TITLE 86: REVENUE
CHAPTER I: DEPARTMENT OF REVENUE
PART 130 RETAILERS' OCCUPATION TAX
SECTION 130.340 ROLLING STOCK


 

Section 130.340 Rolling Stock

 

a) Notwithstanding the fact that the sale is at retail, the Retailers' Occupation Tax does not apply to sales of tangible personal property to owners, lessors, or shippers of tangible personal property that is utilized by interstate carriers for hire for use as rolling stock moving in interstate commerce as long as so used by the interstate carriers for hire. [35 ILCS 120/2-5(13)] This exemption is not only available to purchasers who are interstate carriers for hire and who otherwise meet the requirements of the exemption, but also to lessors who lease to interstate carriers who use the property as rolling stock moving in interstate commerce and to shippers, including manufacturers, who provide tangible personal property (such as shipping containers) to interstate carriers for hire when those interstate carriers use that property as rolling stock moving in interstate commerce.

 

1) In making an initial determination of eligibility, two conditions that an item must meet in each instance are:

 

A) it must transport persons or property for hire; and

 

B) it must transport persons or property in interstate commerce.

 

2) The purchase of an item that does not meet both criteria in subsection (a)(1) is not eligible for the rolling stock exemption under any circumstances.

 

b) Definitions. As used in this Section:

 

"Aircraft" has the meaning prescribed in Section 3 of the Illinois Aeronautics Act. [620 ILCS 5/1]

 

"Commercial service or cargo service airport" means land, improvements to land, equipment, and appliances necessary for the receipt and transfer of persons and property onto or off of aircraft primarily for interstate or international transport.

 

"Gross vehicle weight rating" or "GVWR" means the value specified by the manufacturer as the loaded weight of a single vehicle. [625 ILCS 5/1-124.5]

 

"Limousine" means any privately owned first division vehicle intended to be used for the transportation of persons for-hire when the payment is not based on a meter charge, but is prearranged for a designated destination. [625 ILCS 5/1-139.1]

 

"Motor vehicle" means, except as otherwise provided in this Section, a motor vehicle as defined in Section 1-146 of the Illinois Vehicle Code [625 ILCS 5/1-146]. The term "motor vehicle" does not include aircraft or watercraft.

 

The term "Rolling Stock" includes transportation vehicles of any kind used by an interstate transportation company for hire (e.g., railroad, bus line, airline, trucking company, barge company, and limousine company), but not vehicles that are being used by a person to transport its officers, employees, customers or others not for hire (even if they cross State lines) or to transport property that the person owns or is selling and delivering to customers (even if the transportation crosses State lines). Railroad "rolling stock" includes all railroad cars, passenger and freight, and locomotives (including switching locomotives) or mobile power units of every nature for moving the cars, operating on railroad tracks, and includes all property purchased for the purpose of being attached to the cars or locomotives as a part of the cars or locomotives. The exemption includes some equipment (such as shipping containers called trailers and shipping containers transferred at intermodal terminal facilities or commercial service or cargo service airports) that is used by interstate carriers for hire, loaded on railroad cars or aircraft, to transport property, but that does not operate under its own power and is not actually attached to the railroad cars or aircraft. The exemption does not apply to fuel nor to jacks or flares or other items that are used by interstate carriers for hire in servicing the transportation vehicles, but that do not become a part of the vehicles, and that do not participate directly in some way in the transportation process. The exemption does not include property of an interstate carrier for hire used in the company's office, such as furniture, computers, office supplies and the like.

 

"Trailer" means a trailer as defined in Section 1-209 of the Illinois Vehicle Code; a semitrailer as defined in Section 1-187 of the Illinois Vehicle Code; and a pole trailer as defined in Section 1-209 of the Illinois Vehicle Code.

 

"Watercraft" means:

 

Class 2, Class 3, and Class 4 watercraft, as defined in Section 3-2 of the Boat Registration and Safety Act; [625 ILCS 45/3-2]; or

 

personal watercraft, as defined in Section 1-2 of the Boat Registration and Safety Act. [625 ILCS 45/1-2]

 

c) Generally, the rolling stock exemption cannot be claimed by a purely intrastate carrier for hire as to any tangible personal property that it purchases because it does not meet the statutory tests of being an interstate carrier for hire. However, the rolling stock exemption applies to rolling stock used by an interstate carrier for hire, even just between points in Illinois, if the rolling stock transports, for hire, persons whose journeys or property whose shipments originate or terminate outside Illinois. [35 ILCS 120/2-50].

 

d) Motor vehicles (other than limousines) and trailers. This subsection (d) sets forth the specific requirements to qualify for the rolling stock exemption for motor vehicles and trailers. This subsection (d) does not apply to limousines. For discussion of the application of the rolling stock exemption to limousines, see subsection (e).

 

1) Rolling stock test for purchases on or after August 24, 2017. This subsection (d)(1) applies to motor vehicles and trailers (and repair and replacement parts) purchased on or after August 24, 2017 (the effective date of Public Act 100-321).

 

A) Application of the rolling stock test. For motor vehicles and trailers purchased on or after August 24, 2017, "use as rolling stock moving in interstate commerce" means that:

 

i) the motor vehicle or trailer is used to transport persons or property for hire;

 

ii) the purchaser who is an owner, lessor, or shipper claiming the exemption certifies that the motor vehicle or trailer will be utilized, from the time of purchase and continuing through the statute of limitations for issuing a Notice of Tax Liability under the Retailers' Occupation Tax Act, by an interstate carrier or carriers for hire who hold, and are required by Federal Motor Carrier Safety Administration (FMCSA) regulations to hold, an active USDOT (United States Department of Transportation) Number with the Carrier Operation listed as "Interstate" and the Operation Classification listed as "authorized for hire", "exempt for hire", or both "authorized for hire" and "exempt for hire"; except that this subsection (d)(1)(A)(ii) does not apply to a motor vehicle or trailer used at an airport to support the operation of an aircraft moving in interstate commerce, as long as (i) in the case of a motor vehicle, the motor vehicle meets the requirements of subsections (d)(1)(A)(i) and (d)(1)(A)(iii) or (ii) in the case of a trailer, the trailer meets the requirements of subsection (d)(1)(A)(i); and

 

iii) for motor vehicles, the motor vehicle's gross vehicle weight rating exceeds 16,000 pounds. [35 ILCS 120/2-51(d-5)]

 

B) Repair and replacement parts purchased on or after August 24, 2017 for motor vehicles and trailers. "Use as rolling stock moving in interstate commerce" in this subsection (d)(1) applies to all property purchased on or after August 24, 2017 for the purpose of being attached to a motor vehicle or trailer as a part thereof, regardless of whether the motor vehicle or trailer was purchased before, on, or after August 24, 2017 [35 ILCS 120/2-51(d-5)]. This means that repair and replacement parts purchased on or after August 24, 2017 for the purpose of being attached to a motor vehicle or trailer as a part thereof qualify for the rolling stock exemption if, at the time of purchase of the repair or replacement parts, the motor vehicle or trailer to which the parts will be attached and the purchaser of the repair or replacement parts (or the carrier if the purchaser is not the carrier) meet the requirements of subsection (d)(1)(A), and the purchaser provides a certification to that effect as required in subsection (d)(1)(E), regardless of when the motor vehicle or trailer itself was purchased. For repair and replacement parts for limousines, see subsection (e)(2).

 

C) If a motor vehicle or trailer (or a repair or replacement part) ceases to meet the requirements under subsection (d)(1)(A), then the tax is imposed on the selling price, allowing for a reasonable depreciation for the period during which the motor vehicle or trailer qualified for the exemption. [35 ILCS 120/2-51(d-5)] Reasonable depreciation shall be determined in accordance with 86 Ill. Adm. Code 150.110.

 

D) For purposes of this subsection (d)(1), "motor vehicle" excludes limousines, but otherwise means that term as defined in Section 1-146 of the Illinois Vehicle Code.

 

E) Certification of exemption for motor vehicles and trailers purchased on or after August 24, 2017. To properly claim the rolling stock exemption, the purchaser must give the seller a certification that the purchaser is purchasing the property for use as rolling stock moving in interstate commerce.

 

i) If the purchaser is an interstate carrier for hire, the purchaser must include in the certification its active USDOT Number issued by the FMCSA. In addition, the purchaser must certify that its FMCSA Company Operation type is listed as "Interstate". Finally, the purchaser must certify that its FMCSA Operation Classification is listed as "Authorized For-Hire", "Exempt For-Hire", or both "Authorized For-Hire" and "Exempt For-Hire".

 

ii) The USDOT Number, FMCSA Company Operation type, and FMCSA Operation Classification requirement does not apply to a motor vehicle or trailer used at an airport to support the operation of an aircraft moving in interstate commerce, as long as it otherwise meets the other requirements of the exemption in subsection (d)(1)(A).

 

iii) If the purchaser is a lessor, the purchaser must give the seller of the property a certification to that effect, similarly certifying the lessee's interstate carrier for hire status (i.e., USDOT Number, FMCSA Company Operation type, and FMCSA Operation Classification).

