93RD GENERAL ASSEMBLY
State of Illinois
2003 and 2004
HB6619

 

Introduced 02/09/04, by George Scully Jr.

 

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

    Amends the Use Tax Act, the Service Use Tax Act, the Service Occupation Tax Act, and the Retailers' Occupation Tax Act. Provides that, at the same time as the taxpayer files it's annual Illinois income tax return, the taxpayer must disclose the aggregate dollar amount of manufacturing and assembling machinery and equipment tax exemptions received under these Acts during the most recently completed calendar year, broken down by plant and by facility. Provides that, if a plant or facility with respect to which a taxpayer received such manufacturing and assembling machinery and equipment exemptions closes, the taxpayer must pay to the Department all amounts that were not not paid in taxes under these Acts due to the exemption, for the 5-year period immediately preceding the plant or facility closure.


LRB093 18465 SJM 47022 b

FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

HB6619 LRB093 18465 SJM 47022 b

1     AN ACT concerning taxes.
 
2     Be it enacted by the People of the State of Illinois,
3 represented in the General Assembly:
 
4     Section 5. The Use Tax Act is amended by changing Section
5 3-50 as follows:
 
6     (35 ILCS 105/3-50)  (from Ch. 120, par. 439.3-50)
7     Sec. 3-50. Manufacturing and assembly exemption. The
8 manufacturing and assembling machinery and equipment exemption
9 includes machinery and equipment that replaces machinery and
10 equipment in an existing manufacturing facility as well as
11 machinery and equipment that are for use in an expanded or new
12 manufacturing facility. The machinery and equipment exemption
13 also includes machinery and equipment used in the general
14 maintenance or repair of exempt machinery and equipment or for
15 in-house manufacture of exempt machinery and equipment. For the
16 purposes of this exemption, terms 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 into a
24     material with a different form, use, or name. In relation
25     to a recognized integrated business composed of a series of
26     operations that collectively constitute manufacturing, or
27     individually constitute manufacturing operations, the
28     manufacturing process commences with the first operation
29     or stage of production in the series and does not end until
30     the completion of the final product in the last operation
31     or stage of production in the series. For purposes of this
32     exemption, photoprocessing is a manufacturing process of

 

 

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1     tangible personal property for wholesale or retail sale.
2         (2) "Assembling process" means the production of an
3     article of tangible personal property, whether the article
4     is a finished product or an article for use in the process
5     of manufacturing or assembling a different article of
6     tangible personal property, by the combination of existing
7     materials in a manner commonly regarded as assembling that
8     results in an article or material of a different form, use,
9     or name.
10         (3) "Machinery" means major mechanical machines or
11     major components of those machines contributing to a
12     manufacturing or assembling process.
13         (4) "Equipment" includes an independent device or tool
14     separate from machinery but essential to an integrated
15     manufacturing or assembly process; including computers
16     used primarily in a manufacturer's computer assisted
17     design, computer assisted manufacturing (CAD/CAM) system;
18     any subunit or assembly comprising a component of any
19     machinery or auxiliary, adjunct, or attachment parts of
20     machinery, such as tools, dies, jigs, fixtures, patterns,
21     and molds; and any parts that require periodic replacement
22     in the course of normal operation; but does not include
23     hand tools. Equipment includes chemicals or chemicals
24     acting as catalysts but only if the chemicals or chemicals
25     acting as catalysts effect a direct and immediate change
26     upon a product being manufactured or assembled for
27     wholesale or retail sale or lease.
28     The manufacturing and assembling machinery and equipment
29 exemption includes the sale of materials to a purchaser who
30 produces exempted types of machinery, equipment, or tools and
31 who rents or leases that machinery, equipment, or tools to a
32 manufacturer of tangible personal property. This exemption
33 also includes the sale of materials to a purchaser who
34 manufactures those materials into an exempted type of
35 machinery, equipment, or tools that the purchaser uses himself
36 or herself in the manufacturing of tangible personal property.

