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92_SB1810
LRB9215670SMdv
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 Service Use Tax Act is amended by
5 changing Section 2 as follows:
6 (35 ILCS 110/2) (from Ch. 120, par. 439.32)
7 Sec. 2. "Use" means the exercise by any person of any
8 right or power over tangible personal property incident to
9 the ownership of that property, but does not include the sale
10 or use for demonstration by him of that property in any form
11 as tangible personal property in the regular course of
12 business. "Use" does not mean the interim use of tangible
13 personal property nor the physical incorporation of tangible
14 personal property, as an ingredient or constituent, into
15 other tangible personal property, (a) which is sold in the
16 regular course of business or (b) which the person
17 incorporating such ingredient or constituent therein has
18 undertaken at the time of such purchase to cause to be
19 transported in interstate commerce to destinations outside
20 the State of Illinois.
21 "Purchased from a serviceman" means the acquisition of
22 the ownership of, or title to, tangible personal property
23 through a 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
28 serviceman for a purchase valued in money, whether paid in
29 money or otherwise, including cash, credits and services, and
30 shall be determined without any deduction on account of the
31 supplier's cost of the property sold or on account of any
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1 other expense incurred by the supplier. When a serviceman
2 contracts out part or all of the services required in his
3 sale of service, it shall be presumed that the cost price to
4 the serviceman of the property transferred to him or her by
5 his or her subcontractor is equal to 50% of the
6 subcontractor's charges to the serviceman in the absence of
7 proof of the consideration paid by the subcontractor for the
8 purchase of such property.
9 "Selling price" means the consideration for a sale valued
10 in money whether received in money or otherwise, including
11 cash, credits and service, and shall be determined without
12 any deduction on account of the serviceman's cost of the
13 property sold, the cost of materials used, labor or service
14 cost or any other expense whatsoever, but does not include
15 interest or finance charges which appear as separate items on
16 the bill of sale or sales contract nor charges that are added
17 to prices by sellers on account of the seller's duty to
18 collect, from the purchaser, the tax that is imposed by this
19 Act.
20 "Department" means the Department of Revenue.
21 "Person" means any natural individual, firm, partnership,
22 association, joint stock company, joint venture, public or
23 private corporation, limited liability company, and any
24 receiver, executor, trustee, guardian or other representative
25 appointed by order of any court.
26 "Sale of service" means any transaction except:
27 (1) a retail sale of tangible personal property
28 taxable under the Retailers' Occupation Tax Act or under
29 the Use Tax Act.
30 (2) a sale of tangible personal property for the
31 purpose of resale made in compliance with Section 2c of
32 the Retailers' Occupation Tax Act.
33 (3) except as hereinafter provided, a sale or
34 transfer of tangible personal property as an incident to
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1 the rendering of service for or by any governmental body,
2 or for or by any corporation, society, association,
3 foundation or institution organized and operated
4 exclusively for charitable, religious or educational
5 purposes or any not-for-profit corporation, society,
6 association, foundation, institution or organization
7 which has no compensated officers or employees and which
8 is organized and operated primarily for the recreation of
9 persons 55 years of age or older. A limited liability
10 company may qualify for the exemption under this
11 paragraph only if the limited liability company is
12 organized and operated exclusively for educational
13 purposes.
14 (4) a sale or transfer of tangible personal
15 property as an incident to the rendering of service for
16 interstate carriers for hire for use as rolling stock
17 moving in interstate commerce or by lessors under a lease
18 of one year or longer, executed or in effect at the time
19 of purchase of personal property, to interstate carriers
20 for hire for use as rolling stock moving in interstate
21 commerce so long as so used by such interstate carriers
22 for hire, and equipment operated by a telecommunications
23 provider, licensed as a common carrier by the Federal
24 Communications Commission, which is permanently installed
25 in or affixed to aircraft moving in interstate commerce.
26 (4a) a sale or transfer of tangible personal
27 property as an incident to the rendering of service for
28 owners, lessors, or shippers of tangible personal
29 property which is utilized by interstate carriers for
30 hire for use as rolling stock moving in interstate
31 commerce so long as so used by interstate carriers for
32 hire, and equipment operated by a telecommunications
33 provider, licensed as a common carrier by the Federal
34 Communications Commission, which is permanently installed
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1 in or affixed to aircraft moving in interstate commerce.
