101ST GENERAL ASSEMBLY
State of Illinois
2019 and 2020
HB3573

 

Introduced , by Rep. Keith R. Wheeler

 

SYNOPSIS AS INTRODUCED:
 
35 ILCS 105/3-5
35 ILCS 105/3-50  from Ch. 120, par. 439.3-50
35 ILCS 110/2  from Ch. 120, par. 439.32
35 ILCS 115/2  from Ch. 120, par. 439.102
35 ILCS 120/2-45  from Ch. 120, par. 441-45

    Amends the Use Tax Act, the Service Use Tax Act, the Service Occupation Tax Act, and the Retailers' Occupation Tax Act to extend the Manufacturing Machinery and Equipment Exemption to production related tangible personal property. Provides that the term "production related tangible personal property" includes certain supplies and consumables used in a manufacturing facility. Effective immediately.


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FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

HB3573LRB101 07573 HLH 52618 b

1    AN ACT concerning revenue.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Use Tax Act is amended by changing Sections
53-5 and 3-50 as follows:
 
6    (35 ILCS 105/3-5)
7    Sec. 3-5. Exemptions. Use of the following tangible
8personal property is exempt from the tax imposed by this Act:
9    (1) Personal property purchased from a corporation,
10society, association, foundation, institution, or
11organization, other than a limited liability company, that is
12organized and operated as a not-for-profit service enterprise
13for the benefit of persons 65 years of age or older if the
14personal property was not purchased by the enterprise for the
15purpose of resale by the enterprise.
16    (2) Personal property purchased by a not-for-profit
17Illinois county fair association for use in conducting,
18operating, or promoting the county fair.
19    (3) Personal property purchased by a not-for-profit arts or
20cultural organization that establishes, by proof required by
21the Department by rule, that it has received an exemption under
22Section 501(c)(3) of the Internal Revenue Code and that is
23organized and operated primarily for the presentation or

 

 

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1support of arts or cultural programming, activities, or
2services. These organizations include, but are not limited to,
3music and dramatic arts organizations such as symphony
4orchestras and theatrical groups, arts and cultural service
5organizations, local arts councils, visual arts organizations,
6and media arts organizations. On and after July 1, 2001 (the
7effective date of Public Act 92-35), however, an entity
8otherwise eligible for this exemption shall not make tax-free
9purchases unless it has an active identification number issued
10by the Department.
11    (4) Personal property purchased by a governmental body, by
12a corporation, society, association, foundation, or
13institution organized and operated exclusively for charitable,
14religious, or educational purposes, or by a not-for-profit
15corporation, society, association, foundation, institution, or
16organization that has no compensated officers or employees and
17that is organized and operated primarily for the recreation of
18persons 55 years of age or older. A limited liability company
19may qualify for the exemption under this paragraph only if the
20limited liability company is organized and operated
21exclusively for educational purposes. On and after July 1,
221987, however, no entity otherwise eligible for this exemption
23shall make tax-free purchases unless it has an active exemption
24identification number issued by the Department.
25    (5) Until July 1, 2003, a passenger car that is a
26replacement vehicle to the extent that the purchase price of

 

 

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1the car is subject to the Replacement Vehicle Tax.
2    (6) Until July 1, 2003 and beginning again on September 1,
32004 through August 30, 2014, graphic arts machinery and
4equipment, including repair and replacement parts, both new and
5used, and including that manufactured on special order,
6certified by the purchaser to be used primarily for graphic
7arts production, and including machinery and equipment
8purchased for lease. Equipment includes chemicals or chemicals
9acting as catalysts but only if the chemicals or chemicals
10acting as catalysts effect a direct and immediate change upon a
11graphic arts product. Beginning on July 1, 2017, graphic arts
12machinery and equipment is included in the manufacturing and
13assembling machinery and equipment exemption under paragraph
14(18).
15    (7) Farm chemicals.
16    (8) Legal tender, currency, medallions, or gold or silver
17coinage issued by the State of Illinois, the government of the
18United States of America, or the government of any foreign
19country, and bullion.
20    (9) Personal property purchased from a teacher-sponsored
21student organization affiliated with an elementary or
22secondary school located in Illinois.
23    (10) A motor vehicle that is used for automobile renting,
24as defined in the Automobile Renting Occupation and Use Tax
25Act.
26    (11) Farm machinery and equipment, both new and used,

 

 

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1including that manufactured on special order, certified by the
2purchaser to be used primarily for production agriculture or
3State or federal agricultural programs, including individual
4replacement parts for the machinery and equipment, including
5machinery and equipment purchased for lease, and including
6implements of husbandry defined in Section 1-130 of the
7Illinois Vehicle Code, farm machinery and agricultural
8chemical and fertilizer spreaders, and nurse wagons required to
9be registered under Section 3-809 of the Illinois Vehicle Code,
10but excluding other motor vehicles required to be registered
11under the Illinois Vehicle Code. Horticultural polyhouses or
12hoop houses used for propagating, growing, or overwintering
13plants shall be considered farm machinery and equipment under
14this item (11). Agricultural chemical tender tanks and dry
15boxes shall include units sold separately from a motor vehicle
16required to be licensed and units sold mounted on a motor
17vehicle required to be licensed if the selling price of the
18tender is separately stated.
19    Farm machinery and equipment shall include precision
20farming equipment that is installed or purchased to be
21installed on farm machinery and equipment including, but not
22limited to, tractors, harvesters, sprayers, planters, seeders,
23or spreaders. Precision farming equipment includes, but is not
24limited to, soil testing sensors, computers, monitors,
25software, global positioning and mapping systems, and other
26such equipment.