 

 

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1 This exemption includes the sale of exempted types of machinery
2 or equipment to a purchaser who is not the manufacturer, but
3 who rents or leases the use of the property to a manufacturer.
4 The purchaser of the machinery and equipment who has an active
5 resale registration number shall furnish that number to the
6 seller at the time of purchase. A user of the machinery,
7 equipment, or tools without an active resale registration
8 number shall prepare a certificate of exemption for each
9 transaction stating facts establishing the exemption for that
10 transaction, and that certificate shall be available to the
11 Department for inspection or audit. The Department shall
12 prescribe the form of the certificate. Informal rulings,
13 opinions, or letters issued by the Department in response to an
14 inquiry or request for an opinion from any person regarding the
15 coverage and applicability of this exemption to specific
16 devices shall be published, maintained as a public record, and
17 made available for public inspection and copying. If the
18 informal ruling, opinion, or letter contains trade secrets or
19 other confidential information, where possible, the Department
20 shall delete that information before publication. Whenever
21 informal rulings, opinions, or letters contain a policy of
22 general applicability, the Department shall formulate and
23 adopt that policy as a rule in accordance with the Illinois
24 Administrative Procedure Act.
25     At the same time as the taxpayer files it's annual Illinois
26 income tax return, the taxpayer must disclose the aggregate
27 dollar amount of manufacturing and assembling machinery and
28 equipment tax exemptions received under the Use Tax Act, the
29 Service Use Tax Act, the Service Occupation Tax Act, and the
30 Retailers' Occupation Tax Act during the most recently
31 completed calendar year, broken down by plant and by facility.
32 If a plant or facility with respect to which a taxpayer
33 received such manufacturing and assembling machinery and
34 equipment exemptions closes, the taxpayer must pay to the
35 Department all amounts that were not not paid in taxes under
36 the Use Tax Act, the Service Use Tax Act, the Service

 

 

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1 Occupation Tax Act, and the Retailers' Occupation Tax Act due
2 to the exemption, for the 5-year period immediately preceding
3 the date of the plant or facility closure.
4 (Source: P.A. 91-51, eff. 6-30-99; 92-484, eff. 8-23-01.)
 
5     Section 10. The Service Use Tax Act is amended by changing
6 Section 2 as follows:
 
7     (35 ILCS 110/2)  (from Ch. 120, par. 439.32)
8     Sec. 2. "Use" means the exercise by any person of any right
9 or power over tangible personal property incident to the
10 ownership of that property, but does not include the sale or
11 use for demonstration by him of that property in any form as
12 tangible personal property in the regular course of business.
13 "Use" does not mean the interim use of tangible personal
14 property nor the physical incorporation of tangible personal
15 property, as an ingredient or constituent, into other tangible
16 personal property, (a) which is sold in the regular course of
17 business or (b) which the person incorporating such ingredient
18 or constituent therein has undertaken at the time of such
19 purchase to cause to be transported in interstate commerce to
20 destinations outside the State of Illinois.
21     "Purchased from a serviceman" means the acquisition of the
22 ownership of, or title to, tangible personal property through a
23 sale of service.
24     "Purchaser" means any person who, through a sale of
25 service, acquires the ownership of, or title to, any tangible
26 personal property.
27     "Cost price" means the consideration paid by the serviceman
28 for a purchase valued in money, whether paid in money or
29 otherwise, including cash, credits and services, and shall be
30 determined without any deduction on account of the supplier's
31 cost of the property sold or on account of any other expense
32 incurred by the supplier. When a serviceman contracts out part
33 or all of the services required in his sale of service, it
34 shall be presumed that the cost price to the serviceman of the

 

 

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1 property transferred to him or her by his or her subcontractor
2 is equal to 50% of the subcontractor's charges to the
3 serviceman in the absence of proof of the consideration paid by
4 the subcontractor for the purchase of such property.
5     "Selling price" means the consideration for a sale valued
6 in money whether received in money or otherwise, including
7 cash, credits and service, and shall be determined without any
8 deduction on account of the serviceman's cost of the property
9 sold, the cost of materials used, labor or service cost or any
10 other expense whatsoever, but does not include interest or
11 finance charges which appear as separate items on the bill of
12 sale or sales contract nor charges that are added to prices by
13 sellers on account of the seller's duty to collect, from the
14 purchaser, the tax that is imposed by this Act.
15     "Department" means the Department of Revenue.
16     "Person" means any natural individual, firm, partnership,
17 association, joint stock company, joint venture, public or
18 private corporation, limited liability company, and any
19 receiver, executor, trustee, guardian or other representative
20 appointed by order of any court.
21     "Sale of service" means any transaction except:
22         (1) a retail sale of tangible personal property taxable
23     under the Retailers' Occupation Tax Act or under the Use
24     Tax Act.
25         (2) a sale of tangible personal property for the
26     purpose of resale made in compliance with Section 2c of the
27     Retailers' Occupation Tax Act.
28         (3) except as hereinafter provided, a sale or transfer
29     of tangible personal property as an incident to the
30     rendering of service for or by any governmental body, or
31     for or by any corporation, society, association,
32     foundation or institution organized and operated
33     exclusively for charitable, religious or educational
34     purposes or any not-for-profit corporation, society,
35     association, foundation, institution or organization which
36     has no compensated officers or employees and which is