2 (5) a sale or transfer of machinery and equipment
3 used 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
8 other person, whether the materials used in the process
9 are owned by the manufacturer or some other person, or
10 whether such sale or lease is made apart from or as an
11 incident to the seller's engaging in a service occupation
12 and the applicable tax is a Service Use Tax or Service
13 Occupation Tax, rather than Use Tax or Retailers'
14 Occupation Tax.
15 (5a) the repairing, reconditioning or remodeling,
16 for a common carrier by rail, of tangible personal
17 property which belongs to such carrier for hire, and as
18 to which such carrier receives the physical possession of
19 the 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
27 property which is produced by the seller thereof on
28 special order in such a way as to have made the
29 applicable tax the Service Occupation Tax or the Service
30 Use Tax, rather than the Retailers' Occupation Tax or the
31 Use Tax, for an interstate carrier by rail which receives
32 the physical possession of such property in Illinois, and
33 which transports such property, or shares with another
34 common carrier in the transportation of such property,
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1 out of Illinois on a standard uniform bill of lading
2 showing the seller of the property as the shipper or
3 consignor of such property to a destination outside
4 Illinois, for use outside Illinois.
5 (6) a sale or transfer of distillation machinery
6 and equipment, sold as a unit or kit and assembled or
7 installed by the retailer, which machinery and equipment
8 is certified by the user to be used only for the
9 production of ethyl alcohol that will be used for
10 consumption as motor fuel or as a component of motor fuel
11 for the personal use of such user and not subject to sale
12 or resale.
13 (7) at the election election of any serviceman not
14 required to be otherwise registered as a retailer under
15 Section 2a of the Retailers' Occupation Tax Act, made for
16 each fiscal year sales of service in which the aggregate
17 annual cost price of tangible personal property
18 transferred as an incident to the sales of service is
19 less than 35%, or 75% in the case of servicemen
20 transferring prescription drugs or servicemen engaged in
21 graphic arts production, of the aggregate annual total
22 gross receipts from all sales of service. The purchase of
23 such tangible personal property by the serviceman shall
24 be subject to tax under the Retailers' Occupation Tax Act
25 and the Use Tax Act. However, if a primary serviceman who
26 has made the election described in this paragraph
27 subcontracts service work to a secondary serviceman who
28 has also made the election described in this paragraph,
29 the primary serviceman does not incur a Use Tax liability
30 if the secondary serviceman (i) has paid or will pay Use
31 Tax on his or her cost price of any tangible personal
32 property transferred to the primary serviceman and (ii)
33 certifies that fact in writing to the primary serviceman.
34 Tangible personal property transferred incident to the
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1 completion of a maintenance agreement is exempt from the tax
2 imposed pursuant to this Act.
3 Exemption (5) also includes machinery and equipment used
4 in the general maintenance or repair of such exempt machinery
5 and equipment or for in-house manufacture of exempt machinery
6 and equipment. For the purposes of exemption (5), each of
7 these terms shall have the following meanings: (1)
8 "manufacturing process" shall mean the production of any
9 article of tangible personal property, whether such article
10 is a finished product or an article for use in the process of
11 manufacturing or assembling a different article of tangible
12 personal property, by procedures commonly regarded as
13 manufacturing, processing, fabricating, or refining which
14 changes some existing material or materials into a material
15 with a different form, use or name. In relation to a
16 recognized integrated business composed of a series of
17 operations which collectively constitute manufacturing, or
18 individually constitute manufacturing operations, the
19 manufacturing process shall be deemed to commence with the
20 first operation or stage of production in the series, and
21 shall not be deemed to end until the completion of the final
22 product in the last operation or stage of production in the
23 series; and further, for purposes of exemption (5),
24 photoprocessing is deemed to be a manufacturing process of
25 tangible personal property for wholesale or retail sale; (2)
26 "assembling process" shall mean the production of any article
27 of tangible personal property, whether such article is a
28 finished product or an article for use in the process of
29 manufacturing or assembling a different article of tangible
30 personal property, by the combination of existing materials
31 in a manner commonly regarded as assembling which results in
32 a material of a different form, use or name; (3) "machinery"
33 shall mean major mechanical machines or major components of
34 such machines contributing to a manufacturing or assembling
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1 process; and (4) "equipment" shall include any independent
2 device or tool separate from any machinery but essential to
3 an integrated manufacturing or assembly process; including
4 computers used primarily in a manufacturer's computer
5 assisted design, computer assisted manufacturing (CAD/CAM)
6 system; or any subunit or assembly comprising a component of
7 any machinery or auxiliary, adjunct or attachment parts of
8 machinery, such as tools, dies, jigs, fixtures, patterns and
9 molds; or any parts which require periodic replacement in the
10 course of normal operation; but shall not include hand tools.
