through June 30, 2005, the
26    use in this State of motor vehicles of the second division:

 

 

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

 

 

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1    production related tangible personal property, as defined
2    in Section 3-50 of the Use Tax Act, purchased on or after
3    July 1, 2019. The exemption provided by this paragraph (5)
4    does not include machinery and equipment used in (i) the
5    generation of electricity for wholesale or retail sale;
6    (ii) the generation or treatment of natural or artificial
7    gas for wholesale or retail sale that is delivered to
8    customers through pipes, pipelines, or mains; or (iii) the
9    treatment of water for wholesale or retail sale that is
10    delivered to customers through pipes, pipelines, or mains.
11    The provisions of Public Act 98-583 are declaratory of
12    existing law as to the meaning and scope of this exemption.
13    The exemption under this paragraph (5) is exempt from the
14    provisions of Section 3-75.
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

 

 

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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

 

 

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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. On and after July 1, 2017, exemption (5) also
22includes graphic arts machinery and equipment, as defined in
23paragraph (5) of Section 3-5. The machinery and equipment
24exemption does not include machinery and equipment used in (i)
25the generation of electricity for wholesale or retail sale;
26(ii) the generation or treatment of natural or artificial gas

 

 

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1for wholesale or retail sale that is delivered to customers
2through pipes, pipelines, or mains; or (iii) the treatment of
3water for wholesale or retail sale that is delivered to
4customers through pipes, pipelines, or mains. The provisions of
5Public Act 98-583 are declaratory of existing law as to the
6meaning and scope of this exemption. For the purposes of
7exemption (5), each of these terms shall have the following
8meanings: (1) "manufacturing process" shall mean the
9production of any article of tangible personal property,
10whether such article is a finished product or an article for
11use in the process of manufacturing or assembling a different
12article of tangible personal property, by procedures commonly
13regarded as manufacturing, processing, fabricating, or
14refining which changes some existing material or materials into
15a material with a different form, use or name. In relation to a
16recognized integrated business composed of a series of
17operations which collectively constitute manufacturing, or
18individually constitute manufacturing operations, the
19manufacturing process shall be deemed to commence with the
20first operation or stage of production in the series, and shall
21not be deemed to end until the completion of the final product
22in the last operation or stage of production in the series; and
23further, for purposes of exemption (5), photoprocessing is
24deemed to be a manufacturing process of tangible personal
25property for wholesale or retail sale; (2) "assembling process"
26shall mean the production of any article of tangible personal

 

 

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

 

 

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

 

 

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1property within the meaning of this Act.
2    "Serviceman" means any person who is engaged in the
3occupation of making sales of service.
4    "Sale at retail" means "sale at retail" as defined in the
5Retailers' Occupation Tax Act.
6    "Supplier" means any person who makes sales of tangible
7personal property to servicemen for the purpose of resale as an
8incident to a sale of service.
9    "Serviceman maintaining a place of business in this State",
10or any like term, means and includes any serviceman:
11        (1) having or maintaining within this State, directly
12    or by a subsidiary, an office, distribution house, sales
13    house, warehouse or other place of business, or any agent
14    or other representative operating within this State under
15    the authority of the serviceman or its subsidiary,
16    irrespective of whether such place of business or agent or
17    other representative is located here permanently or
18    temporarily, or whether such serviceman or subsidiary is
19    licensed to do business in this State;
20        (1.1) having a contract with a person located in this
21    State under which the person, for a commission or other
22    consideration based on the sale of service by the
23    serviceman, directly or indirectly refers potential
24    customers to the serviceman by providing to the potential
25    customers a promotional code or other mechanism that allows
26    the serviceman to track purchases referred by such persons.