 

 

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1     organized and operated primarily for the recreation of
2     persons 55 years of age or older. A limited liability
3     company may qualify for the exemption under this paragraph
4     only if the limited liability company is organized and
5     operated exclusively for educational purposes.
6         (4) a sale or transfer of tangible personal property as
7     an incident to the rendering of service for interstate
8     carriers for hire for use as rolling stock moving in
9     interstate commerce or by lessors under a lease of one year
10     or longer, executed or in effect at the time of purchase of
11     personal property, to interstate carriers for hire for use
12     as rolling stock moving in interstate commerce so long as
13     so used by such interstate carriers for hire, and equipment
14     operated by a telecommunications provider, licensed as a
15     common carrier by the Federal Communications Commission,
16     which is permanently installed in or affixed to aircraft
17     moving in interstate commerce.
18         (4a) a sale or transfer of tangible personal property
19     as an incident to the rendering of service for owners,
20     lessors, or shippers of tangible personal property which is
21     utilized by interstate carriers for hire for use as rolling
22     stock moving in interstate commerce so long as so used by
23     interstate carriers for hire, and equipment operated by a
24     telecommunications provider, licensed as a common carrier
25     by the Federal Communications Commission, which is
26     permanently installed in or affixed to aircraft moving in
27     interstate commerce.
28         (4a-5) on and after July 1, 2003, a sale or transfer of
29     a motor vehicle of the second division with a gross vehicle
30     weight in excess of 8,000 pounds as an incident to the
31     rendering of service if that motor vehicle is subject to
32     the commercial distribution fee imposed under Section
33     3-815.1 of the Illinois Vehicle Code. This exemption
34     applies to repair and replacement parts added after the
35     initial purchase of such a motor vehicle if that motor
36     vehicle is used in a manner that would qualify for the

 

 

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1     rolling stock exemption otherwise provided for in this Act.
2         (5) a sale or transfer of machinery and equipment used
3     primarily in the process of the manufacturing or
4     assembling, either in an existing, an expanded or a new
5     manufacturing facility, of tangible personal property for
6     wholesale or retail sale or lease, whether such sale or
7     lease is made directly by the manufacturer or by some other
8     person, whether the materials used in the process are owned
9     by the manufacturer or some other person, or whether such
10     sale or lease is made apart from or as an incident to the
11     seller's engaging in a service occupation and the
12     applicable tax is a Service Use Tax or Service Occupation
13     Tax, rather than Use Tax or Retailers' Occupation Tax.
14         (5a) the repairing, reconditioning or remodeling, for
15     a common carrier by rail, of tangible personal property
16     which belongs to such carrier for hire, and as to which
17     such carrier receives the physical possession of the
18     repaired, reconditioned or remodeled item of tangible
19     personal property in Illinois, and which such carrier
20     transports, or shares with another common carrier in the
21     transportation of such property, out of Illinois on a
22     standard uniform bill of lading showing the person who
23     repaired, reconditioned or remodeled the property to a
24     destination outside Illinois, for use outside Illinois.
25         (5b) a sale or transfer of tangible personal property
26     which is produced by the seller thereof on special order in
27     such a way as to have made the applicable tax the Service
28     Occupation Tax or the Service Use Tax, rather than the
29     Retailers' Occupation Tax or the Use Tax, for an interstate
30     carrier by rail which receives the physical possession of
31     such property in Illinois, and which transports such
32     property, or shares with another common carrier in the
33     transportation of such property, out of Illinois on a
34     standard uniform bill of lading showing the seller of the
35     property as the shipper or consignor of such property to a
36     destination outside Illinois, for use outside Illinois.