 

 

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1    Farm machinery and equipment also includes computers,
2sensors, software, and related equipment used primarily in the
3computer-assisted operation of production agriculture
4facilities, equipment, and activities such as, but not limited
5to, the collection, monitoring, and correlation of animal and
6crop data for the purpose of formulating animal diets and
7agricultural chemicals. This item (11) is exempt from the
8provisions of Section 3-90.
9    (12) Until June 30, 2013, fuel and petroleum products sold
10to or used by an air common carrier, certified by the carrier
11to be used for consumption, shipment, or storage in the conduct
12of its business as an air common carrier, for a flight destined
13for or returning from a location or locations outside the
14United States without regard to previous or subsequent domestic
15stopovers.
16    Beginning July 1, 2013, fuel and petroleum products sold to
17or used by an air carrier, certified by the carrier to be used
18for consumption, shipment, or storage in the conduct of its
19business as an air common carrier, for a flight that (i) is
20engaged in foreign trade or is engaged in trade between the
21United States and any of its possessions and (ii) transports at
22least one individual or package for hire from the city of
23origination to the city of final destination on the same
24aircraft, without regard to a change in the flight number of
25that aircraft.
26    (13) Proceeds of mandatory service charges separately

 

 

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1stated on customers' bills for the purchase and consumption of
2food and beverages purchased at retail from a retailer, to the
3extent that the proceeds of the service charge are in fact
4turned over as tips or as a substitute for tips to the
5employees who participate directly in preparing, serving,
6hosting or cleaning up the food or beverage function with
7respect to which the service charge is imposed.
8    (14) Until July 1, 2003, oil field exploration, drilling,
9and production equipment, including (i) rigs and parts of rigs,
10rotary rigs, cable tool rigs, and workover rigs, (ii) pipe and
11tubular goods, including casing and drill strings, (iii) pumps
12and pump-jack units, (iv) storage tanks and flow lines, (v) any
13individual replacement part for oil field exploration,
14drilling, and production equipment, and (vi) machinery and
15equipment purchased for lease; but excluding motor vehicles
16required to be registered under the Illinois Vehicle Code.
17    (15) Photoprocessing machinery and equipment, including
18repair and replacement parts, both new and used, including that
19manufactured on special order, certified by the purchaser to be
20used primarily for photoprocessing, and including
21photoprocessing machinery and equipment purchased for lease.
22    (16) Until July 1, 2023, coal and aggregate exploration,
23mining, off-highway hauling, processing, maintenance, and
24reclamation equipment, including replacement parts and
25equipment, and including equipment purchased for lease, but
26excluding motor vehicles required to be registered under the

 

 

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1Illinois Vehicle Code. The changes made to this Section by
2Public Act 97-767 apply on and after July 1, 2003, but no claim
3for credit or refund is allowed on or after August 16, 2013
4(the effective date of Public Act 98-456) for such taxes paid
5during the period beginning July 1, 2003 and ending on August
616, 2013 (the effective date of Public Act 98-456).
7    (17) Until July 1, 2003, distillation machinery and
8equipment, sold as a unit or kit, assembled or installed by the
9retailer, certified by the user to be used only for the
10production of ethyl alcohol that will be used for consumption
11as motor fuel or as a component of motor fuel for the personal
12use of the user, and not subject to sale or resale.
13    (18) Manufacturing and assembling machinery and equipment
14used primarily in the process of manufacturing or assembling
15tangible personal property for wholesale or retail sale or
16lease, whether that sale or lease is made directly by the
17manufacturer or by some other person, whether the materials
18used in the process are owned by the manufacturer or some other
19person, or whether that sale or lease is made apart from or as
20an incident to the seller's engaging in the service occupation
21of producing machines, tools, dies, jigs, patterns, gauges, or
22other similar items of no commercial value on special order for
23a particular purchaser. The exemption provided by this
24paragraph (18) includes production related tangible personal
25property, as defined in Section 3-50, purchased on or after
26July 1, 2019. The exemption provided by this paragraph (18)

 

 

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1does not include machinery and equipment used in (i) the
2generation of electricity for wholesale or retail sale; (ii)
3the generation or treatment of natural or artificial gas for
4wholesale or retail sale that is delivered to customers through
5pipes, pipelines, or mains; or (iii) the treatment of water for
6wholesale or retail sale that is delivered to customers through
7pipes, pipelines, or mains. The provisions of Public Act 98-583
8are declaratory of existing law as to the meaning and scope of
9this exemption. Beginning on July 1, 2017, the exemption
10provided by this paragraph (18) includes, but is not limited
11to, graphic arts machinery and equipment, as defined in
12paragraph (6) of this Section.
13    (19) Personal property delivered to a purchaser or
14purchaser's donee inside Illinois when the purchase order for
15that personal property was received by a florist located
16outside Illinois who has a florist located inside Illinois
17deliver the personal property.
18    (20) Semen used for artificial insemination of livestock
19for direct agricultural production.
20    (21) Horses, or interests in horses, registered with and
21meeting the requirements of any of the Arabian Horse Club
22Registry of America, Appaloosa Horse Club, American Quarter
23Horse Association, United States Trotting Association, or
24Jockey Club, as appropriate, used for purposes of breeding or
25racing for prizes. This item (21) is exempt from the provisions
26of Section 3-90, and the exemption provided for under this item

 

 

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1(21) applies for all periods beginning May 30, 1995, but no
2claim for credit or refund is allowed on or after January 1,
32008 for such taxes paid during the period beginning May 30,
42000 and ending on January 1, 2008.
5    (22) Computers and communications equipment utilized for
6any hospital purpose and equipment used in the diagnosis,
7analysis, or treatment of hospital patients purchased by a
8lessor who leases the equipment, under a lease of one year or
9longer executed or in effect at the time the lessor would
10otherwise be subject to the tax imposed by this Act, to a
11hospital that has been issued an active tax exemption
12identification number by the Department under Section 1g of the
13Retailers' Occupation Tax Act. If the equipment is leased in a
14manner that does not qualify for this exemption or is used in
15any other non-exempt manner, the lessor shall be liable for the
16tax imposed under this Act or the Service Use Tax Act, as the
17case may be, based on the fair market value of the property at
18the time the non-qualifying use occurs. No lessor shall collect
19or attempt to collect an amount (however designated) that
20purports to reimburse that lessor for the tax imposed by this
21Act or the Service Use Tax Act, as the case may be, if the tax
22has not been paid by the lessor. If a lessor improperly
23collects any such amount from the lessee, the lessee shall have
24a legal right to claim a refund of that amount from the lessor.
25If, however, that amount is not refunded to the lessee for any
26reason, the lessor is liable to pay that amount to the