 

 

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

 

 

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

 

 

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1    location in this State of authorized installation,
2    servicing, or repair facilities;
3        (5) being owned or controlled by the same interests
4    which own or control any retailer engaging in business in
5    the same or similar line of business in this State;
6        (6) having a franchisee or licensee operating under its
7    trade name if the franchisee or licensee is required to
8    collect the tax under this Section;
9        (7) pursuant to a contract with a cable television
10    operator located in this State, soliciting orders for
11    tangible personal property by means of advertising which is
12    transmitted or distributed over a cable television system
13    in this State;
14        (8) engaging in activities in Illinois, which
15    activities in the state in which the supply business
16    engaging in such activities is located would constitute
17    maintaining a place of business in that state; or
18        (9) beginning October 1, 2018, making sales of service
19    to purchasers in Illinois from outside of Illinois if:
20            (A) the cumulative gross receipts from sales of
21        service to purchasers in Illinois are $100,000 or more;
22        or
23            (B) the serviceman enters into 200 or more separate
24        transactions for sales of service to purchasers in
25        Illinois.
26        The serviceman shall determine on a quarterly basis,

 

 

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1    ending on the last day of March, June, September, and
2    December, whether he or she meets the criteria of either
3    subparagraph (A) or (B) of this paragraph (9) for the
4    preceding 12-month period. If the serviceman meets the
5    criteria of either subparagraph (A) or (B) for a 12-month
6    period, he or she is considered a serviceman maintaining a
7    place of business in this State and is required to collect
8    and remit the tax imposed under this Act and file returns
9    for one year. At the end of that one-year period, the
10    serviceman shall determine whether the serviceman met the
11    criteria of either subparagraph (A) or (B) during the
12    preceding 12-month period. If the serviceman met the
13    criteria in either subparagraph (A) or (B) for the
14    preceding 12-month period, he or she is considered a
15    serviceman maintaining a place of business in this State
16    and is required to collect and remit the tax imposed under
17    this Act and file returns for the subsequent year. If at
18    the end of a one-year period a serviceman that was required
19    to collect and remit the tax imposed under this Act
20    determines that he or she did not meet the criteria in
21    either subparagraph (A) or (B) during the preceding
22    12-month period, the serviceman subsequently shall
23    determine on a quarterly basis, ending on the last day of
24    March, June, September, and December, whether he or she
25    meets the criteria of either subparagraph (A) or (B) for
26    the preceding 12-month period.

 

 

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1        Beginning January 1, 2020, neither the gross receipts
2    from nor the number of separate transactions for sales of
3    service to purchasers in Illinois that a serviceman makes
4    through a marketplace facilitator and for which the
5    serviceman has received a certification from the
6    marketplace facilitator pursuant to Section 2d of this Act
7    shall be included for purposes of determining whether he or
8    she has met the thresholds of this paragraph (9).
9        (10) Beginning January 1, 2020, a marketplace
10    facilitator, as defined in Section 2d of this Act.
11(Source: P.A. 100-22, eff. 7-6-17; 100-321, eff. 8-24-17;
12100-587, eff. 6-4-18; 100-863, eff. 8-14-18; 101-9, Article 10,
13Section 10-15, eff. 6-5-19; 101-9, Article 25, Section 25-10,
14eff. 6-5-19; revised 7-10-19.)
 
15    Section 15. The Service Occupation Tax Act is amended by
16changing Section 2 as follows:
 
17    (35 ILCS 115/2)  (from Ch. 120, par. 439.102)
18    Sec. 2. In this Act:
19    "Transfer" means any transfer of the title to property or
20of the ownership of property whether or not the transferor
21retains title as security for the payment of amounts due him
22from the transferee.
23    "Cost Price" means the consideration paid by the serviceman
24for a purchase valued in money, whether paid in money or

 

 

10100HB3608sam001- 24 -LRB101 10557 HLH 64090 a

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

 

 

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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) (Blank).
12    (d-1) A sale or transfer of tangible personal property as
13an incident to the rendering of service for owners, lessors or
14shippers of tangible personal property which is utilized by
15interstate carriers for hire for use as rolling stock moving in
16interstate commerce, and equipment operated by a
17telecommunications provider, licensed as a common carrier by
18the Federal Communications Commission, which is permanently
19installed in or affixed to aircraft moving in interstate
20commerce.
21    (d-1.1) On and after July 1, 2003 and through June 30,
222004, a sale or transfer of a motor vehicle of the second
23division with a gross vehicle weight in excess of 8,000 pounds
24as an incident to the rendering of service if that motor
25vehicle is subject to the commercial distribution fee imposed
26under Section 3-815.1 of the Illinois Vehicle Code. Beginning

 

 