 

 

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1         (6) until July 1, 2003, a sale or transfer of
2     distillation machinery and equipment, sold as a unit or kit
3     and assembled or installed by the retailer, which machinery
4     and equipment is certified by the user to be used only for
5     the production of ethyl alcohol that will be used for
6     consumption as motor fuel or as a component of motor fuel
7     for the personal use of such user and not subject to sale
8     or resale.
9         (7) at the election of any serviceman not required to
10     be otherwise registered as a retailer under Section 2a of
11     the Retailers' Occupation Tax Act, made for each fiscal
12     year sales of service in which the aggregate annual cost
13     price of tangible personal property transferred as an
14     incident to the sales of service is less than 35%, or 75%
15     in the case of servicemen transferring prescription drugs
16     or servicemen engaged in graphic arts production, of the
17     aggregate annual total gross receipts from all sales of
18     service. The purchase of such tangible personal property by
19     the serviceman shall be subject to tax under the Retailers'
20     Occupation Tax Act and the Use Tax Act. However, if a
21     primary serviceman who has made the election described in
22     this paragraph subcontracts service work to a secondary
23     serviceman who has also made the election described in this
24     paragraph, the primary serviceman does not incur a Use Tax
25     liability if the secondary serviceman (i) has paid or will
26     pay Use Tax on his or her cost price of any tangible
27     personal property transferred to the primary serviceman
28     and (ii) certifies that fact in writing to the primary
29     serviceman.
30     Tangible personal property transferred incident to the
31 completion of a maintenance agreement is exempt from the tax
32 imposed pursuant to this Act.
33     Exemption (5) also includes machinery and equipment used in
34 the general maintenance or repair of such exempt machinery and
35 equipment or for in-house manufacture of exempt machinery and
36 equipment. For the purposes of exemption (5), each of these

 

 

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

 

 

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1 operation; but shall not include hand tools. Equipment includes
2 chemicals or chemicals acting as catalysts but only if the
3 chemicals or chemicals acting as catalysts effect a direct and
4 immediate change upon a product being manufactured or assembled
5 for wholesale or retail sale or lease. The purchaser of such
6 machinery and equipment who has an active resale registration
7 number shall furnish such number to the seller at the time of
8 purchase. The user of such machinery and equipment and tools
9 without an active resale registration number shall prepare a
10 certificate of exemption for each transaction stating facts
11 establishing the exemption for that transaction, which
12 certificate shall be available to the Department for inspection
13 or audit. The Department shall prescribe the form of the
14 certificate.
15     Any informal rulings, opinions or letters issued by the
16 Department in response to an inquiry or request for any opinion
17 from any person regarding the coverage and applicability of
18 exemption (5) to specific devices shall be published,
19 maintained as a public record, and made available for public
20 inspection and copying. If the informal ruling, opinion or
21 letter contains trade secrets or other confidential
22 information, where possible the Department shall delete such
23 information prior to publication. Whenever such informal
24 rulings, opinions, or letters contain any policy of general
25 applicability, the Department shall formulate and adopt such
26 policy as a rule in accordance with the provisions of the
27 Illinois Administrative Procedure Act.
28     At the same time as the taxpayer files it's annual Illinois
29 income tax return, the taxpayer must disclose the aggregate
30 dollar amount of manufacturing and assembling machinery and
31 equipment tax exemptions received under the Use Tax Act, the
32 Service Use Tax Act, the Service Occupation Tax Act, and the
33 Retailers' Occupation Tax Act during the most recently
34 completed calendar year, broken down by plant and by facility.
35 If a plant or facility with respect to which a taxpayer
36 received manufacturing and assembling machinery and equipment

 

 

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1 exemptions closes, the taxpayer must pay to the Department all
2 amounts that were not not paid in taxes under the Use Tax Act,
3 the Service Use Tax Act, the Service Occupation Tax Act, and
4 the Retailers' Occupation Tax Act due to such exemptions, for
5 the 5-year period immediately preceding the plant or facility
6 closure.
7     On and after July 1, 1987, no entity otherwise eligible
8 under exemption (3) of this Section shall make tax free
9 purchases unless it has an active exemption identification
10 number issued by the Department.
11     The purchase, employment and transfer of such tangible
12 personal property as newsprint and ink for the primary purpose
13 of conveying news (with or without other information) is not a
14 purchase, use or sale of service or of tangible personal
15 property within the meaning of this Act.
16     "Serviceman" means any person who is engaged in the
17 occupation of making sales of service.
18     "Sale at retail" means "sale at retail" as defined in the
19 Retailers' Occupation Tax Act.
20     "Supplier" means any person who makes sales of tangible
21 personal property to servicemen for the purpose of resale as an
22 incident to a sale of service.
23     "Serviceman maintaining a place of business in this State",
24 or any like term, means and includes any serviceman:
25         1. having or maintaining within this State, directly or
26     by a subsidiary, an office, distribution house, sales
27     house, warehouse or other place of business, or any agent
28     or other representative operating within this State under
29     the authority of the serviceman or its subsidiary,
30     irrespective of whether such place of business or agent or
31     other representative is located here permanently or
32     temporarily, or whether such serviceman or subsidiary is
33     licensed to do business in this State;
34         2. soliciting orders for tangible personal property by
35     means of a telecommunication or television shopping system
36     (which utilizes toll free numbers) which is intended by the