 

iv) If the purchaser is an owner or shipper of tangible personal property that will be utilized by interstate carriers for hire for use as rolling stock moving in interstate commerce, the purchaser must give the seller of the property a certification to that effect, similarly certifying the interstate carrier for hire status (i.e., USDOT Number, FMCSA Company Operation type, and FMCSA Operation Classification) of the interstate carrier for hire that will utilize the property.

 

F) If a retailer accepts a certification under subsection (d)(1)(E), this does not preclude the Department from disregarding it and assessing Retailers' Occupation Tax against the retailer if the Department determines that, at the time the retailer accepted the certification, the purchaser, or the carrier identified by the purchaser in cases where the purchaser is not the carrier, did not meet the active USDOT Number, FMCSA Company Operation type, and FMCSA Operation Classification requirements.

 

G) The giving of a certification under subsection (d)(1)(E) by a purchaser does not preclude the Department from disregarding it and assessing Use Tax against the purchaser if, in examining the purchaser's records (or, in cases where the purchaser is not the carrier, the carrier's records), the Department finds that the certification was not true as to some fact that shows the purchase was taxable and should not have been certified as being tax exempt. The Department reserves the right to require the purchaser to provide a copy of the purchaser's (or carrier's, in cases where the purchaser is not the carrier) FMCSA documentation whenever the Department deems it necessary.

 

H) For sales where an active USDOT Number is required, a retailer can confirm whether the carrier meets the Company Operation type and Operation Classification by searching the Federal Motor Carrier Safety Administration's Safety and Fitness Electronic Records (SAFER) System using the carrier's USDOT Number. The information displayed will state whether the carrier's FMCSA Company Operation type is "Interstate" and whether the carrier's FMCSA Operation Classification is "Authorized For-Hire" or "Exempt For-Hire". If the USDOT Number is not active or if one or both of the requirements for FMCSA Company Operation type or FMCSA Operation Classification is not met, the sale does not qualify for the rolling stock exemption.

 

I) The following examples apply the rolling stock test for purchases of motor vehicles on or after August 24, 2017.

 

EXAMPLE 1 Exempt: An interstate trucking company decides to purchase a new truck with a gross vehicle weight rating exceeding 16,000 pounds for its business. The company has been issued a USDOT Number by the FMCSA within the United States Department of Transportation. The company's FMCSA Company Operation type is listed in the SAFER System as "Interstate" and its FMCSA Operation Classification is listed as "Authorized For-Hire". The company completes a RUT-7 Certification Form certifying that it meets the requirements for the exemption and the retailer uses the SAFER System to confirm the certification. The sale is exempt.

 

EXAMPLE 2 Not Exempt: A company decides to become an interstate trucking company and purchases a new truck with a gross vehicle weight rating exceeding 16,000 pounds for its business. It has applied for but not yet received a USDOT Number. The purchase of the truck cannot meet the statutory requirements for exemption because the company has not yet been issued a USDOT Number and, therefore, does not have an active USDOT Number at the time of purchase.

 

EXAMPLE 3 Not Exempt: A company decides to purchase a new truck with a gross vehicle weight rating exceeding 16,000 pounds for its business. The company has been issued a USDOT Number by the FMCSA within the United States Department of Transportation. The company's FMCSA Company Operation type is listed in the SAFER System as "Interstate". Its FMCSA Operation Classification is listed as "Private Property" (which designates a company that transports only its own cargo). The purchase of the truck cannot meet the statutory requirements for exemption because the company's FMCSA Operation Classification is neither "Authorized For-Hire" nor "Exempt For-Hire."

 

2) Rolling stock test for purchases before August 24, 2017. This subsection (d)(2) applies to motor vehicles and trailers (and repair and replacement parts) purchased before August 24, 2017 (the effective date of Public Act 100-321). For motor vehicles and trailers (and repair and replacement parts for these items) purchased on or after August 24, 2017, subsection (d)(1) applies.

 

A) Application of the rolling stock test for motor vehicles purchased before August 24, 2017. A motor vehicle whose gross vehicle weight rating exceeds 16,000 pounds will qualify for the rolling stock exemption if, during a 12-month period, it carries persons or property for hire in interstate commerce for greater than 50% of its total trips for that period or for greater than 50% of its total miles for that period. The person claiming the rolling stock exemption for a motor vehicle must make an election at the time of purchase to use either the trips or mileage method to document that the motor vehicle will be used in a manner that qualifies for the exemption. [35 ILCS 120/2-51(c)]

 

i) If the purchase is from an Illinois retailer, the election must be made on a certification described in subsection (d)(2)(F). If the purchase is from an out-of-state retailer or from a non-retailer, the election must be documented in the purchaser's books and records.

 

ii) If no election is made as required under the provisions of subsection (d)(2)(A)(i), the person will be deemed to have chosen the mileage method. [35 ILCS 120/2-51(c)]

 

iii) Once such an election for a motor vehicle has been made, or is deemed to have been made, the method used to document the qualification of that motor vehicle for the rolling stock exemption will remain in effect for the duration of the purchaser's ownership of that motor vehicle. [35 ILCS 120/2-51(f)]

 

B) Application of the rolling stock test for trailers purchased before August 24, 2017. To qualify for the rolling stock exemption the trailer must, during a 12-month period, carry persons or property for hire in interstate commerce for greater than 50% of its total trips for that period or for greater than 50% of its total miles for that period. Except as provided in subsections (d)(2)(B)(i) through (iii), purchasers of trailers must make an election at the time of purchase to use either the trips or mileage method. [35 ILCS 120/2-51(d)] If the purchase is from an Illinois retailer, the election must be made on a certification described in subsection (d)(2)(F). If the purchase is from an out-of-state retailer or from a non-retailer, the election must be documented in the purchaser's books and records. If no election is made as required under the provisions of this subsection (d)(2)(B), the person will be deemed to have chosen the mileage method. [35 ILCS 120/2-51(d)] The election to use either the trips or mileage method made as required under this subsection (d)(2)(B) will remain in effect for the duration of the purchaser's ownership of that trailer. [35 ILCS 120/2-51(f)] The owner of trailers that are dedicated to a motor vehicle, or group of motor vehicles, may elect at the time of purchase to alternatively document the qualifying use of those trailers in the following manner:

 

i) if a trailer is dedicated to a single motor vehicle that qualifies under subsection (d)(2)(A), then that trailer will also qualify for the exemption;

 

ii) if a trailer is dedicated to a group of motor vehicles that all qualify under subsection (d)(2)(A), then that trailer will also qualify for the exemption; or

 

iii) if one or more trailers are dedicated to a group of motor vehicles and not all of those motor vehicles in that group qualify as rolling stock moving in interstate commerce under subsection (d)(2)(A), then the percentage of those trailers that qualifies for the exemption is equal to the percentage of those motor vehicles in that group that qualify for the exemption. However, the mathematical application of the qualifying percentage to the group of trailers will not be applied to any fraction of a trailer. If the owner of the trailers chooses to use the method provided under this subsection (d)(2)(B)(iii), any trailer or group of trailers that is not considered to qualify for the exemption under the mathematical application of the qualifying percentage will not qualify for the exemption even if documentation for a specific trailer or trailers in that group is provided to show that such a trailer or trailers would have met the test in subsection (d)(2)(B)(i).

 

iv) For purposes of this subsection (d)(2)(B), "dedicated" means that the trailer or trailers are used exclusively by a specific motor vehicle or specific group or fleet of motor vehicles.

 

C) Repair and replacement parts for motor vehicles and trailers purchased before August 24, 2017. The definition of "use as rolling stock moving in interstate commerce" required to meet the test for the rolling stock exemption as set forth in subsections (d)(2)(A) for motor vehicles and (d)(2)(B) for trailers applies to all property purchased before August 24, 2017 for the purpose of being attached to motor vehicles or trailers as a part thereof. [35 ILCS 120/2-51(c) and (d)] Repair and replacement parts purchased before August 24, 2017 for the purpose of being attached to a motor vehicle or trailer as a part thereof qualify for the rolling stock exemption if, at the time of purchase of the repair or replacement parts and for each of the corresponding motor vehicle's or trailer's consecutive 12-month periods thereafter (i.e. the parts follow the 12-month periods for the rolling stock that they become a part of), the motor vehicle or trailer to which the parts were to be attached met the requirements of subsection (d)(2)(A) or (d)(2)(B), as appropriate, and the purchaser provided a certification to that effect as required in subsection (d)(2)(F), regardless of when the motor vehicle or trailer itself was purchased. For more detail on the application of 12-month periods for repair and replacement parts, see subsection (d)(2)(E)(iii).

 

D) Basic guidelines on the trips or miles that may and may not be used to claim the rolling stock exemption for motor vehicles and trailers purchased before August 24, 2017.