 

 

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1Department.
2    (23) Personal property purchased by a lessor who leases the
3property, under a lease of one year or longer executed or in
4effect at the time the lessor would otherwise be subject to the
5tax imposed by this Act, to a governmental body that has been
6issued an active sales tax exemption identification number by
7the Department under Section 1g of the Retailers' Occupation
8Tax Act. If the property is leased in a manner that does not
9qualify for this exemption or used in any other non-exempt
10manner, the lessor shall be liable for the tax imposed under
11this Act or the Service Use Tax Act, as the case may be, based
12on the fair market value of the property at the time the
13non-qualifying use occurs. No lessor shall collect or attempt
14to collect an amount (however designated) that purports to
15reimburse that lessor for the tax imposed by this Act or the
16Service Use Tax Act, as the case may be, if the tax has not been
17paid by the lessor. If a lessor improperly collects any such
18amount from the lessee, the lessee shall have a legal right to
19claim a refund of that amount from the lessor. If, however,
20that amount is not refunded to the lessee for any reason, the
21lessor is liable to pay that amount to the Department.
22    (24) Beginning with taxable years ending on or after
23December 31, 1995 and ending with taxable years ending on or
24before December 31, 2004, personal property that is donated for
25disaster relief to be used in a State or federally declared
26disaster area in Illinois or bordering Illinois by a

 

 

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1manufacturer or retailer that is registered in this State to a
2corporation, society, association, foundation, or institution
3that has been issued a sales tax exemption identification
4number by the Department that assists victims of the disaster
5who reside within the declared disaster area.
6    (25) Beginning with taxable years ending on or after
7December 31, 1995 and ending with taxable years ending on or
8before December 31, 2004, personal property that is used in the
9performance of infrastructure repairs in this State, including
10but not limited to municipal roads and streets, access roads,
11bridges, sidewalks, waste disposal systems, water and sewer
12line extensions, water distribution and purification
13facilities, storm water drainage and retention facilities, and
14sewage treatment facilities, resulting from a State or
15federally declared disaster in Illinois or bordering Illinois
16when such repairs are initiated on facilities located in the
17declared disaster area within 6 months after the disaster.
18    (26) Beginning July 1, 1999, game or game birds purchased
19at a "game breeding and hunting preserve area" as that term is
20used in the Wildlife Code. This paragraph is exempt from the
21provisions of Section 3-90.
22    (27) A motor vehicle, as that term is defined in Section
231-146 of the Illinois Vehicle Code, that is donated to a
24corporation, limited liability company, society, association,
25foundation, or institution that is determined by the Department
26to be organized and operated exclusively for educational

 

 

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1purposes. For purposes of this exemption, "a corporation,
2limited liability company, society, association, foundation,
3or institution organized and operated exclusively for
4educational purposes" means all tax-supported public schools,
5private schools that offer systematic instruction in useful
6branches of learning by methods common to public schools and
7that compare favorably in their scope and intensity with the
8course of study presented in tax-supported schools, and
9vocational or technical schools or institutes organized and
10operated exclusively to provide a course of study of not less
11than 6 weeks duration and designed to prepare individuals to
12follow a trade or to pursue a manual, technical, mechanical,
13industrial, business, or commercial occupation.
14    (28) Beginning January 1, 2000, personal property,
15including food, purchased through fundraising events for the
16benefit of a public or private elementary or secondary school,
17a group of those schools, or one or more school districts if
18the events are sponsored by an entity recognized by the school
19district that consists primarily of volunteers and includes
20parents and teachers of the school children. This paragraph
21does not apply to fundraising events (i) for the benefit of
22private home instruction or (ii) for which the fundraising
23entity purchases the personal property sold at the events from
24another individual or entity that sold the property for the
25purpose of resale by the fundraising entity and that profits
26from the sale to the fundraising entity. This paragraph is

 

 

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1exempt from the provisions of Section 3-90.
2    (29) Beginning January 1, 2000 and through December 31,
32001, new or used automatic vending machines that prepare and
4serve hot food and beverages, including coffee, soup, and other
5items, and replacement parts for these machines. Beginning
6January 1, 2002 and through June 30, 2003, machines and parts
7for machines used in commercial, coin-operated amusement and
8vending business if a use or occupation tax is paid on the
9gross receipts derived from the use of the commercial,
10coin-operated amusement and vending machines. This paragraph
11is exempt from the provisions of Section 3-90.
12    (30) Beginning January 1, 2001 and through June 30, 2016,
13food for human consumption that is to be consumed off the
14premises where it is sold (other than alcoholic beverages, soft
15drinks, and food that has been prepared for immediate
16consumption) and prescription and nonprescription medicines,
17drugs, medical appliances, and insulin, urine testing
18materials, syringes, and needles used by diabetics, for human
19use, when purchased for use by a person receiving medical
20assistance under Article V of the Illinois Public Aid Code who
21resides in a licensed long-term care facility, as defined in
22the Nursing Home Care Act, or in a licensed facility as defined
23in the ID/DD Community Care Act, the MC/DD Act, or the
24Specialized Mental Health Rehabilitation Act of 2013.
25    (31) Beginning on August 2, 2001 (the effective date of
26Public Act 92-227), computers and communications equipment

 

 