 

 

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1     retailer to be broadcast by cable television or other means
2     of broadcasting, to consumers located in this State;
3         3. pursuant to a contract with a broadcaster or
4     publisher located in this State, soliciting orders for
5     tangible personal property by means of advertising which is
6     disseminated primarily to consumers located in this State
7     and only secondarily to bordering jurisdictions;
8         4. soliciting orders for tangible personal property by
9     mail if the solicitations are substantial and recurring and
10     if the retailer benefits from any banking, financing, debt
11     collection, telecommunication, or marketing activities
12     occurring in this State or benefits from the location in
13     this State of authorized installation, servicing, or
14     repair facilities;
15         5. being owned or controlled by the same interests
16     which own or control any retailer engaging in business in
17     the same or similar line of business in this State;
18         6. having a franchisee or licensee operating under its
19     trade name if the franchisee or licensee is required to
20     collect the tax under this Section;
21         7. pursuant to a contract with a cable television
22     operator located in this State, soliciting orders for
23     tangible personal property by means of advertising which is
24     transmitted or distributed over a cable television system
25     in this State; or
26         8. engaging in activities in Illinois, which
27     activities in the state in which the supply business
28     engaging in such activities is located would constitute
29     maintaining a place of business in that state.
30 (Source: P.A. 92-484, eff. 8-23-01; 93-23, eff. 6-20-03; 93-24,
31 eff. 6-20-03; revised 8-21-03.)
 
32     Section 15. The Service Occupation Tax Act is amended by
33 changing Section 2 as follows:
 
34     (35 ILCS 115/2)  (from Ch. 120, par. 439.102)

 

 

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1     Sec. 2. "Transfer" means any transfer of the title to
2 property or of the ownership of property whether or not the
3 transferor retains title as security for the payment of amounts
4 due him from the transferee.
5     "Cost Price" means the consideration paid by the serviceman
6 for a purchase valued in money, whether paid in money or
7 otherwise, including cash, credits and services, and shall be
8 determined without any deduction on account of the supplier's
9 cost of the property sold or on account of any other expense
10 incurred by the supplier. When a serviceman contracts out part
11 or all of the services required in his sale of service, it
12 shall be presumed that the cost price to the serviceman of the
13 property transferred to him by his or her subcontractor is
14 equal to 50% of the subcontractor's charges to the serviceman
15 in the absence of proof of the consideration paid by the
16 subcontractor for the purchase of such property.
17     "Department" means the Department of Revenue.
18     "Person" means any natural individual, firm, partnership,
19 association, joint stock company, joint venture, public or
20 private corporation, limited liability company, and any
21 receiver, executor, trustee, guardian or other representative
22 appointed by order of any court.
23     "Sale of Service" means any transaction except:
24     (a) A retail sale of tangible personal property taxable
25 under the Retailers' Occupation Tax Act or under the Use Tax
26 Act.
27     (b) A sale of tangible personal property for the purpose of
28 resale made in compliance with Section 2c of the Retailers'
29 Occupation Tax Act.
30     (c) Except as hereinafter provided, a sale or transfer of
31 tangible personal property as an incident to the rendering of
32 service for or by any governmental body or for or by any
33 corporation, society, association, foundation or institution
34 organized and operated exclusively for charitable, religious
35 or educational purposes or any not-for-profit corporation,
36 society, association, foundation, institution or organization

 

 