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1on July 1, 2004 and through June 30, 2005, the use in this
2State of motor vehicles of the second division: (i) with a
3gross vehicle weight rating in excess of 8,000 pounds; (ii)
4that are subject to the commercial distribution fee imposed
5under Section 3-815.1 of the Illinois Vehicle Code; and (iii)
6that are primarily used for commercial purposes. Through June
730, 2005, this exemption applies to repair and replacement
8parts added after the initial purchase of such a motor vehicle
9if that motor vehicle is used in a manner that would qualify
10for the rolling stock exemption otherwise provided for in this
11Act. For purposes of this paragraph, "used for commercial
12purposes" means the transportation of persons or property in
13furtherance of any commercial or industrial enterprise whether
14for-hire or not.
15    (d-2) The repairing, reconditioning or remodeling, for a
16common carrier by rail, of tangible personal property which
17belongs to such carrier for hire, and as to which such carrier
18receives the physical possession of the repaired,
19reconditioned or remodeled item of tangible personal property
20in Illinois, and which such carrier transports, or shares with
21another common carrier in the transportation of such property,
22out of Illinois on a standard uniform bill of lading showing
23the person who repaired, reconditioned or remodeled the
24property as the shipper or consignor of such property to a
25destination outside Illinois, for use outside Illinois.
26    (d-3) A sale or transfer of tangible personal property

 

 

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1which is produced by the seller thereof on special order in
2such a way as to have made the applicable tax the Service
3Occupation Tax or the Service Use Tax, rather than the
4Retailers' Occupation Tax or the Use Tax, for an interstate
5carrier by rail which receives the physical possession of such
6property in Illinois, and which transports such property, or
7shares with another common carrier in the transportation of
8such property, out of Illinois on a standard uniform bill of
9lading showing the seller of the property as the shipper or
10consignor of such property to a destination outside Illinois,
11for use outside Illinois.
12    (d-4) Until January 1, 1997, a sale, by a registered
13serviceman paying tax under this Act to the Department, of
14special order printed materials delivered outside Illinois and
15which are not returned to this State, if delivery is made by
16the seller or agent of the seller, including an agent who
17causes the product to be delivered outside Illinois by a common
18carrier or the U.S. postal service.
19    (e) A sale or transfer of machinery and equipment used
20primarily in the process of the manufacturing or assembling,
21either in an existing, an expanded or a new manufacturing
22facility, of tangible personal property for wholesale or retail
23sale or lease, whether such sale or lease is made directly by
24the manufacturer or by some other person, whether the materials
25used in the process are owned by the manufacturer or some other
26person, or whether such sale or lease is made apart from or as

 

 

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1an incident to the seller's engaging in a service occupation
2and the applicable tax is a Service Occupation Tax or Service
3Use Tax, rather than Retailers' Occupation Tax or Use Tax. The
4exemption provided by this paragraph (e) includes production
5related tangible personal property, as defined in Section 3-50
6of the Use Tax Act, purchased on or after July 1, 2019. The
7exemption provided by this paragraph (e) does not include
8machinery and equipment used in (i) the generation of
9electricity for wholesale or retail sale; (ii) the generation
10or treatment of natural or artificial gas for wholesale or
11retail sale that is delivered to customers through pipes,
12pipelines, or mains; or (iii) the treatment of water for
13wholesale or retail sale that is delivered to customers through
14pipes, pipelines, or mains. The provisions of Public Act 98-583
15are declaratory of existing law as to the meaning and scope of
16this exemption. The exemption under this subsection (e) is
17exempt from the provisions of Section 3-75.
18    (f) Until July 1, 2003, the sale or transfer of
19distillation machinery and equipment, sold as a unit or kit and
20assembled or installed by the retailer, which machinery and
21equipment is certified by the user to be used only for the
22production of ethyl alcohol that will be used for consumption
23as motor fuel or as a component of motor fuel for the personal
24use of such user and not subject to sale or resale.
25    (g) At the election of any serviceman not required to be
26otherwise registered as a retailer under Section 2a of the

 

 

