Full Text of SB2214 94th General Assembly
SB2214 94TH GENERAL ASSEMBLY
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94TH GENERAL ASSEMBLY
State of Illinois
2005 and 2006 SB2214
Introduced 1/11/2006, by Sen. M. Maggie Crotty SYNOPSIS AS INTRODUCED: |
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35 ILCS 115/2 |
from Ch. 120, par. 439.102 |
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Amends the Service Occupation Tax Act. Provides that a serviceman is not required to register as a retailer under the Retailers' Occupation Tax Act if: (i) all of his or her sales activities constitute accommodation retail sales made to service customers; and (ii) these accommodation retail sales do not exceed 3% of the serviceman's annual revenues from sales of service. Effective immediately.
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A BILL FOR
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| AN ACT concerning revenue.
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| Be it enacted by the People of the State of Illinois,
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| represented in the General Assembly:
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| Section 5. The Service Occupation Tax Act is amended by | 5 |
| changing Section 2 as follows:
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| (35 ILCS 115/2) (from Ch. 120, par. 439.102)
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| Sec. 2. "Transfer" means any transfer of the title to | 8 |
| property or of
the ownership of property whether or not the | 9 |
| transferor retains title as
security for the payment of amounts | 10 |
| due him from the transferee.
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| "Cost Price" means the consideration paid by the serviceman | 12 |
| for a
purchase valued in money, whether paid in money or | 13 |
| otherwise, including
cash, credits and services, and shall be | 14 |
| determined without any deduction
on account of the supplier's | 15 |
| cost of the property sold or on account of any
other expense | 16 |
| incurred by the supplier. When a serviceman contracts out
part | 17 |
| or all of the services required in his sale of service, it | 18 |
| shall be
presumed that the cost price to the serviceman of the | 19 |
| property
transferred to him by his or her subcontractor is | 20 |
| equal to 50% of the
subcontractor's charges to the serviceman | 21 |
| in the absence of proof of the
consideration paid by the | 22 |
| subcontractor for the purchase of such
property.
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| "Department" means the Department of Revenue.
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| "Person" means any natural individual, firm, partnership, | 25 |
| association, joint
stock company, joint venture, public or | 26 |
| private corporation, limited liability
company, and any | 27 |
| receiver, executor, trustee, guardian or other representative
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| appointed by order of any court.
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| "Sale of Service" means any transaction except:
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| (a) A retail sale of tangible personal property taxable | 31 |
| under the Retailers'
Occupation Tax Act or under the Use Tax | 32 |
| Act.
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| (b) A sale of tangible personal property for the purpose of | 2 |
| resale made in
compliance with Section 2c of the Retailers' | 3 |
| Occupation Tax Act.
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| (c) Except as hereinafter provided, a sale or transfer of | 5 |
| tangible personal
property as an incident to the rendering of | 6 |
| service for or by any governmental
body or for or by any | 7 |
| corporation, society, association, foundation or
institution | 8 |
| organized and operated exclusively for charitable, religious | 9 |
| or
educational purposes or any not-for-profit corporation, | 10 |
| society, association,
foundation, institution or organization | 11 |
| which has no compensated officers or
employees and which is | 12 |
| organized and operated primarily for the recreation of
persons | 13 |
| 55 years of age or older. A limited liability company may | 14 |
| qualify for
the exemption under this paragraph only if the | 15 |
| limited liability company is
organized and operated | 16 |
| exclusively for educational purposes.
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| (d) A sale or transfer of tangible personal
property
as an | 18 |
| incident to the
rendering of service for interstate carriers | 19 |
| for hire for use as rolling stock
moving in interstate commerce | 20 |
| or lessors under leases of one year or longer,
executed or in | 21 |
| effect at the time of purchase, to interstate carriers for hire
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| for use as rolling stock moving in interstate commerce, and | 23 |
| equipment operated
by a telecommunications provider, licensed | 24 |
| as a common
carrier by the Federal Communications Commission, | 25 |
| which is permanently
installed in or affixed to aircraft moving | 26 |
| in interstate commerce.