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1 which has no compensated officers or employees and which is
2 organized and operated primarily for the recreation of persons
3 55 years of age or older. A limited liability company may
4 qualify for the exemption under this paragraph only if the
5 limited liability company is organized and operated
6 exclusively for educational purposes.
7     (d) A sale or transfer of tangible personal property as an
8 incident to the rendering of service for interstate carriers
9 for hire for use as rolling stock moving in interstate commerce
10 or lessors under leases of one year or longer, executed or in
11 effect at the time of purchase, to interstate carriers for hire
12 for use as rolling stock moving in interstate commerce, and
13 equipment operated by a telecommunications provider, licensed
14 as a common carrier by the Federal Communications Commission,
15 which is permanently installed in or affixed to aircraft moving
16 in interstate commerce.
17     (d-1) A sale or transfer of tangible personal property as
18 an incident to the rendering of service for owners, lessors or
19 shippers of tangible personal property which is utilized by
20 interstate carriers for hire for use as rolling stock moving in
21 interstate commerce, and equipment operated by a
22 telecommunications provider, licensed as a common carrier by
23 the Federal Communications Commission, which is permanently
24 installed in or affixed to aircraft moving in interstate
25 commerce.
26     (d-1.1) On and after July 1, 2003, a sale or transfer of a
27 motor vehicle of the second division with a gross vehicle
28 weight in excess of 8,000 pounds as an incident to the
29 rendering of service if that motor vehicle is subject to the
30 commercial distribution fee imposed under Section 3-815.1 of
31 the Illinois Vehicle Code. This exemption applies to repair and
32 replacement parts added after the initial purchase of such a
33 motor vehicle if that motor vehicle is used in a manner that
34 would qualify for the rolling stock exemption otherwise
35 provided for in this Act.
36     (d-2) The repairing, reconditioning or remodeling, for a

 

 

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

 

 

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1 person, or whether such sale or lease is made apart from or as
2 an incident to the seller's engaging in a service occupation
3 and the applicable tax is a Service Occupation Tax or Service
4 Use Tax, rather than Retailers' Occupation Tax or Use Tax.
5     (f) Until July 1, 2003, the sale or transfer of
6 distillation machinery and equipment, sold as a unit or kit and
7 assembled or installed by the retailer, which machinery and
8 equipment is certified by the user to be used only for the
9 production of ethyl alcohol that will be used for consumption
10 as motor fuel or as a component of motor fuel for the personal
11 use of such user and not subject to sale or resale.
12     (g) At the election of any serviceman not required to be
13 otherwise registered as a retailer under Section 2a of the
14 Retailers' Occupation Tax Act, made for each fiscal year sales
15 of service in which the aggregate annual cost price of tangible
16 personal property transferred as an incident to the sales of
17 service is less than 35% (75% in the case of servicemen
18 transferring prescription drugs or servicemen engaged in
19 graphic arts production) of the aggregate annual total gross
20 receipts from all sales of service. The purchase of such
21 tangible personal property by the serviceman shall be subject
22 to tax under the Retailers' Occupation Tax Act and the Use Tax
23 Act. However, if a primary serviceman who has made the election
24 described in this paragraph subcontracts service work to a
25 secondary serviceman who has also made the election described
26 in this paragraph, the primary serviceman does not incur a Use
27 Tax liability if the secondary serviceman (i) has paid or will
28 pay Use Tax on his or her cost price of any tangible personal
29 property transferred to the primary serviceman and (ii)
30 certifies that fact in writing to the primary serviceman.
31     Tangible personal property transferred incident to the
32 completion of a maintenance agreement is exempt from the tax
33 imposed pursuant to this Act.
34     Exemption (e) also includes machinery and equipment used in
35 the general maintenance or repair of such exempt machinery and
36 equipment or for in-house manufacture of exempt machinery and

 

 

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1 equipment. For the purposes of exemption (e), each of these
2 terms shall have the following meanings: (1) "manufacturing
3 process" shall mean the production of any article of tangible
4 personal property, whether such article is a finished product
5 or an article for use in the process of manufacturing or
6 assembling a different article of tangible personal property,
7 by procedures commonly regarded as manufacturing, processing,
8 fabricating, or refining which changes some existing material
9 or materials into a material with a different form, use or
10 name. In relation to a recognized integrated business composed
11 of a series of operations which collectively constitute
12 manufacturing, or individually constitute manufacturing
13 operations, the manufacturing process shall be deemed to
14 commence with the first operation or stage of production in the
15 series, and shall not be deemed to end until the completion of
16 the final product in the last operation or stage of production
17 in the series; and further for purposes of exemption (e),
18 photoprocessing is deemed to be a manufacturing process of
19 tangible personal property for wholesale or retail sale; (2)
20 "assembling process" shall mean the production of any article
21 of tangible personal property, whether such article is a
22 finished product or an article for use in the process of
23 manufacturing or assembling a different article of tangible
24 personal property, by the combination of existing materials in
25 a manner commonly regarded as assembling which results in a
26 material of a different form, use or name; (3) "machinery"
27 shall mean major mechanical machines or major components of
28 such machines contributing to a manufacturing or assembling
29 process; and (4) "equipment" shall include any independent
30 device or tool separate from any machinery but essential to an
31 integrated manufacturing or assembly process; including
32 computers used primarily in a manufacturer's computer assisted
33 design, computer assisted manufacturing (CAD/CAM) system; or
34 any subunit or assembly comprising a component of any machinery
35 or auxiliary, adjunct or attachment parts of machinery, such as
36 tools, dies, jigs, fixtures, patterns and molds; or any parts