10100HB3608sam001- 29 -LRB101 10557 HLH 64090 a

1Retailers' Occupation Tax Act, made for each fiscal year sales
2of service in which the aggregate annual cost price of tangible
3personal property transferred as an incident to the sales of
4service is less than 35% (75% in the case of servicemen
5transferring prescription drugs or servicemen engaged in
6graphic arts production) of the aggregate annual total gross
7receipts from all sales of service. The purchase of such
8tangible personal property by the serviceman shall be subject
9to tax under the Retailers' Occupation Tax Act and the Use Tax
10Act. However, if a primary serviceman who has made the election
11described in this paragraph subcontracts service work to a
12secondary serviceman who has also made the election described
13in this paragraph, the primary serviceman does not incur a Use
14Tax liability if the secondary serviceman (i) has paid or will
15pay Use Tax on his or her cost price of any tangible personal
16property transferred to the primary serviceman and (ii)
17certifies that fact in writing to the primary serviceman.
18    Tangible personal property transferred incident to the
19completion of a maintenance agreement is exempt from the tax
20imposed pursuant to this Act.
21    Exemption (e) also includes machinery and equipment used in
22the general maintenance or repair of such exempt machinery and
23equipment or for in-house manufacture of exempt machinery and
24equipment. On and after July 1, 2017, exemption (e) also
25includes graphic arts machinery and equipment, as defined in
26paragraph (5) of Section 3-5. The machinery and equipment

 

 

10100HB3608sam001- 30 -LRB101 10557 HLH 64090 a

1exemption does not include machinery and equipment used in (i)
2the generation of electricity for wholesale or retail sale;
3(ii) the generation or treatment of natural or artificial gas
4for wholesale or retail sale that is delivered to customers
5through pipes, pipelines, or mains; or (iii) the treatment of
6water for wholesale or retail sale that is delivered to
7customers through pipes, pipelines, or mains. The provisions of
8Public Act 98-583 are declaratory of existing law as to the
9meaning and scope of this exemption. For the purposes of
10exemption (e), each of these terms shall have the following
11meanings: (1) "manufacturing process" shall mean the
12production of any article of tangible personal property,
13whether such article is a finished product or an article for
14use in the process of manufacturing or assembling a different
15article of tangible personal property, by procedures commonly
16regarded as manufacturing, processing, fabricating, or
17refining which changes some existing material or materials into
18a material with a different form, use or name. In relation to a
19recognized integrated business composed of a series of
20operations which collectively constitute manufacturing, or
21individually constitute manufacturing operations, the
22manufacturing process shall be deemed to commence with the
23first operation or stage of production in the series, and shall
24not be deemed to end until the completion of the final product
25in the last operation or stage of production in the series; and
26further for purposes of exemption (e), photoprocessing is

 

 

10100HB3608sam001- 31 -LRB101 10557 HLH 64090 a

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

 

 

10100HB3608sam001- 32 -LRB101 10557 HLH 64090 a

1number shall furnish such number to the seller at the time of
2purchase. The purchaser of such machinery and equipment and
3tools without an active resale registration number shall
4furnish to the seller a certificate of exemption for each
5transaction stating facts establishing the exemption for that
6transaction, which certificate shall be available to the
7Department for inspection or audit.
8    Except as provided in Section 2d of this Act, the rolling
9stock exemption applies to rolling stock used by an interstate
10carrier for hire, even just between points in Illinois, if such
11rolling stock transports, for hire, persons whose journeys or
12property whose shipments originate or terminate outside
13Illinois.
14    Any informal rulings, opinions or letters issued by the
15Department in response to an inquiry or request for any opinion
16from any person regarding the coverage and applicability of
17exemption (e) to specific devices shall be published,
18maintained as a public record, and made available for public
19inspection and copying. If the informal ruling, opinion or
20letter contains trade secrets or other confidential
21information, where possible the Department shall delete such
22information prior to publication. Whenever such informal
23rulings, opinions, or letters contain any policy of general
24applicability, the Department shall formulate and adopt such
25policy as a rule in accordance with the provisions of the
26Illinois Administrative Procedure Act.

 

 

10100HB3608sam001- 33 -LRB101 10557 HLH 64090 a

1    On and after July 1, 1987, no entity otherwise eligible
2under exemption (c) of this Section shall make tax-free
3purchases unless it has an active exemption identification
4number issued by the Department.
5    "Serviceman" means any person who is engaged in the
6occupation of making sales of service.
7    "Sale at Retail" means "sale at retail" as defined in the
8Retailers' Occupation Tax Act.
9    "Supplier" means any person who makes sales of tangible
10personal property to servicemen for the purpose of resale as an
11incident to a sale of service.
12(Source: P.A. 100-22, eff. 7-6-17; 100-321, eff. 8-24-17;
13100-863, eff. 8-14-18; 101-9, eff. 6-5-19.)
 