 

i) For interstate trips or interstate miles to qualify, the interstate trips or miles must be for hire. However, the total amount of trips taken or miles traveled by rolling stock within any 12-month period includes trips or miles for hire and those not for hire. An example of a not for hire trip or not for hire mileage is when a business uses its truck to transport its own merchandise.

 

EXAMPLE − Non-Qualifying: A farmer in Decatur, Illinois sells grain to an interstate carrier. The carrier takes delivery of the grain in Decatur and hauls it to Oklahoma City, Oklahoma. The shipment from Decatur, Illinois to Oklahoma City, Oklahoma is not included in the carrier's qualifying interstate trips or miles for hire because the shipment was not for hire. The carrier owned the grain it was shipping interstate. For an interstate trip to qualify, it must be for hire.

 

ii) Any use of the rolling stock in a movement from one location to another, including but not limited to mileage incurred by rolling stock returning from a delivery without a load or passengers, shall be counted as a trip or mileage.

 

iii) However, the movement of the rolling stock in relation to the maintenance or repair of that rolling stock shall not count as a trip or mileage.

 

iv) Any mileage shown for rolling stock that is undocumented as a trip or trips shall be counted as part of the total trips or mileage taken by that rolling stock. If the trips method has been chosen for that rolling stock, the Department shall use its best judgment and information to determine the number of trips represented by such mileage.

 

v) A movement whereby rolling stock is returning empty from a trip for hire shall be counted as a trip or mileage for hire. A movement whereby rolling stock is moving to a location where property or passengers are being loaded for a trip for hire shall be counted as a trip or mileage for hire.

 

E) Twelve-month periods for motor vehicles and trailers (and repair and replacement parts) purchased before August 24, 2017.

 

i) To be eligible for the rolling stock exemption, motor vehicles and trailers must carry persons or property for hire in interstate commerce for greater than 50% of their total trips or for greater than 50% of their total miles for each 12-month period subject to the limitations period for issuing a Notice of Tax Liability under the Retailers' Occupation Tax Act [35 ILCS 120/4 and 5] and under the following Acts through incorporation of Sections 4 and 5 of the Retailers' Occupation Tax Act: the Use Tax Act [35 ILCS 105/12]; the Service Occupation Tax Act [35 ILCS 115/12]; and the Service Use Tax Act [35 ILCS 110/12]. The first 12-month period for the use of a motor vehicle or trailer begins on the date of registration or titling with an agency of this State, whichever occurs later. If the motor vehicle or trailer is not required to be titled or registered with an agency of this State or the motor vehicle or trailer is not titled or registered with an agency of this State within the time required, the first 12-month period for use of that motor vehicle or trailer begins on its date of purchase or first use in Illinois, whichever is later.

 

ii) If a motor vehicle or trailer carries persons or property for hire in interstate commerce in a manner that qualifies for the rolling stock exemption in the first 12-month period, but then does not carry persons or property for hire in interstate commerce in a manner that qualifies for the rolling stock exemption in a subsequent 12-month period, the motor vehicle or trailer and any property attached to that motor vehicle or trailer upon which the rolling stock exemption was claimed will be subject to tax on its original purchase price and tax is due by the last day of the month following the conclusion of the 12-month period in which the exemption conditions are no longer met.

 

EXAMPLE: A motor vehicle is used in a qualifying manner for the first 12-month period but is not used in a qualifying manner for the second 12-month period. That motor vehicle will be subject to tax based upon its original purchase price, even if it is then used in a qualifying manner in the third 12-month period. As a result, by the last day of the month following the month in which the rolling stock ceases to qualify for the exemption (at the conclusion of the second 12-month period at which time the purchaser knows that the exemption conditions are no longer met), the purchaser must file a Use Tax return and pay the tax.

 

iii) For repair and replacement parts to qualify for the rolling stock exemption, the motor vehicle or trailer upon which those parts are installed must be used in a qualifying manner for the motor vehicle's or trailer's 12-month period in which the purchase of the repair or replacement parts occurred and each consecutive 12-month period thereafter (i.e., the parts follow the 12-month periods for the rolling stock that they become a part of). For example, if repair parts were attached or incorporated into a qualifying motor vehicle that was titled and registered prior to the audit period (beyond the limitations period for issuing a Notice of Tax Liability for the vehicle), that motor vehicle must be used in a qualifying manner for the motor vehicle's 12-month period in which the purchase of the repair or replacement parts occurred and each consecutive 12-month period thereafter in order for the parts to qualify for the exemption. This applies regardless of whether the motor vehicle was originally used in a qualifying manner for the 12-month periods preceding the motor vehicle's 12-month period in which the purchase of the repair or replacement parts occurred.

 

F) Certification of exemption for motor vehicles and trailers purchased before August 24, 2017. To properly claim the rolling stock exemption for motor vehicles and trailers purchased before August 24, 2017, the purchaser must give the seller a certification that the purchaser is an interstate carrier for hire, and that the purchaser is purchasing the property for use as rolling stock moving in interstate commerce.

 

i) If the purchaser of a motor vehicle or trailer or repair or replacement parts for a motor vehicle or trailer is an interstate carrier for hire, the purchaser must include its USDOT Number and Interstate Operating Authority Number (MC Number) issued by the FMCSA or must certify that it is a type of interstate carrier for hire (such as an interstate carrier of agricultural commodities for hire) that is not required by law to have an MC Number. In the latter event, the carrier must include its USDOT Number.

 

ii) If the carrier is a type that is subject to regulation by some Federal Government regulatory agency other than the FMCSA, the carrier must include its registration number from such other Federal Government regulatory agency in the certification claiming the benefit of the rolling stock exemption.

 

iii) If the purchaser of a motor vehicle or trailer or repair or replacement parts for a motor vehicle or trailer is a long-term lessor (under a lease of one year or more in duration), the purchaser must give the seller of the property a certification to that effect, similarly identifying the lessee interstate carrier for hire as provided above (i.e., USDOT Number, MC Number, other number if appropriate).

 

iv) If the purchaser is an owner, lessor, or shipper of tangible personal property that will be utilized by interstate carriers for hire for use as rolling stock moving in interstate commerce, the purchaser must give the seller of the property a certification to that effect, similarly identifying the lessee or other interstate carrier for hire that will utilize the property.

 

v) The giving of a certification does not preclude the Department from disregarding it and assessing Use Tax against the purchaser if, in examining the purchaser's records or activities (or, in cases where the purchaser is not the carrier, the carrier's records or activities), the Department finds that the certification was not true as to some fact that shows that the purchase was taxable and should not have been certified as being tax exempt.

 

vi) The Department reserves the right to require the purchaser to provide a copy of the purchaser's (or carrier's, in cases where the purchaser is not the carrier) FMCSA or other Federal Government regulatory agency Certificate of Operating Authority (or as much of the certificate as the Department deems adequate to verify the fact that the purchaser (or carrier, in cases where the purchaser is not the carrier) is an interstate carrier for hire) whenever the Department deems it necessary. In cases where the interstate carrier for hire is not required by law to have a USDOT Number, MC Number, or other Federal Government regulatory agency number, the Department reserves the right to require the carrier (or purchaser, if the carrier is not the purchaser) to provide other evidence of eligibility for the exemption and to keep records documenting the rolling stock's eligibility for the exemption.

 

G) Examples applying the limitations period for issuing a Notice of Tax Liability under the Retailers' Occupation Tax Act [35 ILCS 120/4 and 5] or the Use Tax Act [35 ILCS 105/12] incorporating Sections 4 and 5 of the Retailers' Occupation Tax Act for motor vehicles purchased before August 24, 2017. In general, except in the case of a fraudulent return, or in the case of an amended return (where a notice of tax liability may be issued on or after each January 1 and July 1 for an amended return filed not more than three years prior to such January 1 or July 1, respectively), no Notice of Tax Liability shall be issued on and after each January 1 and July 1 covering gross receipts received during any month or period of time more than three years prior to such January 1 and July 1, respectively. For further discussion of the statute of limitations for issuing a Notice of Tax Liability, see Section 130.815.

 

EXAMPLE 1: A qualifying vehicle was purchased on January 15, 2017 and titled and registered on that date and the appropriate return was timely filed claiming the rolling stock exemption. The vehicle was used in a qualifying manner for the first 12-month period ending on January 15, 2018. However, the vehicle was not used in a qualifying manner at any time thereafter. The period in which the Department would be able to issue a Notice of Tax Liability for tax due regarding that vehicle would expire on June 30, 2020. If the vehicle had been originally purchased and registered outside Illinois and later relocated and registered in Illinois, the first 12-month period would begin on the date of registration in Illinois. For example, if the vehicle was purchased on January 15, 2017 and titled and registered on that date in Missouri, but later relocated to Illinois and registered in Illinois on July 20, 2017, then the period in which the Department would be able to issue a Notice of Tax Liability for Use Tax due regarding that vehicle would expire on December 31, 2020.