 

 

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1 which require periodic replacement in the course of normal
2 operation; but shall not include hand tools. Equipment includes
3 chemicals or chemicals acting as catalysts but only if the
4 chemicals or chemicals acting as catalysts effect a direct and
5 immediate change upon a product being manufactured or assembled
6 for wholesale or retail sale or lease. The purchaser of such
7 machinery and equipment who has an active resale registration
8 number shall furnish such number to the seller at the time of
9 purchase. The purchaser of such machinery and equipment and
10 tools without an active resale registration number shall
11 furnish to the seller a certificate of exemption for each
12 transaction stating facts establishing the exemption for that
13 transaction, which certificate shall be available to the
14 Department for inspection or audit. At the same time as the
15 taxpayer files it's annual Illinois income tax return, the
16 taxpayer must disclose the aggregate dollar amount of
17 manufacturing and assembling machinery and equipment tax
18 exemptions received under the Use Tax Act, the Service Use Tax
19 Act, the Service Occupation Tax Act, and the Retailers'
20 Occupation Tax Act during the most recently completed calendar
21 year, broken down by plant and by facility. If a plant or
22 facility with respect to which a taxpayer received
23 manufacturing and assembling machinery and equipment
24 exemptions closes, the taxpayer must pay to the Department all
25 amounts that were not not paid in taxes under the Use Tax Act,
26 the Service Use Tax Act, the Service Occupation Tax Act, and
27 the Retailers' Occupation Tax Act due to such exemptions, for
28 the 5-year period immediately preceding the date of the plant
29 or facility closure.
30     Except as provided in Section 2d of this Act, the rolling
31 stock exemption applies to rolling stock used by an interstate
32 carrier for hire, even just between points in Illinois, if such
33 rolling stock transports, for hire, persons whose journeys or
34 property whose shipments originate or terminate outside
35 Illinois.
36     Any informal rulings, opinions or letters issued by the

 

 

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1 Department in response to an inquiry or request for any opinion
2 from any person regarding the coverage and applicability of
3 exemption (e) to specific devices shall be published,
4 maintained as a public record, and made available for public
5 inspection and copying. If the informal ruling, opinion or
6 letter contains trade secrets or other confidential
7 information, where possible the Department shall delete such
8 information prior to publication. Whenever such informal
9 rulings, opinions, or letters contain any policy of general
10 applicability, the Department shall formulate and adopt such
11 policy as a rule in accordance with the provisions of the
12 Illinois Administrative Procedure Act.
13     On and after July 1, 1987, no entity otherwise eligible
14 under exemption (c) of this Section shall make tax free
15 purchases unless it has an active exemption identification
16 number issued by the Department.
17     "Serviceman" means any person who is engaged in the
18 occupation of making sales of service.
19     "Sale at Retail" means "sale at retail" as defined in the
20 Retailers' Occupation Tax Act.
21     "Supplier" means any person who makes sales of tangible
22 personal property to servicemen for the purpose of resale as an
23 incident to a sale of service.
24 (Source: P.A. 92-484, eff. 8-23-01; 93-23, eff. 6-20-03; 93-24,
25 eff. 6-20-03; revised 8-21-03.)
 
26     Section 20. The Retailers' Occupation Tax Act is amended by
27 changing Section 2-45 as follows:
 
28     (35 ILCS 120/2-45)  (from Ch. 120, par. 441-45)
29     Sec. 2-45. Manufacturing and assembly exemption. The
30 manufacturing and assembly machinery and equipment exemption
31 includes machinery and equipment that replaces machinery and
32 equipment in an existing manufacturing facility as well as
33 machinery and equipment that are for use in an expanded or new
34 manufacturing facility.