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1utilized for any hospital purpose and equipment used in the
2diagnosis, analysis, or treatment of hospital patients
3purchased by a lessor who leases the equipment, under a lease
4of one year or longer executed or in effect at the time the
5lessor would otherwise be subject to the tax imposed by this
6Act, to a hospital that has been issued an active tax exemption
7identification number by the Department under Section 1g of the
8Retailers' Occupation Tax Act. If the equipment is leased in a
9manner that does not qualify for this exemption or is used in
10any other nonexempt manner, the lessor shall be liable for the
11tax imposed under this Act or the Service Use Tax Act, as the
12case may be, based on the fair market value of the property at
13the time the nonqualifying use occurs. No lessor shall collect
14or attempt to collect an amount (however designated) that
15purports to reimburse that lessor for the tax imposed by this
16Act or the Service Use Tax Act, as the case may be, if the tax
17has not been paid by the lessor. If a lessor improperly
18collects any such amount from the lessee, the lessee shall have
19a legal right to claim a refund of that amount from the lessor.
20If, however, that amount is not refunded to the lessee for any
21reason, the lessor is liable to pay that amount to the
22Department. This paragraph is exempt from the provisions of
23Section 3-90.
24    (32) Beginning on August 2, 2001 (the effective date of
25Public Act 92-227), personal property purchased by a lessor who
26leases the property, under a lease of one year or longer

 

 

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1executed or in effect at the time the lessor would otherwise be
2subject to the tax imposed by this Act, to a governmental body
3that has been issued an active sales tax exemption
4identification number by the Department under Section 1g of the
5Retailers' Occupation Tax Act. If the property is leased in a
6manner that does not qualify for this exemption or used in any
7other nonexempt manner, the lessor shall be liable for the tax
8imposed under this Act or the Service Use Tax Act, as the case
9may be, based on the fair market value of the property at the
10time the nonqualifying use occurs. No lessor shall collect or
11attempt to collect an amount (however designated) that purports
12to reimburse that lessor for the tax imposed by this Act or the
13Service Use Tax Act, as the case may be, if the tax has not been
14paid by the lessor. If a lessor improperly collects any such
15amount from the lessee, the lessee shall have a legal right to
16claim a refund of that amount from the lessor. If, however,
17that amount is not refunded to the lessee for any reason, the
18lessor is liable to pay that amount to the Department. This
19paragraph is exempt from the provisions of Section 3-90.
20    (33) On and after July 1, 2003 and through June 30, 2004,
21the use in this State of motor vehicles of the second division
22with a gross vehicle weight in excess of 8,000 pounds and that
23are subject to the commercial distribution fee imposed under
24Section 3-815.1 of the Illinois Vehicle Code. Beginning on July
251, 2004 and through June 30, 2005, the use in this State of
26motor vehicles of the second division: (i) with a gross vehicle

 

 

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1weight rating in excess of 8,000 pounds; (ii) that are subject
2to the commercial distribution fee imposed under Section
33-815.1 of the Illinois Vehicle Code; and (iii) that are
4primarily used for commercial purposes. Through June 30, 2005,
5this exemption applies to repair and replacement parts added
6after the initial purchase of such a motor vehicle if that
7motor vehicle is used in a manner that would qualify for the
8rolling stock exemption otherwise provided for in this Act. For
9purposes of this paragraph, the term "used for commercial
10purposes" means the transportation of persons or property in
11furtherance of any commercial or industrial enterprise,
12whether for-hire or not.
13    (34) Beginning January 1, 2008, tangible personal property
14used in the construction or maintenance of a community water
15supply, as defined under Section 3.145 of the Environmental
16Protection Act, that is operated by a not-for-profit
17corporation that holds a valid water supply permit issued under
18Title IV of the Environmental Protection Act. This paragraph is
19exempt from the provisions of Section 3-90.
20    (35) Beginning January 1, 2010, materials, parts,
21equipment, components, and furnishings incorporated into or
22upon an aircraft as part of the modification, refurbishment,
23completion, replacement, repair, or maintenance of the
24aircraft. This exemption includes consumable supplies used in
25the modification, refurbishment, completion, replacement,
26repair, and maintenance of aircraft, but excludes any

 

 

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1materials, parts, equipment, components, and consumable
2supplies used in the modification, replacement, repair, and
3maintenance of aircraft engines or power plants, whether such
4engines or power plants are installed or uninstalled upon any
5such aircraft. "Consumable supplies" include, but are not
6limited to, adhesive, tape, sandpaper, general purpose
7lubricants, cleaning solution, latex gloves, and protective
8films. This exemption applies only to the use of qualifying
9tangible personal property by persons who modify, refurbish,
10complete, repair, replace, or maintain aircraft and who (i)
11hold an Air Agency Certificate and are empowered to operate an
12approved repair station by the Federal Aviation
13Administration, (ii) have a Class IV Rating, and (iii) conduct
14operations in accordance with Part 145 of the Federal Aviation
15Regulations. The exemption does not include aircraft operated
16by a commercial air carrier providing scheduled passenger air
17service pursuant to authority issued under Part 121 or Part 129
18of the Federal Aviation Regulations. The changes made to this
19paragraph (35) by Public Act 98-534 are declarative of existing
20law.
21    (36) Tangible personal property purchased by a
22public-facilities corporation, as described in Section
2311-65-10 of the Illinois Municipal Code, for purposes of
24constructing or furnishing a municipal convention hall, but
25only if the legal title to the municipal convention hall is
26transferred to the municipality without any further

 

 

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1consideration by or on behalf of the municipality at the time
2of the completion of the municipal convention hall or upon the
3retirement or redemption of any bonds or other debt instruments
4issued by the public-facilities corporation in connection with
5the development of the municipal convention hall. This
6exemption includes existing public-facilities corporations as
7provided in Section 11-65-25 of the Illinois Municipal Code.
8This paragraph is exempt from the provisions of Section 3-90.
9    (37) Beginning January 1, 2017, menstrual pads, tampons,
10and menstrual cups.
11    (38) Merchandise that is subject to the Rental Purchase
12Agreement Occupation and Use Tax. The purchaser must certify
13that the item is purchased to be rented subject to a rental
14purchase agreement, as defined in the Rental Purchase Agreement
15Act, and provide proof of registration under the Rental
16Purchase Agreement Occupation and Use Tax Act. This paragraph
17is exempt from the provisions of Section 3-90.
18    (39) Tangible personal property purchased by a purchaser
19who is exempt from the tax imposed by this Act by operation of
20federal law. This paragraph is exempt from the provisions of
21Section 3-90.
22(Source: P.A. 99-180, eff. 7-29-15; 99-855, eff. 8-19-16;
23100-22, eff. 7-6-17; 100-437, eff. 1-1-18; 100-594, eff.
246-29-18; 100-863, eff. 8-14-18; 100-1171, eff. 1-4-19; revised
251-8-19.)
 