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| (d-1) A sale or transfer of tangible personal
property as | 28 |
| an incident to
the rendering of service for owners, lessors or | 29 |
| shippers of tangible personal
property which is utilized by | 30 |
| interstate carriers for hire for use as rolling
stock moving in | 31 |
| interstate commerce, and equipment operated
by a | 32 |
| telecommunications provider, licensed as a common carrier by | 33 |
| the
Federal Communications Commission, which is permanently | 34 |
| installed in or
affixed to aircraft moving in interstate | 35 |
| commerce.
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| (d-1.1) On and after July 1, 2003 and through June 30, |
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| 2004, a sale or transfer of a motor vehicle
of the
second | 2 |
| division with a gross vehicle weight in excess of 8,000 pounds | 3 |
| as an
incident to the rendering of service if that motor
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| vehicle is subject
to the commercial distribution fee imposed | 5 |
| under Section 3-815.1 of the
Illinois Vehicle
Code. Beginning | 6 |
| on July 1, 2004 and through June 30, 2005, the use in this | 7 |
| State of motor vehicles of the second division: (i) with a | 8 |
| gross vehicle weight rating in excess of 8,000 pounds; (ii) | 9 |
| that are subject to the commercial distribution fee imposed | 10 |
| under Section 3-815.1 of the Illinois Vehicle Code; and (iii) | 11 |
| that are primarily used for commercial purposes. Through June | 12 |
| 30, 2005, this exemption applies to repair and replacement | 13 |
| parts added after the
initial
purchase of such a motor vehicle | 14 |
| if that motor vehicle is used in a manner that
would
qualify | 15 |
| for the rolling stock exemption otherwise provided for in this | 16 |
| Act. For purposes of this paragraph, "used for commercial | 17 |
| purposes" means the transportation of persons or property in | 18 |
| furtherance of any commercial or industrial enterprise whether | 19 |
| for-hire or not.
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| (d-2) The repairing, reconditioning or remodeling, for a | 21 |
| common carrier by
rail, of tangible personal property which | 22 |
| belongs to such carrier for hire, and
as to which such carrier | 23 |
| receives the physical possession of the repaired,
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| reconditioned or remodeled item of tangible personal property | 25 |
| in Illinois, and
which such carrier transports, or shares with | 26 |
| another common carrier in the
transportation of such property, | 27 |
| out of Illinois on a standard uniform bill of
lading showing | 28 |
| the person who repaired, reconditioned or remodeled the | 29 |
| property
as the shipper or consignor of such property to a | 30 |
| destination outside Illinois,
for use outside Illinois.
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| (d-3) A sale or transfer of tangible personal property | 32 |
| which
is produced by the seller thereof on special order in | 33 |
| such a way as to have
made the applicable tax the Service | 34 |
| Occupation Tax or the Service Use Tax,
rather than the | 35 |
| Retailers' Occupation Tax or the Use Tax, for an interstate
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| carrier by rail which receives the physical possession of such |
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| property in
Illinois, and which transports such property, or | 2 |
| shares with another common
carrier in the transportation of | 3 |
| such property, out of Illinois on a standard
uniform bill of | 4 |
| lading showing the seller of the property as the shipper or
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| consignor of such property to a destination outside Illinois, | 6 |
| for use outside
Illinois.
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| (d-4) Until January 1, 1997, a sale, by a registered | 8 |
| serviceman paying tax
under this Act to the Department, of | 9 |
| special order printed materials delivered
outside Illinois and | 10 |
| which are not returned to this State, if delivery is made
by | 11 |
| the seller or agent of the seller, including an agent who | 12 |
| causes the product
to be delivered outside Illinois by a common | 13 |
| carrier or the U.S.
postal service.