 

EXAMPLE 2: A qualifying vehicle was purchased on July 10, 2015, and was titled and registered on that date. On January 12, 2017, the owner purchased new tires for the vehicle and the vehicle was used in a qualifying manner for the vehicle's 12-month period ending on July 10, 2017, and the two subsequent 12-month periods ending on July 10, 2019. However, the vehicle was not used in a qualifying manner at any time thereafter. The period in which the Department would be able to issue a Notice of Tax Liability for tax due regarding the replacement parts (new tires) would expire on June 30, 2020.

 

H) Examples applying the greater than 50% trips test for motor vehicles purchased before August 24, 2017:

 

EXAMPLE 1 − Qualifying: An interstate carrier uses a truck whose gross vehicle weight rating exceeds 16,000 pounds to carry property for hire from Springfield, Illinois to Champaign, Illinois where part of the property is delivered. As documented on the bill of lading provided to the carrier, that property will be delivered, as part of the continuation of the shipment, by another carrier to a location outside of Illinois (qualifies as interstate trip because documentation of interstate shipment). The truck continues to Indianapolis, Indiana and delivers more of the property in that city (qualifies as interstate trip because transported out of state). The truck then continues to Gary, Indiana and delivers the remainder of the property in that city (qualifies as interstate trip because shipment originated in Illinois). The truck then returns empty to Springfield, Illinois from the delivery in Gary, Indiana (qualifies as interstate trip because returning from qualifying trip (see subsection (d)(2)(D)(v)). The truck is considered to have made a total of four trips (one trip to Champaign, Illinois, one trip to Indianapolis, Indiana, one trip to Gary, Indiana, and a return trip back to Springfield, Illinois). If these were all the trips that the truck made within the first 12-month period (or were all the trips that truck made in a subsequent 12-month period), it would qualify for the test set forth in subsection (d)(2)(A) for that 12-month period because it made 4 qualifying interstate trips for hire, thereby resulting in a percentage of 100% of its total trips during that 12-month period. Any repair and replacement parts purchased for the truck during the first 12-month period would also have qualified for the exemption.

 

EXAMPLE 2 − Non-Qualifying: An interstate carrier uses a truck whose gross vehicle weight rating exceeds 16,000 pounds to carry property for hire from Chicago, Illinois to Joliet, Illinois where that property is delivered for use by the recipient (does not qualify as interstate trip because it is strictly intrastate transport). The truck then continues to Gary, Indiana and picks up property for use by that carrier's business (does not qualify because it is not for hire). The truck then returns to Chicago, Illinois (does not qualify because returning from a non-qualifying trip out of state). The truck is considered to have made a total of three trips (one to Joliet, Illinois, one to Gary, Indiana, and a return trip to Chicago, Illinois). If these were all the trips that the truck made within the first 12-month period (or were all the trips that truck made in a subsequent 12-month period), it would not qualify for the test set forth in subsection (d)(2)(A) for that 12-month period because these trips resulted in a 0 percentage of qualifying interstate trips for hire.

 

I) Examples of application of the greater than 50% mileage test for motor vehicles purchased before August 24, 2017:

 

EXAMPLE 1 − Qualifying: An interstate carrier uses a truck whose gross vehicle weight rating exceeds 16,000 pounds to carry property for hire from Springfield, Illinois to Champaign, Illinois (88 mile movement) where part of the property is delivered. As documented on the bill of lading provided to the carrier, that property will be delivered, as part of the continuation of the shipment, by another carrier to a location outside of Illinois (qualifies as interstate miles because documentation of interstate shipment). The truck continues to Indianapolis, Indiana (125 mile movement) and delivers more of the property in that city (qualifies as interstate trip because transported out of state). The truck then continues to Hammond, Indiana (151 mile movement) and delivers the remainder of the property in that city (qualifies as interstate trip because shipment originated in Illinois). The truck then returns empty to Springfield, Illinois (204 mile movement) from the delivery in Hammond, Indiana (qualifies as interstate trip because returning from qualifying trip (see subsection (d)(2)(D)(v)). The truck is considered to have driven a total of 568 qualifying miles. If these were all the miles that the truck was driven within the first 12-month period (or were all the miles that truck was driven in a subsequent 12-month period), it would qualify for the test set forth in subsection (d)(2)(A) for that 12-month period because 100% of its miles were for qualifying interstate movements for hire. Any repair or replacement parts purchased for the truck during the first 12-month period would also have qualified for the exemption.

 

EXAMPLE 2 − Non-Qualifying: If the truck described above in Example 1 had instead traveled a total of 1,568 miles during that 12-month period with 1,000 of those miles not being documented as qualifying miles, the truck would not have qualified for the exemption because it only had 568 qualifying miles out of 1,568 miles for a 36.22% qualifying percentage. Any repair or replacement parts purchased for the truck would not have qualified for the exemption.

 

EXAMPLE 3 − Qualifying and Non-Qualifying: A short-term truck leasing company (e.g., 3 months) leases trucks whose gross vehicle weight rating exceeds 16,000 pounds. The trucks are typically leased to persons who transport property in interstate commerce. The leasing company requires its customers to provide detailed records of the destination of each trip of a leased truck and whether the transport was for hire. One of the leasing company's trucks travels 3,000 miles during its first 12-month period, 4,500 miles during its second 12-month period, and 2,800 miles during its third 12-month period. The leasing company can show through the records it collects that, for each 12-month period, the truck carried property in interstate commerce for hire for greater than 50% of the miles traveled by the truck. For another truck, however, the records show that, for the second 12-month period, the truck did not transport property in interstate commerce for hire. This is because of the combination of (i) trips that were strictly in-state and for which the property did not originate or terminate out of state and (ii) trips that were not for hire, but rather were trips in which the customer hauled its own property. A third truck did not qualify for the exemption because the leasing company could not provide the documentation to support its claim that the truck was used in each of the 12-month periods to carry persons or property for hire in interstate commerce for greater than 50% of its total trips or total miles for that period.

 

J) Examples where trailers are dedicated to a motor vehicle or motor vehicles.

 

EXAMPLE 1: A trucking company owns 2 trailers that are dedicated to the company's 2 trucks and the owner elected at purchase to document the qualification of the trailers based on the qualification of the trucks to which they would be dedicated. Both of these trucks qualify for the exemption. Both the trailers will be considered to have met the requirements for the exemption during those periods.

 

EXAMPLE 2: A trucking company owns 30 trailers. All of those trailers are dedicated to a subsidiary company's 20 truck fleet and the owner elected at purchase to document the qualification of the trailers based on the qualification of the trucks to which they would be dedicated. Only 19 of those 20 trucks qualify for the exemption for the appropriate 12-month periods. The qualifying percentage for the group of trucks for which all of the trailers are dedicated is 95%. The application of the 95% qualifying percentage to the 30 trailer group would represent 28.5 trailers. Because no fraction of a trailer may qualify under the mathematical application of the qualifying percentage, only 28 of the 30 trailers will be considered to have met the requirements for the exemption during those periods.

 

e) Limousines. This subsection (e) sets forth the specific requirements to qualify for the rolling stock exemption for limousines.

 

1) Application of the rolling stock test for limousines. A limousine, as defined in subsection (b), will qualify for the rolling stock exemption if, during a 12-month period, it carries persons or property for hire in interstate commerce for greater than 50% of its total trips for that period or for greater than 50% of its total miles for that period. Persons claiming the rolling stock exemption for a limousine must make an election at the time of purchase to use either the trips or mileage method to document that the limousine will be used in a manner that qualifies for the exemption. [35 ILCS 120/2-51(c)]

 

A) If the purchase is from an Illinois retailer, the election must be made on a certification as provided in subsection (e)(5). If the purchase is from an out-of-state retailer or from a non-retailer, the election must be documented in the purchaser's books and records.

 

B) If no election is made as required under subsection (e)(1)(A), the person will be deemed to have chosen the mileage method.

 

C) Once such an election for a limousine has been made, or is deemed to have been made, the method used to document the qualification of that limousine for the rolling stock exemption will remain in effect for the duration of the purchaser's ownership of that limousine. [35 ILCS 120/2-51(f)]

 

2) Repair and replacement parts for limousines. The definition of "use as rolling stock moving in interstate commerce" required to meet the test for the rolling stock exemption as set forth in subsection (e)(1) applies to all property purchased for the purpose of being attached to the limousine as a part thereof. [35 ILCS 120/2-51(c)] Repair and replacement parts purchased for the purpose of being attached to a limousine as a part thereof qualify for the rolling stock exemption if, at the time of purchase of the repair or replacement parts and for each of the corresponding limousine's consecutive 12-month periods thereafter (i.e., the parts follow the 12-month periods for the rolling stock that they become a part of), the limousine to which the parts will be attached meets the requirements of subsection (e)(1) and the purchaser provides a certification to that effect as required in subsection (e)(5), regardless of when the limousine itself was purchased. For more detail on the application of 12-month periods for repair and replacement parts, see subsection (e)(4) incorporating the provision of subsection (d)(2)(E)(iii).

 

3) Basic guidelines on the trips or miles that may and may not be used to claim the rolling stock exemption for limousines.