 

 

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1    (35 ILCS 105/3-50)  (from Ch. 120, par. 439.3-50)
2    Sec. 3-50. Manufacturing and assembly exemption. The
3manufacturing and assembling machinery and equipment exemption
4includes machinery and equipment that replaces machinery and
5equipment in an existing manufacturing facility as well as
6machinery and equipment that are for use in an expanded or new
7manufacturing facility. The machinery and equipment exemption
8also includes machinery and equipment used in the general
9maintenance or repair of exempt machinery and equipment or for
10in-house manufacture of exempt machinery and equipment.
11Beginning on July 1, 2017, the manufacturing and assembling
12machinery and equipment exemption also includes graphic arts
13machinery and equipment, as defined in paragraph (6) of Section
143-5. The machinery and equipment exemption does not include
15machinery and equipment used in (i) the generation of
16electricity for wholesale or retail sale; (ii) the generation
17or treatment of natural or artificial gas for wholesale or
18retail sale that is delivered to customers through pipes,
19pipelines, or mains; or (iii) the treatment of water for
20wholesale or retail sale that is delivered to customers through
21pipes, pipelines, or mains. The provisions of this amendatory
22Act of the 98th General Assembly are declaratory of existing
23law as to the meaning and scope of this exemption. For the
24purposes of this exemption, terms have the following meanings:
25        (1) "Manufacturing process" means the production of an
26    article of tangible personal property, whether the article

 

 

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1    is a finished product or an article for use in the process
2    of manufacturing or assembling a different article of
3    tangible personal property, by a procedure commonly
4    regarded as manufacturing, processing, fabricating, or
5    refining that changes some existing material into a
6    material with a different form, use, or name. In relation
7    to a recognized integrated business composed of a series of
8    operations that collectively constitute manufacturing, or
9    individually constitute manufacturing operations, the
10    manufacturing process commences with the first operation
11    or stage of production in the series and does not end until
12    the completion of the final product in the last operation
13    or stage of production in the series. For purposes of this
14    exemption, photoprocessing is a manufacturing process of
15    tangible personal property for wholesale or retail sale.
16        (2) "Assembling process" means the production of an
17    article of tangible personal property, whether the article
18    is a finished product or an article for use in the process
19    of manufacturing or assembling a different article of
20    tangible personal property, by the combination of existing
21    materials in a manner commonly regarded as assembling that
22    results in an article or material of a different form, use,
23    or name.
24        (3) "Machinery" means major mechanical machines or
25    major components of those machines contributing to a
26    manufacturing or assembling process.

 

 

HB3573- 21 -LRB101 07573 HLH 52618 b

1        (4) "Equipment" includes an independent device or tool
2    separate from machinery but essential to an integrated
3    manufacturing or assembly process; including computers
4    used primarily in a manufacturer's computer assisted
5    design, computer assisted manufacturing (CAD/CAM) system;
6    any subunit or assembly comprising a component of any
7    machinery or auxiliary, adjunct, or attachment parts of
8    machinery, such as tools, dies, jigs, fixtures, patterns,
9    and molds; and any parts that require periodic replacement
10    in the course of normal operation; but does not include
11    hand tools. Equipment includes chemicals or chemicals
12    acting as catalysts but only if the chemicals or chemicals
13    acting as catalysts effect a direct and immediate change
14    upon a product being manufactured or assembled for
15    wholesale or retail sale or lease.
16        (5) "Production related tangible personal property"
17    means all tangible personal property that is used or
18    consumed by the purchaser in a manufacturing facility in
19    which a manufacturing process takes place and includes,
20    without limitation, tangible personal property that is
21    purchased for incorporation into real estate within a
22    manufacturing facility, supplies and consumables used in a
23    manufacturing facility including fuels, coolants,
24    solvents, oils, lubricants, and adhesives, hand tools,
25    protective apparel, and fire and safety equipment used or
26    consumed within a manufacturing facility, and tangible

 

 

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1    personal property that is used or consumed in activities
2    such as research and development, preproduction material
3    handling, receiving, quality control, inventory control,
4    storage, staging, and packaging for shipping and
5    transportation purposes. "Production related tangible
6    personal property" does not include (i) tangible personal
7    property that is used, within or without a manufacturing
8    facility, in sales, purchasing, accounting, fiscal
9    management, marketing, personnel recruitment or selection,
10    or landscaping or (ii) tangible personal property that is
11    required to be titled or registered with a department,
12    agency, or unit of federal, State, or local government.
13    The manufacturing and assembling machinery and equipment
14exemption includes production related tangible personal
15property that is purchased on or after July 1, 2007 and on or
16before June 30, 2008 and on or after July 1, 2019. The
17exemption for production related tangible personal property
18purchased on or after July 1, 2007 and on or before June 30,
192008 is subject to both of the following limitations:
20        (1) The maximum amount of the exemption for any one
21    taxpayer may not exceed 5% of the purchase price of
22    production related tangible personal property that is
23    purchased on or after July 1, 2007 and on or before June
24    30, 2008. A credit under Section 3-85 of this Act may not
25    be earned by the purchase of production related tangible
26    personal property for which an exemption is received under

 

 