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| (e) A sale or transfer of machinery and equipment used | 15 |
| primarily in
the process of the manufacturing or assembling, | 16 |
| either in an existing, an
expanded or a new manufacturing | 17 |
| facility, of tangible personal property for
wholesale or retail | 18 |
| sale or lease, whether such sale or lease is made directly
by | 19 |
| the manufacturer or by some other person, whether the materials | 20 |
| used in the
process are owned by the manufacturer or some other | 21 |
| person, or whether such
sale or lease is made apart from or as | 22 |
| an incident to the seller's engaging in
a service occupation | 23 |
| and the applicable tax is a Service Occupation Tax or
Service | 24 |
| Use Tax, rather than Retailers' Occupation Tax or Use Tax.
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| (f) Until July 1, 2003, the sale or transfer of | 26 |
| distillation
machinery
and equipment, sold as a
unit or kit and | 27 |
| assembled or installed by the retailer, which machinery
and | 28 |
| equipment is certified by the user to be used only for the | 29 |
| production
of ethyl alcohol that will be used for consumption | 30 |
| as motor fuel or as a
component of motor fuel for the personal | 31 |
| use of such user and not subject
to sale or resale.
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| (g) At the election of any serviceman not required to be | 33 |
| otherwise
registered as a retailer under Section 2a of the | 34 |
| Retailers' Occupation Tax Act,
made for each fiscal year sales | 35 |
| of service in which the aggregate annual cost
price of tangible | 36 |
| personal property transferred as an incident to the sales of
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| service is less than 35% (75% in the case of servicemen | 2 |
| transferring
prescription drugs or servicemen engaged in | 3 |
| graphic arts production) of the
aggregate annual total gross | 4 |
| receipts from all sales of service. For purposes of this | 5 |
| Section, a serviceman is not required to register as a retailer | 6 |
| under Section 2a of the Retailers' Occupation Tax Act if: (i) | 7 |
| all of his or her sales activities constitute accommodation | 8 |
| retail sales made to service customers; and (ii) these | 9 |
| accommodation retail sales do not exceed 3% of the serviceman's | 10 |
| annual revenues from sales of service. The purchase
of such | 11 |
| tangible personal property by the serviceman shall be subject | 12 |
| to tax
under the Retailers' Occupation Tax Act and the Use Tax | 13 |
| Act.
However, if a
primary serviceman who has made the election | 14 |
| described in this paragraph
subcontracts service work to a | 15 |
| secondary serviceman who has also made the
election described | 16 |
| in this paragraph, the primary serviceman does not
incur a Use | 17 |
| Tax liability if the secondary serviceman (i) has paid or will | 18 |
| pay
Use
Tax on his or her cost price of any tangible personal | 19 |
| property transferred
to the primary serviceman and (ii) | 20 |
| certifies that fact in writing to the
primary serviceman.
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| Tangible personal property transferred incident to the | 22 |
| completion of a
maintenance agreement is exempt from the tax | 23 |
| imposed pursuant to this Act.
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| Exemption (e) also includes machinery and equipment used in | 25 |
| the
general maintenance or repair of such exempt machinery and | 26 |
| equipment or for
in-house manufacture of exempt machinery and | 27 |
| equipment.