 

A) For interstate trips or interstate miles to qualify, the interstate trips or miles must be for hire. However, the total amount of trips taken or miles traveled by a limousine in any 12-month period includes trips or miles for hire and those not for hire. An example of a not for hire trip or not for hire mileage is when a business uses its limousine to transport its own employees.

 

B) Any use of the limousine in a movement from one location to another, including but not limited to mileage incurred by a limousine returning from a delivery without a passenger, shall be counted as a trip or mileage.

 

C) However, the movement of the limousine in relation to the maintenance or repair of that limousine shall not count as a trip or mileage.

 

D) Any mileage shown for a limousine that is undocumented as a trip or trips shall be counted as part of the total trips or mileage taken by that limousine. If the trips method has been chosen for that limousine, the Department shall use its best judgment and information to determine the number of trips represented by such mileage.

 

E) A movement whereby a limousine is returning empty from a trip for hire shall be counted as a trip or mileage for hire. A movement whereby a limousine is moving to a location where passengers are being loaded for a trip for hire shall be counted as a trip or mileage for hire.

 

F) A limousine that carries for hire a person to or from an airport is presumed, absent evidence to the contrary, to be carrying a person whose journey originates or terminates outside Illinois, even if the limousine travels just between points in Illinois.

 

EXAMPLE 1 Qualifying: A limousine picks up passengers at their residence in downtown Chicago and drives them to O'Hare International Airport. This trip is presumed, absent evidence to the contrary, to be a qualifying trip or miles for purposes of the exemption. In addition, the limousine picks up more passengers at O'Hare International Airport and drives them to a hotel in downtown Chicago. This trip is also presumed, absent evidence to the contrary, to be a qualifying trip or miles for purposes of the exemption.

 

EXAMPLE 2 − Non-Qualifying: A major corporation owns a limousine that it uses to transport employees to and from O'Hare International Airport for business travel. These limousine trips are not qualifying trips or miles for purposes of the exemption because they are not for hire.

 

4) Twelve-month periods for limousines (and repair and replacement parts for limousines). The guidelines provided in subsection (d)(2)(E) apply to limousines the same as if set forth here, except that the limitation in that subsection to purchases made before August 24, 2017, does not apply and references to motor vehicles and trailers mean limousines.

 

5) Certification of exemption for limousines. To properly claim the rolling stock exemption, the purchaser must give the seller a certification the purchaser is an interstate carrier for hire, and the purchaser is purchasing the limousine, as defined in this Section, or repair or replacement parts for a limousine for use as rolling stock moving in interstate commerce.

 

A) If the purchaser is an owner or lessor of a limousine that will be utilized by interstate carriers for hire for use as rolling stock moving in interstate commerce, the purchaser must give the seller of the property a certification to that effect, similarly identifying the lessee or other interstate carrier for hire that will utilize the property.

 

B) The giving of a certification does not preclude the Department from disregarding it and assessing Use Tax against the purchaser if, in examining the purchaser's records or activities (or, in cases where the purchaser is not the carrier, the carrier's records or activities), the Department finds the certification was not true as to some fact that shows that the purchase was taxable and should not have been certified as being tax exempt.

 

C) In cases where the interstate carrier for hire is not required by law to have a USDOT Number, MC Number, or other Federal Government regulatory agency number, the Department reserves the right to require the carrier (or purchaser, if the carrier is not the purchaser) to provide other evidence of eligibility for the exemption and to keep records documenting the rolling stock's eligibility for the exemption.

 

6) Examples. The Examples in subsections (d)(2)(G), (H), and (I) apply to limousines the same as if set forth here, except that references to motor vehicles mean limousines.

 

f) Aircraft.

 

1) Application of the rolling stock test for aircraft. For aircraft purchased on or after January 1, 2014, "use as rolling stock moving in interstate commerce" occurs when, during a 12-month period, the rolling stock has carried persons or property for hire in interstate commerce for greater than 50% of its total trips for that period or for greater than 50% of its total miles for that period. [35 ILCS 120/2-51(e)] For aircraft purchased before January 1, 2014 to be eligible for the exemption, the taxpayer is required to show the aircraft transported persons or property for hire in interstate commerce on a "regular and frequent" basis. See National School Bus Service, Inc. v. Department of Revenue, 302 Ill. App. 3d 820 (1st Dist. 1998). The person claiming the exemption shall make an election at the time of purchase to use either the trips or mileage method and document that election in their books and records. [35 ILCS 120/2-51(e)]

 

A) If the purchase is from an Illinois retailer, the election must be made on a certification as provided in subsection (f)(6). If the purchase is from an out-of-state retailer or from a non-retailer, the election must be documented in the purchaser's books and records.

 

B) If no election is made under subsection (f)(1)(A) to use the trips or mileage method, the person shall be deemed to have chosen the mileage method. [35 ILCS 120/2-51(e)] For aircraft, flight hours may be used in lieu of recording miles in determining whether the aircraft meets the mileage test in subsection (f)(1). [35 ILCS 120/2-51(f)]

 

C) Once such an election for an aircraft has been made, or is deemed to have been made if no election is made, the method used to document the qualification of that aircraft for the rolling stock exemption will remain in effect for the duration of the purchaser's ownership of that aircraft. [35 ILCS 120/2-51(f)]

 

2) Repair and replacement parts for aircraft. Notwithstanding any other provision of law to the contrary, property purchased on or after January 1, 2014 for the purpose of being attached to aircraft as a part thereof qualifies as rolling stock moving in interstate commerce only if the aircraft to which it will be attached qualifies as rolling stock moving in interstate commerce under the test set forth in subsection (f)(1), regardless of when the aircraft was purchased. Persons who purchased aircraft prior to January 1, 2014 shall make an election to use either the trips or mileage method and document that election in their books and records for the purpose of determining whether property purchased on or after January 1, 2014 for the purpose of being attached to aircraft as a part thereof qualifies as rolling stock moving in interstate commerce under subsection (f)(1). [35 ILCS 120/2-51(e)] Repair and replacement parts purchased for the purpose of being attached to an aircraft as a part thereof qualify for the rolling stock exemption if, at the time of purchase of the repair or replacement parts and for each of the corresponding aircraft's consecutive 12-month periods thereafter (i.e., the parts follow the 12-month periods for the rolling stock that they become a part of), the aircraft to which the parts will be attached meets the requirements of subsection (f)(1) and the purchaser provides a certification to that effect as required in subsection (f)(6), regardless of when the aircraft itself was purchased. For more detail on the application of 12-month periods for repair and replacement parts, see subsection (f)(4) incorporating the provision of subsection (d)(2)(E)(iii).

 

3) Basic guidelines on the trips or miles that may and may not be used to claim the rolling stock exemption for aircraft.

 

A) For interstate trips or interstate miles (or flight hours used in lieu of miles) to qualify, the interstate trips or miles (or flight hours used in lieu of miles) must be for hire. However, the total amount of trips taken or miles (or flight hours used in lieu of miles) traveled by an aircraft within any 12-month period includes trips or miles (or flight hours used in lieu of miles) for hire and those not for hire. An example of a not for hire trip or not for hire mileage (or flight hours used in lieu of mileage) is when a business uses its aircraft to transport its own employees or cargo.

 

B) Any use of an aircraft in a movement from one location to another, including but not limited to mileage (or flight hours used in lieu of mileage) incurred by an aircraft returning from a delivery without a load or passengers, shall be counted as a trip or mileage (or flight hours used in lieu of mileage).

 

C) However, the movement of an aircraft in relation to the maintenance or repair of that aircraft shall not count as a trip or mileage (or flight hours used in lieu of mileage).

 

D) Any mileage (or flight hours used in lieu of mileage) shown for an aircraft that is undocumented as a trip or trips shall be counted as part of the total trips or mileage (or flight hours used in lieu of mileage) taken by that aircraft. If the trips method has been chosen for that aircraft, the Department shall use its best judgment and information to determine the number of trips represented by such mileage (or flight hours used in lieu of mileage).

 

E) A movement whereby an aircraft is returning empty from a trip for hire shall be counted as a trip or mileage (or flight hours used in lieu of mileage) for hire. A movement whereby an aircraft is moving to a location where property or passengers are being loaded for a trip for hire shall be counted as a trip or mileage (or flight hours used in lieu of mileage) for hire.

 

F) The movement of an aircraft during the first 6 months after purchase or during the first 100 flight hours after purchase, whichever comes first, in relation to inspection or in furtherance of aircraft certification under the Federal Aviation Regulations related to inspection or certification of aircraft for flights for hire does not count as a trip or mileage for purposes of determining whether the aircraft meets the trips or mileage (or flight hours used in lieu of mileage) test for the exemption. To qualify under this subsection (f)(3)(F), taxpayer must maintain records specifically documenting the nature of the inspection or certification.