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1    this Section.
2        (2) The maximum aggregate amount of the exemptions for
3    production related tangible personal property purchased on
4    or after July 1, 2007 and on or before June 30, 2008
5    awarded under this Act and the Retailers' Occupation Tax
6    Act to all taxpayers may not exceed $10,000,000. If the
7    claims for the exemption exceed $10,000,000, then the
8    Department shall reduce the amount of the exemption to each
9    taxpayer on a pro rata basis.
10The Department shall may adopt rules to implement and
11administer the exemption for production related tangible
12personal property.
13    The manufacturing and assembling machinery and equipment
14exemption includes the sale of materials to a purchaser who
15produces exempted types of machinery, equipment, or tools and
16who rents or leases that machinery, equipment, or tools to a
17manufacturer of tangible personal property. This exemption
18also includes the sale of materials to a purchaser who
19manufactures those materials into an exempted type of
20machinery, equipment, or tools that the purchaser uses himself
21or herself in the manufacturing of tangible personal property.
22This exemption includes the sale of exempted types of machinery
23or equipment to a purchaser who is not the manufacturer, but
24who rents or leases the use of the property to a manufacturer.
25The purchaser of the machinery and equipment who has an active
26resale registration number shall furnish that number to the

 

 

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1seller at the time of purchase. A user of the machinery,
2equipment, or tools without an active resale registration
3number shall prepare a certificate of exemption for each
4transaction stating facts establishing the exemption for that
5transaction, and that certificate shall be available to the
6Department for inspection or audit. The Department shall
7prescribe the form of the certificate. Informal rulings,
8opinions, or letters issued by the Department in response to an
9inquiry or request for an opinion from any person regarding the
10coverage and applicability of this exemption to specific
11devices shall be published, maintained as a public record, and
12made available for public inspection and copying. If the
13informal ruling, opinion, or letter contains trade secrets or
14other confidential information, where possible, the Department
15shall delete that information before publication. Whenever
16informal rulings, opinions, or letters contain a policy of
17general applicability, the Department shall formulate and
18adopt that policy as a rule in accordance with the Illinois
19Administrative Procedure Act.
20    The manufacturing and assembling machinery and equipment
21exemption is exempt from the provisions of Section 3-90.
22(Source: P.A. 100-22, eff. 7-6-17.)
 
23    Section 10. The Service Use Tax Act is amended by changing
24Section 2 as follows:
 

 

 

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1    (35 ILCS 110/2)  (from Ch. 120, par. 439.32)
2    Sec. 2. Definitions. In this Act:
3    "Use" means the exercise by any person of any right or
4power over tangible personal property incident to the ownership
5of that property, but does not include the sale or use for
6demonstration by him of that property in any form as tangible
7personal property in the regular course of business. "Use" does
8not mean the interim use of tangible personal property nor the
9physical incorporation of tangible personal property, as an
10ingredient or constituent, into other tangible personal
11property, (a) which is sold in the regular course of business
12or (b) which the person incorporating such ingredient or
13constituent therein has undertaken at the time of such purchase
14to cause to be transported in interstate commerce to
15destinations outside the State of Illinois.
16    "Purchased from a serviceman" means the acquisition of the
17ownership of, or title to, tangible personal property through a
18sale of service.
19    "Purchaser" means any person who, through a sale of
20service, acquires the ownership of, or title to, any tangible
21personal property.
22    "Cost price" means the consideration paid by the serviceman
23for a purchase valued in money, whether paid in money or
24otherwise, including cash, credits and services, and shall be
25determined without any deduction on account of the supplier's
26cost of the property sold or on account of any other expense

 

 

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1incurred by the supplier. When a serviceman contracts out part
2or all of the services required in his sale of service, it
3shall be presumed that the cost price to the serviceman of the
4property transferred to him or her by his or her subcontractor
5is equal to 50% of the subcontractor's charges to the
6serviceman in the absence of proof of the consideration paid by
7the subcontractor for the purchase of such property.
8    "Selling price" means the consideration for a sale valued
9in money whether received in money or otherwise, including
10cash, credits and service, and shall be determined without any
11deduction on account of the serviceman's cost of the property
12sold, the cost of materials used, labor or service cost or any
13other expense whatsoever, but does not include interest or
14finance charges which appear as separate items on the bill of
15sale or sales contract nor charges that are added to prices by
16sellers on account of the seller's duty to collect, from the
17purchaser, the tax that is imposed by this Act.
18    "Department" means the Department of Revenue.
19    "Person" means any natural individual, firm, partnership,
20association, joint stock company, joint venture, public or
21private corporation, limited liability company, and any
22receiver, executor, trustee, guardian or other representative
23appointed by order of any court.
24    "Sale of service" means any transaction except:
25        (1) a retail sale of tangible personal property taxable
26    under the Retailers' Occupation Tax Act or under the Use

 

 

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1    Tax Act.
2        (2) a sale of tangible personal property for the
3    purpose of resale made in compliance with Section 2c of the
4    Retailers' Occupation Tax Act.
5        (3) except as hereinafter provided, a sale or transfer
6    of tangible personal property as an incident to the
7    rendering of service for or by any governmental body, or
8    for or by any corporation, society, association,
9    foundation or institution organized and operated
10    exclusively for charitable, religious or educational
11    purposes or any not-for-profit corporation, society,
12    association, foundation, institution or organization which
13    has no compensated officers or employees and which is
14    organized and operated primarily for the recreation of
15    persons 55 years of age or older. A limited liability
16    company may qualify for the exemption under this paragraph
17    only if the limited liability company is organized and
18    operated exclusively for educational purposes.
19        (4) (blank).
20        (4a) a sale or transfer of tangible personal property
21    as an incident to the rendering of service for owners,
22    lessors, or shippers of tangible personal property which is
23    utilized by interstate carriers for hire for use as rolling
24    stock moving in interstate commerce so long as so used by
25    interstate carriers for hire, and equipment operated by a
26    telecommunications provider, licensed as a common carrier

 

 