14    Section 20. The Retailers' Occupation Tax Act is amended by
15changing Section 2-45 as follows:
 
16    (35 ILCS 120/2-45)  (from Ch. 120, par. 441-45)
17    Sec. 2-45. Manufacturing and assembly exemption. The
18manufacturing and assembly machinery and equipment exemption
19includes machinery and equipment that replaces machinery and
20equipment in an existing manufacturing facility as well as
21machinery and equipment that are for use in an expanded or new
22manufacturing facility.
23    The machinery and equipment exemption also includes
24machinery and equipment used in the general maintenance or

 

 

10100HB3608sam001- 34 -LRB101 10557 HLH 64090 a

1repair of exempt machinery and equipment or for in-house
2manufacture of exempt machinery and equipment. Beginning on
3July 1, 2017, the manufacturing and assembling machinery and
4equipment exemption also includes graphic arts machinery and
5equipment, as defined in paragraph (4) of Section 2-5. The
6machinery and equipment exemption does not include machinery
7and equipment used in (i) the generation of electricity for
8wholesale or retail sale; (ii) the generation or treatment of
9natural or artificial gas for wholesale or retail sale that is
10delivered to customers through pipes, pipelines, or mains; or
11(iii) the treatment of water for wholesale or retail sale that
12is delivered to customers through pipes, pipelines, or mains.
13The provisions of this amendatory Act of the 98th General
14Assembly are declaratory of existing law as to the meaning and
15scope of this exemption. For the purposes of this exemption,
16terms have the following meanings:
17        (1) "Manufacturing process" means the production of an
18    article of tangible personal property, whether the article
19    is a finished product or an article for use in the process
20    of manufacturing or assembling a different article of
21    tangible personal property, by a procedure commonly
22    regarded as manufacturing, processing, fabricating, or
23    refining that changes some existing material or materials
24    into a material with a different form, use, or name. In
25    relation to a recognized integrated business composed of a
26    series of operations that collectively constitute

 

 

10100HB3608sam001- 35 -LRB101 10557 HLH 64090 a

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

 

 

10100HB3608sam001- 36 -LRB101 10557 HLH 64090 a

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

 

 

10100HB3608sam001- 37 -LRB101 10557 HLH 64090 a

1    management, marketing, personnel recruitment or selection,
2    or landscaping or (ii) tangible personal property that is
3    required to be titled or registered with a department,
4    agency, or unit of federal, State, or local government.
5    The manufacturing and assembling machinery and equipment
6exemption includes production related tangible personal
7property that is purchased on or after July 1, 2007 and on or
8before June 30, 2008 and on or after July 1, 2019. The
9exemption for production related tangible personal property
10purchased on or after July 1, 2007 and before June 30, 2008 is
11subject to both of the following limitations:
12        (1) The maximum amount of the exemption for any one
13    taxpayer may not exceed 5% of the purchase price of
14    production related tangible personal property that is
15    purchased on or after July 1, 2007 and on or before June
16    30, 2008. A credit under Section 3-85 of this Act may not
17    be earned by the purchase of production related tangible
18    personal property for which an exemption is received under
19    this Section.
20        (2) The maximum aggregate amount of the exemptions for
21    production related tangible personal property awarded
22    under this Act and the Use Tax Act to all taxpayers may not
23    exceed $10,000,000. If the claims for the exemption exceed
24    $10,000,000, then the Department shall reduce the amount of
25    the exemption to each taxpayer on a pro rata basis.
26The Department shall adopt rules to implement and administer

 

 

10100HB3608sam001- 38 -LRB101 10557 HLH 64090 a

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

 

 

10100HB3608sam001- 39 -LRB101 10557 HLH 64090 a

1shall delete that information before publication. Whenever
2informal rulings, opinions, or letters contain a policy of
3general applicability, the Department shall formulate and
4adopt that policy as a rule in accordance with the Illinois
5Administrative Procedure Act.
6    The manufacturing and assembling machinery and equipment
7exemption is exempt from the provisions of Section 2-70.
8(Source: P.A. 100-22, eff. 7-6-17; 101-9, eff. 6-5-19.)".