 

EXAMPLE 1 − (Aircraft Inspection Flight): To generate more charter business, an aircraft owner decides to provide inflight Wi-Fi to passengers. Because the Wi-Fi equipment has the potential to create electromagnetic interference with an aircraft's instruments, the aircraft is required to conduct a test flight before returning to service. See, e.g., Federal Aviation Administration ("FAA") Advisory Circular AC No. 25-7D (5/4/2018), 32.1 et seq. If the test flight occurs within the first 6 months after purchase or during the first 100 flight hours after purchase, whichever comes first, then the test flight will not be included in the rolling stock determination as a trip or miles (or flight hours used in lieu of miles).

 

EXAMPLE 2 − (Aircraft Certification Flight): Pursuant to 14 C.F.R. 91 Appendix G, 9, and FAA Advisory Circular AC No. 91-85B (1/29/2019), 4.3.5, the FAA has a recurrent height-monitoring program for all operators planning flights in Reduced Vertical Separation Minimum (RVSM) airspace. In the United States, RVSM monitoring requirements can be met by flying over an FAA Aircraft Geometric Height Measurement Element Constellation site. This RVSM monitory flight will not be included in the rolling stock determination as a trip or miles (or flight hours used in lieu of miles), if the flight is conducted within the first six months after purchase or during the first 100 flight hours after purchase, whichever comes first.

 

G) The movement of an aircraft during the first six months after purchase or during the first 100 flight hours per pilot after purchase, whichever comes first, in relation to flight time required for pilot certification of eligibility for conducting for hire flights, or the meeting of FAA or other governmental requirements, rules, or standards to carry persons or property for hire without pilot operating limitations does not count as a trip or mileage (or flight hours used in lieu of mileage) for purposes of determining whether the aircraft meets the trips or mileage (or flight hours used in lieu of mileage) test for the exemption. To qualify under this subsection (f)(3)(G), taxpayer's records must specifically document that the movement was for pilot certification of eligibility for conducting for hire flights or to meet other requirements to carry persons or property for hire without pilot operating limitations.

 

EXAMPLE 1 − (Pilot Certification Flight): Pursuant to 14 C.F.R. 135.299, no charter operator may use a pilot, nor may any person serve as a pilot in command of a flight, unless, since the beginning of the 12th calendar month before that service, that pilot has passed a flight check in one of the types of aircraft in which that pilot is to fly. The flight check shall (i) be given by an approved check pilot or by an FAA administrator; (ii) consist of at least one flight over one route segment; and (iii) include takeoffs and landings at one or more representative airports. These pilot certification flights conducted pursuant to 14 C.F.R. 135.299 will not be included in the rolling stock determination as a trip or miles (or flight hours used in lieu of miles), if the flights are conducted within the first 6 months after purchase or during the first 100 flight hours per pilot after purchase, whichever comes first.

 

EXAMPLE 2 − (Pilot Certification Flight): Pursuant to 14 C.F.R. 135.4, for a two-pilot crew to operate an aircraft without pilot operating limitations under 14 C.F.R. 135 (on-demand charter operations), the two pilots are each required to have 100 hours of flight time in the aircraft type. Flights conducted in the aircraft type which count towards the pilots meeting their 100 hours of flight time under Part 135.4 will not be included in the rolling stock determination as a trip or miles (or flight hours used in lieu of miles), if the flights occur within the first 6 months after purchase or during the first 100 flight hours per pilot after purchase, whichever comes first.

 

4) Twelve-month periods for aircraft (and repair and replacement parts for aircraft). The guidelines provided in subsection (d)(2)(E) apply to aircraft the same as if set forth here, except that the limitation in that subsection to purchases made before August 24, 2017, does not apply and references to motor vehicles and trailers mean aircraft.

 

5) Purchases by lessors of aircraft under a lease for one year or longer. When an aircraft is purchased by a lessor, under a lease for one year or longer, executed or in effect at the time of purchase to an interstate carrier for hire, who did not pay the tax imposed by this Act to the retailer, such lessor (by the last day of the month following the calendar month in which such property reverts to the use of such lessor) shall file a return with the Department and pay the tax upon the fair market value of such property on the date of such reversion. However, in determining the fair market value at the time of reversion, the fair market value of such property shall not exceed the original purchase price of the property that was paid by the lessor at the time of purchase. [35 ILCS 105/10] When the aircraft is no longer used in a manner that qualifies for the rolling stock exemption as provided in this subsection (f)(5), the lessor shall file a return with the Department and pay the tax to the Department by the last day of the month following the calendar month in which the property is no longer subject to a qualifying lease.

 

EXAMPLE: An aircraft was purchased for lease to an interstate carrier for hire on August 15, 2020 and was titled and registered on that date. The lease to the interstate carrier for hire was executed or in effect at the time of purchase. The appropriate return was timely filed claiming the rolling stock exemption. The qualifying lease ended on November 15, 2021, and the aircraft was no longer used in a qualifying manner. At the time the qualifying lease ends and the aircraft reverts to the lessor, the lessor owes Use Tax on the fair market value of the aircraft on the date it reverts to the lessor. The return and the tax are due by the last day of the month following the month in which the aircraft reverts to the lessor. The period in which the Department would be able to issue a Notice of Tax Liability for Use Tax due regarding that aircraft would expire on December 31, 2024.

 

6) Certification of exemption for aircraft. To properly claim the rolling stock exemption, the purchaser must give the seller a certification that the purchaser is an interstate carrier for hire, and that the purchaser is purchasing the aircraft, or repair or replacement parts for an aircraft, for use as rolling stock moving in interstate commerce.

 

A) If the purchaser is a lessor, the purchaser must give the seller of the property a certification to that effect, identifying the lessee that will utilize the property.

 

B) If the purchaser of an aircraft or repair or replacement parts for an aircraft is an interstate carrier for hire, the purchaser must include its Air Carrier Certificate issued by the Federal Aviation Administration.

 

C) If the purchaser of an aircraft or repair or replacement parts for an aircraft is a long-term lessor (under a lease of one year or more in duration), the purchaser must give the seller of the property a certification to that effect, similarly identifying the lessee interstate carrier for hire as provided above (i.e., Air Carrier Certificate issued by the Federal Aviation Administration).

 

D) If the purchaser is an owner, lessor, or shipper of tangible personal property that will be utilized by interstate carriers for hire for use as rolling stock moving in interstate commerce, the purchaser must give the seller of the property a certification to that effect, similarly identifying the lessee or other interstate carrier for hire that will utilize the property. For example, an Air Carrier Certificate issued by the Federal Aviation Administration to the purchaser (or the lessee of the purchaser if the lessee is the carrier) that authorizes the certificate holder to operate as an air carrier and conduct common carriage operations in accordance with Part 135 of the Federal Aviation Regulations (49 C.F.R. 135) would be evidence the carrier is an authorized interstate carrier for hire.

 

E) The giving of a certification does not preclude the Department from disregarding it and assessing Use Tax against the purchaser if, in examining the purchaser's records or activities (or, in cases where the purchaser is not the carrier, the carrier's records or activities), the Department finds that the certification was not true as to some fact that shows the purchase was taxable and should not have been certified as being tax exempt.

 

F) In cases where the interstate carrier for hire is not required by law to have a federal government regulatory agency authorizing it to conduct common carriage operations, the Department reserves the right to require the carrier (or purchaser, if the carrier is not the purchaser) to provide other evidence of eligibility for the exemption and to keep records documenting the rolling stock's eligibility for the exemption.

 

7) Examples applying the limitations period for issuing a Notice of Tax Liability for aircraft. The Examples in subsection (d)(2)(G) apply to aircraft the same as if set forth here, except that references to motor vehicles mean aircraft.

 

8) Examples of application of the greater than 50% trips test for aircraft:

 

EXAMPLE 1 − (Aircraft − Qualifying): The owner of an aircraft has been issued an Air Carrier Certificate by the Federal Aviation Administration which authorizes the certificate holder to operate as an air carrier and conduct common carriage operations in accordance with Part 135 of the Federal Aviation Regulations (49 C.F.R. 135). The owner of the aircraft operates a charter air carrier company and uses the aircraft to carry passengers for hire from O'Hare Airport in Chicago, Illinois to MidAmerica St. Louis Airport in Mascoutah, Illinois where some of the passengers deplane. As documented on the itinerary provided to the carrier, those passengers will be flown, as part of the continuation of their journey, by another carrier to a location outside of Illinois (qualifies as interstate trip because documentation of interstate travel). The aircraft continues to Indianapolis, Indiana and more passengers deplane in Indianapolis (qualifies as interstate trip because transported out of state). The aircraft then continues to Philadelphia, Pennsylvania and the remainder of the passengers deplane in Philadelphia (qualifies as interstate trip because transported out of state). The aircraft then returns empty to O'Hare Airport from Philadelphia (qualifies as interstate trip because returning from qualifying trip (see subsection (d)(2)(D)(v))). The aircraft is considered to have made a total of four trips (one trip to Mascoutah, Illinois, one trip to Indianapolis, Indiana, one trip to Philadelphia, Pennsylvania, and a return trip back to Chicago, Illinois). If these were all the trips that the aircraft made within the first 12-month period (or were all the trips that aircraft made in a subsequent 12-month period), it would qualify for the test set forth in subsection (f)(1) for that 12-month period because it made 4 qualifying interstate trips for hire, thereby resulting in a percentage of 100% of its total trips during that first 12-month period. Any repair or replacement parts purchased for the aircraft during that first 12-month period would also have qualified for the exemption.