HB3573- 28 -LRB101 07573 HLH 52618 b

1    by the Federal Communications Commission, which is
2    permanently installed in or affixed to aircraft moving in
3    interstate commerce.
4        (4a-5) on and after July 1, 2003 and through June 30,
5    2004, a sale or transfer of a motor vehicle of the second
6    division with a gross vehicle weight in excess of 8,000
7    pounds as an incident to the rendering of service if that
8    motor vehicle is subject to the commercial distribution fee
9    imposed under Section 3-815.1 of the Illinois Vehicle Code.
10    Beginning on July 1, 2004 and through June 30, 2005, the
11    use in this State of motor vehicles of the second division:
12    (i) with a gross vehicle weight rating in excess of 8,000
13    pounds; (ii) that are subject to the commercial
14    distribution fee imposed under Section 3-815.1 of the
15    Illinois Vehicle Code; and (iii) that are primarily used
16    for commercial purposes. Through June 30, 2005, this
17    exemption applies to repair and replacement parts added
18    after the initial purchase of such a motor vehicle if that
19    motor vehicle is used in a manner that would qualify for
20    the rolling stock exemption otherwise provided for in this
21    Act. For purposes of this paragraph, "used for commercial
22    purposes" means the transportation of persons or property
23    in furtherance of any commercial or industrial enterprise
24    whether for-hire or not.
25        (5) a sale or transfer of machinery and equipment used
26    primarily in the process of the manufacturing or

 

 

HB3573- 29 -LRB101 07573 HLH 52618 b

1    assembling, either in an existing, an expanded or a new
2    manufacturing facility, of tangible personal property for
3    wholesale or retail sale or lease, whether such sale or
4    lease is made directly by the manufacturer or by some other
5    person, whether the materials used in the process are owned
6    by the manufacturer or some other person, or whether such
7    sale or lease is made apart from or as an incident to the
8    seller's engaging in a service occupation and the
9    applicable tax is a Service Use Tax or Service Occupation
10    Tax, rather than Use Tax or Retailers' Occupation Tax. The
11    exemption provided by this paragraph (5) includes
12    production related tangible personal property, as defined
13    in Section 3-50 of the Use Tax Act, purchased on or after
14    July 1, 2019. The exemption provided by this paragraph (5)
15    does not include machinery and equipment used in (i) the
16    generation of electricity for wholesale or retail sale;
17    (ii) the generation or treatment of natural or artificial
18    gas for wholesale or retail sale that is delivered to
19    customers through pipes, pipelines, or mains; or (iii) the
20    treatment of water for wholesale or retail sale that is
21    delivered to customers through pipes, pipelines, or mains.
22    The provisions of Public Act 98-583 are declaratory of
23    existing law as to the meaning and scope of this exemption.
24    The exemption under this paragraph (5) is exempt from the
25    provisions of Section 3-75.
26        (5a) the repairing, reconditioning or remodeling, for

 

 

HB3573- 30 -LRB101 07573 HLH 52618 b

1    a common carrier by rail, of tangible personal property
2    which belongs to such carrier for hire, and as to which
3    such carrier receives the physical possession of the
4    repaired, reconditioned or remodeled item of tangible
5    personal property in Illinois, and which such carrier
6    transports, or shares with another common carrier in the
7    transportation of such property, out of Illinois on a
8    standard uniform bill of lading showing the person who
9    repaired, reconditioned or remodeled the property to a
10    destination outside Illinois, for use outside Illinois.
11        (5b) a sale or transfer of tangible personal property
12    which is produced by the seller thereof on special order in
13    such a way as to have made the applicable tax the Service
14    Occupation Tax or the Service Use Tax, rather than the
15    Retailers' Occupation Tax or the Use Tax, for an interstate
16    carrier by rail which receives the physical possession of
17    such property in Illinois, and which transports such
18    property, or shares with another common carrier in the
19    transportation of such property, out of Illinois on a
20    standard uniform bill of lading showing the seller of the
21    property as the shipper or consignor of such property to a
22    destination outside Illinois, for use outside Illinois.
23        (6) until July 1, 2003, a sale or transfer of
24    distillation machinery and equipment, sold as a unit or kit
25    and assembled or installed by the retailer, which machinery
26    and equipment is certified by the user to be used only for

 

 

HB3573- 31 -LRB101 07573 HLH 52618 b

1    the production of ethyl alcohol that will be used for
2    consumption as motor fuel or as a component of motor fuel
3    for the personal use of such user and not subject to sale
4    or resale.
5        (7) at the election of any serviceman not required to
6    be otherwise registered as a retailer under Section 2a of
7    the Retailers' Occupation Tax Act, made for each fiscal
8    year sales of service in which the aggregate annual cost
9    price of tangible personal property transferred as an
10    incident to the sales of service is less than 35%, or 75%
11    in the case of servicemen transferring prescription drugs
12    or servicemen engaged in graphic arts production, of the
13    aggregate annual total gross receipts from all sales of
14    service. The purchase of such tangible personal property by
15    the serviceman shall be subject to tax under the Retailers'
16    Occupation Tax Act and the Use Tax Act. However, if a
17    primary serviceman who has made the election described in
18    this paragraph subcontracts service work to a secondary
19    serviceman who has also made the election described in this
20    paragraph, the primary serviceman does not incur a Use Tax
21    liability if the secondary serviceman (i) has paid or will
22    pay Use Tax on his or her cost price of any tangible
23    personal property transferred to the primary serviceman
24    and (ii) certifies that fact in writing to the primary
25    serviceman.
26    Tangible personal property transferred incident to the

 

 