11 Equipment includes chemicals or chemicals acting as catalysts
12 but only if the chemicals or chemicals acting as catalysts
13 effect a direct and immediate change upon a product being
14 manufactured or assembled for wholesale or retail sale or
15 lease. The purchaser of such machinery and equipment who has
16 an active resale registration number shall furnish such
17 number to the seller at the time of purchase. The user of
18 such machinery and equipment and tools without an active
19 resale registration number shall prepare a certificate of
20 exemption for each transaction stating facts establishing the
21 exemption for that transaction, which certificate shall be
22 available to the Department for inspection or audit. The
23 Department shall prescribe the form of the certificate.
24 Any informal rulings, opinions or letters issued by the
25 Department in response to an inquiry or request for any
26 opinion from any person regarding the coverage and
27 applicability of exemption (5) to specific devices shall be
28 published, maintained as a public record, and made available
29 for public inspection and copying. If the informal ruling,
30 opinion or letter contains trade secrets or other
31 confidential information, where possible the Department shall
32 delete such information prior to publication. Whenever such
33 informal rulings, opinions, or letters contain any policy of
34 general applicability, the Department shall formulate and
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1 adopt such policy as a rule in accordance with the provisions
2 of the Illinois Administrative Procedure Act.
3 On and after July 1, 1987, no entity otherwise eligible
4 under exemption (3) of this Section shall make tax free
5 purchases unless it has an active exemption identification
6 number issued by the Department.
7 The purchase, employment and transfer of such tangible
8 personal property as newsprint and ink for the primary
9 purpose of conveying news (with or without other information)
10 is not a purchase, use or sale of service or of tangible
11 personal property within the meaning of this Act.
12 "Serviceman" means any person who is engaged in the
13 occupation of making sales of service.
14 "Sale at retail" means "sale at retail" as defined in the
15 Retailers' Occupation Tax Act.
16 "Supplier" means any person who makes sales of tangible
17 personal property to servicemen for the purpose of resale as
18 an incident to a sale of service.
19 "Serviceman maintaining a place of business in this
20 State", or any like term, means and includes any serviceman:
21 1. having or maintaining within this State,
22 directly or by a subsidiary, an office, distribution
23 house, sales house, warehouse or other place of business,
24 or any agent or other representative operating within
25 this State under the authority of the serviceman or its
26 subsidiary, irrespective of whether such place of
27 business or agent or other representative is located here
28 permanently or temporarily, or whether such serviceman or
29 subsidiary is licensed to do business in this State;
30 2. soliciting orders for tangible personal property
31 by means of a telecommunication or television shopping
32 system (which utilizes toll free numbers) which is
33 intended by the retailer to be broadcast by cable
34 television or other means of broadcasting, to consumers
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1 located in this State;
2 3. pursuant to a contract with a broadcaster or
3 publisher located in this State, soliciting orders for
4 tangible personal property by means of advertising which
5 is disseminated primarily to consumers located in this
6 State and only secondarily to bordering jurisdictions;
7 4. soliciting orders for tangible personal property
8 by mail if the solicitations are substantial and
9 recurring and if the retailer benefits from any banking,
10 financing, debt collection, telecommunication, or
11 marketing activities occurring in this State or benefits
12 from the location in this State of authorized
13 installation, servicing, or repair facilities;
14 5. being owned or controlled by the same interests
15 which own or control any retailer engaging in business in
16 the same or similar line of business in this State;
17 6. having a franchisee or licensee operating under
18 its trade name if the franchisee or licensee is required
19 to collect the tax under this Section;
20 7. pursuant to a contract with a cable television
21 operator located in this State, soliciting orders for
22 tangible personal property by means of advertising which
23 is transmitted or distributed over a cable television
24 system in this State; or
25 8. engaging in activities in Illinois, which
26 activities in the state in which the supply business
27 engaging in such activities is located would constitute
28 maintaining a place of business in that state.
29 (Source: P.A. 91-51, eff. 6-30-99; 92-484, eff. 8-23-01.)