 

EXAMPLE 2 − (Aircraft Non-Qualifying): The owner of an aircraft has been issued an Air Carrier Certificate by the Federal Aviation Administration which authorizes the certificate holder to operate as an air carrier and conduct common carriage operations in accordance with Part 135 of the Federal Aviation Regulations (49 C.F.R. 135). The owner of the aircraft operates a charter air carrier company and uses the aircraft to carry passengers for hire from O'Hare Airport in Chicago, Illinois to Abraham Lincoln Capitol Airport in Springfield, Illinois where the passengers deplane (does not qualify as interstate trip because it is strictly intrastate transport). The aircraft then continues to Indianapolis, Indiana and picks up employees of the charter aircraft company (does not qualify because it must be for hire). The aircraft then returns to Chicago, Illinois (does not qualify because returning from a non-qualifying trip out of state). The aircraft is considered to have made a total of three trips (one to Springfield, Illinois, one to Indianapolis, Indiana, and a return trip to Chicago, Illinois). If these were all the trips the aircraft made within the first 12-month period (or were all the trips that aircraft made in a subsequent 12-month period), it would not qualify for the test set forth in subsection (f)(1) for that 12-month period because 0% of these trips qualified as interstate trips for hire. Any repair or replacement parts purchased for the aircraft during that first 12-month period would also not have qualified for the exemption.

 

EXAMPLE 3 − (Aircraft Non-Qualifying): A corporation purchases a jet aircraft and leases it to a qualifying interstate air carrier for hire. The lease was in effect at the time of purchase. An election is made to use the trips test method on the Rolling Stock Certification form. During the first 12-month period, the aircraft had 100 trips. Of that total, 50 trips were for the transportation of company employees. Another 25 trips were for non-qualifying intrastate flights for hire. The remaining 25 trips were for qualifying interstate movements for hire. The aircraft does not qualify for the rolling stock exemption as 75% of its trips (75/100) were for non-qualifying movements.

 

9) Examples of application of the greater than 50% mileage (or flight hours used in lieu of mileage) test for aircraft:

 

EXAMPLE 1 − (Aircraft − Qualifying): The owner of an aircraft has been issued an Air Carrier Certificate by the Federal Aviation Administration which authorizes the certificate holder to operate as an air carrier and conduct common carriage operations in accordance with Part 135 of the Federal Aviation Regulations (49 C.F.R. 135). The owner of the aircraft operates a charter air carrier company and uses the aircraft to carry passengers for hire from MidAmerica St. Louis Airport in Mascoutah, Illinois to Chicago Midway International Airport in Chicago, Illinois (1 hour flight time) where some of the passengers deplane. As documented on the itinerary provided to the carrier, those passengers will be flown, as part of the continuation of their journey, by another carrier to a location outside of Illinois (qualifies as interstate miles because documentation of interstate travel). The aircraft continues to LaGuardia Airport, New York City, New York (2 hours flight time) and more passengers deplane at LaGuardia (qualifies as interstate trip because transported out of state). The aircraft then continues to Indianapolis International Airport, Indianapolis, Indiana (2 hours flight time) and the remainder of the passengers deplane in Indianapolis (qualifies as interstate trip because passengers originated in Illinois). The aircraft then returns empty to MidAmerica St. Louis Airport, Mascoutah, Illinois (30 minutes flight time) from the stop in Indianapolis, Indiana (qualifies as interstate trip because returning from qualifying trip (see subsection (d)(2)(D)(v))). The aircraft is considered to have flown a total of 5 hours and 30 minutes flight time. If these were all the flight hours that the aircraft flew within the first 12-month period (or were all the flight hours that the aircraft flew in a subsequent 12-month period), it would qualify for the test set forth in subsection (f)(1) for that 12-month period because 100% of its flight hours were for qualifying interstate movements for hire. Any repair or replacement parts purchased for the aircraft by the owner of the aircraft would also have qualified for the exemption.

 

EXAMPLE 2 − (Aircraft − Non-Qualifying): If the aircraft described above in Example 1 had traveled instead a total of 24 hours and 45 minutes during that 12-month period with 16 hours and 30 minutes of those flight hours not being documented as qualifying flight hours, the aircraft would not have qualified for the exemption because only 8 hours and 15 minutes of its flight hours qualified out of 24 hours and 45 minutes total flight hours for a 33.33% qualifying percentage. Any repair or replacement parts purchased by the owner for the aircraft would not have qualified for the exemption.

 

EXAMPLE 3 − (Aircraft − Non-Qualifying): A corporation purchases a jet aircraft and leases it to a qualifying interstate air carrier for hire. The lease was in effect at the time of purchase. An election is made to use the mileage test method on the Rolling Stock Certification form and use flight hours instead of mileage. During the first 12-month period, the aircraft had 400 hours of flight time. Of that total, 250 hours were for the transportation of company employees. Another 50 hours were for non-qualifying intrastate flights for hire. The remaining 100 hours of flight time were for qualifying interstate movements for hire. The aircraft does not qualify for the rolling stock exemption as 75% of its flight hours (300/400) were for non-qualifying movements.

 

g) Watercraft.

 

1) Application of the rolling stock test for watercraft. For watercraft purchased on or after January 1, 2014, "use as rolling stock moving in interstate commerce" occurs when, during a 12-month period, the rolling stock has carried persons or property for hire in interstate commerce for greater than 50% of its total trips for that period or for greater than 50% of its total miles for that period. [35 ILCS 120/2-51(e)] Persons claiming the exemption shall make an election at the time of purchase to use either the trips or mileage method and document that election in their books and records.

 

A) If the purchase is from an Illinois retailer, the election must be made on a certification as provided in subsection (g)(6). If the purchase is from an out-of-state retailer or from a non-retailer, the election must be documented in the purchaser's books and records.

 

B) If no election is made under subsection (g)(1)(A) to use the trips or mileage method, the person shall be deemed to have chosen the mileage method. For watercraft, nautical miles or trip hours may be used in lieu of recording miles in determining whether the watercraft meets the mileage test in subsection (g)(1).

 

C) Once such an election for a watercraft has been made, or is deemed to have been made if no election is made, the method used to document the qualification of that watercraft for the rolling stock exemption will remain in effect for the duration of the purchaser's ownership of that watercraft. [35 ILCS 120/2-51(f)]

 

2) Repair and replacement parts for watercraft. Notwithstanding any other provision of law to the contrary, property purchased on or after January 1, 2014 for the purpose of being attached to watercraft as a part thereof qualifies as rolling stock moving in interstate commerce only if the watercraft to which it will be attached qualifies as rolling stock moving in interstate commerce under the test set forth in subsection (g)(1), regardless of when the watercraft was purchased. Persons who purchased watercraft prior to January 1, 2014 shall make an election to use either the trips or mileage method and document that election in their books and records for the purpose of determining whether property purchased on or after January 1, 2014 for the purpose of being attached to watercraft as a part thereof qualifies as rolling stock moving in interstate commerce under subsection (g)(1). [35 ILCS 120/2-51(e)] Repair and replacement parts purchased for the purpose of being attached to a watercraft as a part thereof qualify for the rolling stock exemption if, at the time of purchase of the repair or replacement parts and for each of the corresponding watercraft's consecutive 12-month periods thereafter (i.e., the parts follow the 12-month periods for the rolling stock that they become a part of), the watercraft to which the parts will be attached meets the requirements of subsection (g)(1) and the purchaser provides a certification to that effect as required in subsection (g)(6), regardless of when the watercraft itself was purchased. For more detail on the application of 12-month periods for repair and replacement parts, see subsection (g)(4) incorporating the provision of subsection (d)(2)(E)(iii).

 

3) Basic guidelines on the trips or miles (or nautical miles or trip hours) that may and may not be used to claim the rolling stock exemption for watercraft.

 

A) For interstate trips or interstate miles (or nautical miles or trip hours) to qualify, the interstate trips or miles (or nautical miles or trip hours) must be for hire. However, the total amount of trips taken or miles (or nautical miles or trip hours) traveled by watercraft within any 12-month period includes trips or miles (or nautical miles or trip hours) for hire and those not for hire. An example of a not for hire trip or not for hire mileage (or nautical miles or trip hours) is when a business uses its watercraft to transport its own merchandise.

 

B) Any use of watercraft in a movement from one location to another, including but not limited to mileage (or nautical miles or trip hours) incurred by watercraft returning from a delivery without a load or passengers, shall be counted as a trip or mileage (or nautical miles or trip hours).