 

 

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1     The machinery and equipment exemption also includes
2 machinery and equipment used in the general maintenance or
3 repair of exempt machinery and equipment or for in-house
4 manufacture of exempt machinery and equipment. For the purposes
5 of this exemption, terms have the following meanings:
6         (1) "Manufacturing process" means the production of an
7     article of tangible personal property, whether the article
8     is a finished product or an article for use in the process
9     of manufacturing or assembling a different article of
10     tangible personal property, by a procedure commonly
11     regarded as manufacturing, processing, fabricating, or
12     refining that changes some existing material or materials
13     into a material with a different form, use, or name. In
14     relation to a recognized integrated business composed of a
15     series of operations that collectively constitute
16     manufacturing, or individually constitute manufacturing
17     operations, the manufacturing process commences with the
18     first operation or stage of production in the series and
19     does not end until the completion of the final product in
20     the last operation or stage of production in the series.
21     For purposes of this exemption, photoprocessing is a
22     manufacturing process of tangible personal property for
23     wholesale or retail sale.
24         (2) "Assembling process" means the production of an
25     article of tangible personal property, whether the article
26     is a finished product or an article for use in the process
27     of manufacturing or assembling a different article of
28     tangible personal property, by the combination of existing
29     materials in a manner commonly regarded as assembling that
30     results in a material of a different form, use, or name.
31         (3) "Machinery" means major mechanical machines or
32     major components of those machines contributing to a
33     manufacturing or assembling process.
34         (4) "Equipment" includes an independent device or tool
35     separate from machinery but essential to an integrated
36     manufacturing or assembly process; including computers

 

 

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1     used primarily in a manufacturer's computer assisted
2     design, computer assisted manufacturing (CAD/CAM) system;
3     any subunit or assembly comprising a component of any
4     machinery or auxiliary, adjunct, or attachment parts of
5     machinery, such as tools, dies, jigs, fixtures, patterns,
6     and molds; and any parts that require periodic replacement
7     in the course of normal operation; but does not include
8     hand tools. Equipment includes chemicals or chemicals
9     acting as catalysts but only if the chemicals or chemicals
10     acting as catalysts effect a direct and immediate change
11     upon a product being manufactured or assembled for
12     wholesale or retail sale or lease.
13     The manufacturing and assembling machinery and equipment
14 exemption includes the sale of materials to a purchaser who
15 produces exempted types of machinery, equipment, or tools and
16 who rents or leases that machinery, equipment, or tools to a
17 manufacturer of tangible personal property. This exemption
18 also includes the sale of materials to a purchaser who
19 manufactures those materials into an exempted type of
20 machinery, equipment, or tools that the purchaser uses himself
21 or herself in the manufacturing of tangible personal property.
22 The purchaser of the machinery and equipment who has an active
23 resale registration number shall furnish that number to the
24 seller at the time of purchase. A purchaser of the machinery,
25 equipment, and tools without an active resale registration
26 number shall furnish to the seller a certificate of exemption
27 for each transaction stating facts establishing the exemption
28 for that transaction, and that certificate shall be available
29 to the Department for inspection or audit. Informal rulings,
30 opinions, or letters issued by the Department in response to an
31 inquiry or request for an opinion from any person regarding the
32 coverage and applicability of this exemption to specific
33 devices shall be published, maintained as a public record, and
34 made available for public inspection and copying. If the
35 informal ruling, opinion, or letter contains trade secrets or
36 other confidential information, where possible, the Department

 

 

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1 shall delete that information before publication. Whenever
2 informal rulings, opinions, or letters contain a policy of
3 general applicability, the Department shall formulate and
4 adopt that policy as a rule in accordance with the Illinois
5 Administrative Procedure Act.
6     At the same time as the taxpayer files it's annual Illinois
7 income tax return, the taxpayer must disclose the aggregate
8 dollar amount of manufacturing and assembling machinery and
9 equipment tax exemptions received under the Use Tax Act, the
10 Service Use Tax Act, the Service Occupation Tax Act, and the
11 Retailers' Occupation Tax Act during the most recently
12 completed calendar year, broken down by plant and by facility.
13 If a plant or facility with respect to which a taxpayer
14 received manufacturing and assembling machinery and equipment
15 exemptions closes, the taxpayer must pay to the Department all
16 amounts that were not not paid in taxes under the Use Tax Act,
17 the Service Use Tax Act, the Service Occupation Tax Act, and
18 the Retailers' Occupation Tax Act due to such exemptions, for
19 the 5-year period immediately preceding the date of the plant
20 or facility closure.
21 (Source: P.A. 91-51, eff. 6-30-99; 92-484, eff. 8-23-01.)