For the purposes of exemption (e), each of these | 28 |
| terms shall have the following
meanings: (1) "manufacturing | 29 |
| process" shall mean the production of any
article of tangible | 30 |
| personal property, whether such article is a
finished product | 31 |
| or an article for use in the process of manufacturing
or | 32 |
| assembling a different article of tangible personal property, | 33 |
| by
procedures commonly regarded as manufacturing, processing, | 34 |
| fabricating,
or refining which changes some existing material | 35 |
| or materials into a
material with a different form, use or | 36 |
| name. In relation to a
recognized integrated business composed |
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| of a series of operations which
collectively constitute | 2 |
| manufacturing, or individually constitute
manufacturing | 3 |
| operations, the manufacturing process shall be deemed to
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| commence with the first operation or stage of production in the | 5 |
| series,
and shall not be deemed to end until the completion of | 6 |
| the final product
in the last operation or stage of production | 7 |
| in the series; and further for
purposes of exemption (e), | 8 |
| photoprocessing is deemed to be a manufacturing
process of | 9 |
| tangible personal property for wholesale or retail sale;
(2) | 10 |
| "assembling process" shall mean the production of any article | 11 |
| of
tangible personal property, whether such article is a | 12 |
| finished product
or an article for use in the process of | 13 |
| manufacturing or assembling a
different article of tangible | 14 |
| personal property, by the combination of
existing materials in | 15 |
| a manner commonly regarded as assembling which
results in a | 16 |
| material of a different form, use or name; (3) "machinery"
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| shall mean major mechanical machines or major components of | 18 |
| such machines
contributing to a manufacturing or assembling | 19 |
| process; and (4) "equipment"
shall include any independent | 20 |
| device or tool separate from any machinery but
essential to an | 21 |
| integrated manufacturing or assembly process; including
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| computers used primarily in a manufacturer's computer
assisted | 23 |
| design, computer assisted manufacturing (CAD/CAM) system; or | 24 |
| any
subunit or assembly comprising a component of any machinery | 25 |
| or auxiliary,
adjunct or attachment parts of machinery, such as | 26 |
| tools, dies, jigs, fixtures,
patterns and molds; or any parts | 27 |
| which require periodic replacement in the
course of normal | 28 |
| operation; but shall not include hand tools. Equipment
includes | 29 |
| chemicals or chemicals acting as catalysts but only if the | 30 |
| chemicals
or chemicals acting as catalysts effect a direct and | 31 |
| immediate change upon a
product being manufactured or assembled | 32 |
| for wholesale or retail sale or lease.
The purchaser of such | 33 |
| machinery and equipment
who has an active resale registration | 34 |
| number shall furnish such number to
the seller at the time of | 35 |
| purchase. The purchaser of such machinery and
equipment and | 36 |
| tools without an active resale registration number shall |
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| furnish
to the seller a certificate of exemption for each | 2 |
| transaction stating facts
establishing the exemption for that | 3 |
| transaction, which certificate shall
be available to the | 4 |
| Department for inspection or audit.
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| Except as provided in Section 2d of this Act, the rolling | 6 |
| stock exemption
applies to rolling
stock
used by an interstate
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| carrier for hire, even just between points in Illinois, if such | 8 |
| rolling
stock transports, for hire, persons whose journeys or | 9 |
| property whose
shipments originate or terminate outside | 10 |
| Illinois.
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| Any informal rulings, opinions or letters issued by the | 12 |
| Department in
response to an inquiry or request for any opinion | 13 |
| from any person
regarding the coverage and applicability of | 14 |
| exemption (e) to specific
devices shall be published, | 15 |
| maintained as a public record, and made
available for public | 16 |
| inspection and copying. If the informal ruling,
opinion or | 17 |
| letter contains trade secrets or other confidential
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| information, where possible the Department shall delete such | 19 |
| information
prior to publication. Whenever such informal | 20 |
| rulings, opinions, or
letters contain any policy of general | 21 |
| applicability, the Department
shall formulate and adopt such | 22 |
| policy as a rule in accordance with the
provisions of the | 23 |
| Illinois Administrative Procedure Act.
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| On and after July 1, 1987, no entity otherwise eligible | 25 |
| under exemption
(c) of this Section shall make tax free | 26 |
| purchases unless it has an active
exemption identification | 27 |
| number issued by the Department.
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| "Serviceman" means any person who is engaged in the | 29 |
| occupation of
making sales of service.
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| "Sale at Retail" means "sale at retail" as defined in the | 31 |
| Retailers'
Occupation Tax Act.
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| "Supplier" means any person who makes sales of tangible | 33 |
| personal
property to servicemen for the purpose of resale as an | 34 |
| incident to a
sale of service.
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| (Source: P.A. 92-484, eff. 8-23-01; 93-23, eff. 6-20-03; 93-24, | 36 |
| eff. 6-20-03; 93-1033, eff. 9-3-04.)
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| Section 99. Effective date. This Act takes effect upon | 2 |
| becoming law.
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