 

C) However, the movement of watercraft in relation to the maintenance or repair of that watercraft shall not count as a trip or mileage (or nautical miles or trip hours).

 

D) Any mileage (or nautical miles or trip hours) shown for watercraft that is undocumented as a trip or trips shall be counted as part of the total trips or mileage (or nautical miles or trip hours) taken by that watercraft. If the trips method has been chosen for that watercraft, the Department shall use its best judgment and information to determine the number of trips represented by such mileage (or nautical miles or trip hours).

 

E) A movement whereby watercraft is returning empty from a trip for hire shall be counted as a trip or mileage (or nautical miles or trip hours) for hire. A movement whereby watercraft is moving to a location where property or passengers are being loaded for a trip for hire shall be counted as a trip or mileage (or nautical miles or trip hours) for hire.

 

4) Twelve-month periods for watercraft (and repair and replacement parts for watercraft). The guidelines provided in subsection (d)(2)(E) apply to watercraft the same as if set forth here, except that the limitation in that subsection to purchases made before August 24, 2017, does not apply and references to motor vehicles and trailers mean watercraft.

 

5) Purchases by lessors of watercraft under a lease for one year or longer. When a watercraft is purchased by a lessor, under a lease for one year or longer, executed or in effect at the time of purchase to an interstate carrier for hire, who did not pay the tax imposed by this Act to the retailer, such lessor (by the last day of the month following the calendar month in which such property reverts to the use of such lessor) shall file a return with the Department and pay the tax upon the fair market value of such property on the date of such reversion. However, in determining the fair market value at the time of reversion, the fair market value of such property shall not exceed the original purchase price of the property that was paid by the lessor at the time of purchase. [35 ILCS 105/10] When the watercraft is no longer used in a manner that qualifies for the rolling stock exemption as provided in this subsection (g)(5), the lessor shall file a return with the Department and pay the tax to the Department by the last day of the month following the calendar month in which the property is no longer subject to a qualifying lease.

 

EXAMPLE: A watercraft was purchased for lease to an interstate carrier for hire on August 15, 2020 and was titled and registered on that date. The lease to the interstate carrier for hire was executed or in effect at the time of purchase. The appropriate return was timely filed claiming the rolling stock exemption. The qualifying lease ended on November 15, 2021, and the watercraft was no longer used in a qualifying manner. At the time the qualifying lease ends and the watercraft reverts to the lessor, the lessor owes Use Tax on the fair market value of the watercraft on the date it reverts to the lessor. The return and the tax are due by the last day of the month following the month in which the watercraft reverts to the lessor. The period in which the Department would be able to issue a Notice of Tax Liability for Use Tax due regarding that watercraft would expire on December 31, 2024.

 

6) Certification of exemption for watercraft. To properly claim the rolling stock exemption, the purchaser must give the seller a certification that the purchaser is an interstate carrier for hire, and that the purchaser is purchasing the watercraft, or repair or replacement parts for a watercraft, for use as rolling stock moving in interstate commerce.

 

A) If the purchaser is a lessor, the purchaser must give the seller of the property a certification to that effect, identifying the lessee that will utilize the property.

 

B) If the purchaser of a watercraft or repair or replacement parts for a watercraft is an interstate carrier for hire, the purchaser must include documentation that shows that that the purchaser is authorized by an agency of the federal government to carry persons or property for hire in interstate commerce.

 

C) If the purchaser is an owner, lessor, or shipper of tangible personal property that will be utilized by interstate carriers for hire for use as rolling stock moving in interstate commerce, the purchaser must give the seller of the property a certification to that effect, similarly identifying the lessee or other interstate carrier for hire that will utilize the property. For example, the purchaser may have documentation from the United States Coast Guard's National Vessel Documentation Center that authorizes the certificate holder to carry persons or property interstate for hire as evidence the carrier is an authorized carrier for hire in interstate commerce.

 

D) The giving of a certification does not preclude the Department from disregarding it and assessing Use Tax against the purchaser if, in examining the purchaser's records or activities (or, in cases where the purchaser is not the carrier, the carrier's records or activities), the Department finds that the certification was not true as to some fact that shows the purchase was taxable and should not have been certified as being tax exempt.

 

E) In cases where the interstate carrier for hire is not required by law to have a federal government regulatory agency authorizing it to carry persons or property for hire in interstate commerce, the Department reserves the right to require the carrier (or purchaser, if the carrier is not the purchaser) to provide other evidence of eligibility for the exemption and to keep records documenting the rolling stock's eligibility for the exemption.

 

7) Examples applying the limitations period for issuing a Notice of Tax Liability for watercraft. The Examples in subsection (d)(2)(G) apply to watercraft the same as if set forth here, except that references to motor vehicles mean watercraft.

 

8) Examples of application of the greater than 50% trips test for watercraft:

 

EXAMPLE 1 − (Watercraft − Qualifying): An interstate carrier uses a watercraft to carry property for hire from Moline, Illinois to Quincy, Illinois where part of the property is delivered. As documented on the bill of lading provided to the carrier, that property will be delivered, as part of the continuation of the shipment, by another carrier to a location outside of Illinois (qualifies as interstate trip because documentation of interstate shipment). The watercraft continues to St. Louis, Missouri and delivers more of the property in that city (qualifies as interstate trip because transported out of state). The watercraft then continues to Memphis, Tennessee and delivers the remainder of the property in that city (qualifies as interstate trip because shipment originated in Illinois). The watercraft then returns empty to Moline, Illinois from the delivery in Memphis, Tennessee (qualifies as interstate trip because returning from qualifying trip (see subsection (d)(2)(D)(v))). The watercraft is considered to have made a total of four trips (one trip to Quincy, Illinois, one trip to St. Louis, Missouri, one trip to Memphis, Tennessee, and a return trip to Moline, Illinois). If these were all the trips the watercraft made within the first 12-month period (or were all the trips that watercraft made in a subsequent 12-month period), it would qualify for the test set forth in subsection (g)(1) for that 12-month period because it made four qualifying interstate trips for hire, thereby resulting in a percentage of 100% of its total trips during that first 12-month period. Any repair or replacement parts purchased for the watercraft during that first 12-month period would also have qualified for the exemption.

 

EXAMPLE 2 − (Watercraft Non-Qualifying): An interstate carrier uses a watercraft to carry property for hire from Chicago, Illinois to Peoria, Illinois where that property is delivered for use by the recipient (does not qualify as interstate trip because it is strictly intrastate transport). The watercraft then continues to St. Louis, Missouri and picks up property for use by that carrier's business (does not qualify because it must be for hire). The watercraft then returns to Chicago, Illinois (does not qualify because returning from a non-qualifying trip out of state). The watercraft is considered to have made a total of three trips (one to Peoria, Illinois, one to St. Louis, Missouri, and a return trip to Chicago, Illinois). If these were all the trips that the watercraft made within the first 12-month period (or were all the trips that watercraft made in a subsequent 12-month period), it would not qualify for the test set forth in subsection (g)(1) for that 12-month period because 0% of these trips qualified as interstate trips for hire.

 

9) Examples of application of the greater than 50% mileage (or nautical miles or trip hours) test for watercraft:

 

EXAMPLE 1 − (Watercraft − Qualifying): An interstate carrier uses a watercraft to carry property for hire from Chicago, Illinois to Peoria, Illinois (144 nautical mile movement) where part of the property is delivered. As documented on the bill of lading provided to the carrier, that property will be delivered, as part of the continuation of the shipment, by another carrier to a location outside of Illinois (qualifies as interstate miles because documentation of interstate shipment). The watercraft continues to St. Louis, Missouri (148 nautical mile movement) and delivers more of the property in that city (qualifies as interstate trip because transported out of state). The watercraft then continues to Cape Girardeau, Missouri (102 nautical mile movement) and delivers the remainder of the property in that city (qualifies as interstate trip because shipment originated in Illinois). The watercraft then returns empty to Chicago, Illinois (394 nautical mile movement) from the delivery in Cape Girardeau, Missouri (qualifies as interstate trip because returning from qualifying trip (see subsection (d)(2)(D)(v))). The watercraft is considered to have traveled a total of 788 qualifying nautical miles. If these were all the miles that the watercraft traveled within the first 12-month period (or were all the miles that watercraft traveled in a subsequent 12-month period), it would qualify for the test set forth in subsection (g)(1) for that 12-month period because 100% of its miles were for qualifying interstate movements for hire. Any repair or replacement parts purchased for the watercraft would also have qualified for the exemption.

 

EXAMPLE 2 − (Watercraft Non-Qualifying): If the watercraft described above in Example 4 had traveled instead a total of 2,788 nautical miles during that 12-month period with 2,000 of those nautical miles not being documented as qualifying nautical miles, the watercraft would not have qualified for the exemption because it only had 788 qualifying nautical miles out of 2,788 nautical miles for a 28.26% qualifying percentage. Any repair or replacement parts purchased for the watercraft would not have qualified for the exemption.

 

(Source: Amended at 48 Ill. Reg. 1870, effective January 18, 2024)