HB3573- 32 -LRB101 07573 HLH 52618 b

1completion of a maintenance agreement is exempt from the tax
2imposed pursuant to this Act.
3    Exemption (5) also includes machinery and equipment used in
4the general maintenance or repair of such exempt machinery and
5equipment or for in-house manufacture of exempt machinery and
6equipment. On and after July 1, 2017, exemption (5) also
7includes graphic arts machinery and equipment, as defined in
8paragraph (5) of Section 3-5. The machinery and equipment
9exemption does not include machinery and equipment used in (i)
10the generation of electricity for wholesale or retail sale;
11(ii) the generation or treatment of natural or artificial gas
12for wholesale or retail sale that is delivered to customers
13through pipes, pipelines, or mains; or (iii) the treatment of
14water for wholesale or retail sale that is delivered to
15customers through pipes, pipelines, or mains. The provisions of
16Public Act 98-583 are declaratory of existing law as to the
17meaning and scope of this exemption. For the purposes of
18exemption (5), each of these terms shall have the following
19meanings: (1) "manufacturing process" shall mean the
20production of any article of tangible personal property,
21whether such article is a finished product or an article for
22use in the process of manufacturing or assembling a different
23article of tangible personal property, by procedures commonly
24regarded as manufacturing, processing, fabricating, or
25refining which changes some existing material or materials into
26a material with a different form, use or name. In relation to a

 

 

HB3573- 33 -LRB101 07573 HLH 52618 b

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

 

 

HB3573- 34 -LRB101 07573 HLH 52618 b

1fixtures, patterns and molds; or any parts which require
2periodic replacement in the course of normal operation; but
3shall not include hand tools. Equipment includes chemicals or
4chemicals acting as catalysts but only if the chemicals or
5chemicals acting as catalysts effect a direct and immediate
6change upon a product being manufactured or assembled for
7wholesale or retail sale or lease. The purchaser of such
8machinery and equipment who has an active resale registration
9number shall furnish such number to the seller at the time of
10purchase. The user of such machinery and equipment and tools
11without an active resale registration number shall prepare a
12certificate of exemption for each transaction stating facts
13establishing the exemption for that transaction, which
14certificate shall be available to the Department for inspection
15or audit. The Department shall prescribe the form of the
16certificate.
17    Any informal rulings, opinions or letters issued by the
18Department in response to an inquiry or request for any opinion
19from any person regarding the coverage and applicability of
20exemption (5) to specific devices shall be published,
21maintained as a public record, and made available for public
22inspection and copying. If the informal ruling, opinion or
23letter contains trade secrets or other confidential
24information, where possible the Department shall delete such
25information prior to publication. Whenever such informal
26rulings, opinions, or letters contain any policy of general

 

 

HB3573- 35 -LRB101 07573 HLH 52618 b

1applicability, the Department shall formulate and adopt such
2policy as a rule in accordance with the provisions of the
3Illinois Administrative Procedure Act.
4    On and after July 1, 1987, no entity otherwise eligible
5under exemption (3) of this Section shall make tax-free
6purchases unless it has an active exemption identification
7number issued by the Department.
8    The purchase, employment and transfer of such tangible
9personal property as newsprint and ink for the primary purpose
10of conveying news (with or without other information) is not a
11purchase, use or sale of service or of tangible personal
12property within the meaning of this Act.
13    "Serviceman" means any person who is engaged in the
14occupation of making sales of service.
15    "Sale at retail" means "sale at retail" as defined in the
16Retailers' Occupation Tax Act.
17    "Supplier" means any person who makes sales of tangible
18personal property to servicemen for the purpose of resale as an
19incident to a sale of service.
20    "Serviceman maintaining a place of business in this State",
21or any like term, means and includes any serviceman:
22        (1) having or maintaining within this State, directly
23    or by a subsidiary, an office, distribution house, sales
24    house, warehouse or other place of business, or any agent
25    or other representative operating within this State under
26    the authority of the serviceman or its subsidiary,

 

 

HB3573- 36 -LRB101 07573 HLH 52618 b

1    irrespective of whether such place of business or agent or
2    other representative is located here permanently or
3    temporarily, or whether such serviceman or subsidiary is
4    licensed to do business in this State;
5        (1.1) having a contract with a person located in this
6    State under which the person, for a commission or other
7    consideration based on the sale of service by the
8    serviceman, directly or indirectly refers potential
9    customers to the serviceman by providing to the potential
10    customers a promotional code or other mechanism that allows
11    the serviceman to track purchases referred by such persons.
12    Examples of mechanisms that allow the serviceman to track
13    purchases referred by such persons include but are not
14    limited to the use of a link on the person's Internet
15    website, promotional codes distributed through the
16    person's hand-delivered or mailed material, and
17    promotional codes distributed by the person through radio
18    or other broadcast media. The provisions of this paragraph
19    (1.1) shall apply only if the cumulative gross receipts
20    from sales of service by the serviceman to customers who
21    are referred to the serviceman by all persons in this State
22    under such contracts exceed $10,000 during the preceding 4
23    quarterly periods ending on the last day of March, June,
24    September, and December; a serviceman meeting the
25    requirements of this paragraph (1.1) shall be presumed to
26    be maintaining a place of business in this State but may

 

 

HB3573- 37 -LRB101 07573 HLH 52618 b

1    rebut this presumption by submitting proof that the
2    referrals or other activities pursued within this State by
3    such persons were not sufficient to meet the nexus
4    standards of the United States Constitution during the
5    preceding 4 quarterly periods;
6        (1.2) beginning July 1, 2011, having a contract with a
7    person located in this State under which:
8            (A) the serviceman sells the same or substantially
9        similar line of services as the person located in this
10        State and does so using an identical or substantially
11        similar name, trade name, or trademark as the person
12        located in this State; and
13            (B) the serviceman provides a commission or other
14        consideration to the person located in this State based
15        upon the sale of services by the serviceman.
16    The provisions of this paragraph (1.2) shall apply only if
17    the cumulative gross receipts from sales of service by the
18    serviceman to customers in this State under all such
19    contracts exceed $10,000 during the preceding 4 quarterly
20    periods ending on the last day of March, June, September,
21    and December;
22        (2) soliciting orders for tangible personal property
23    by means of a telecommunication or television shopping
24    system (which utilizes toll free numbers) which is intended
25    by the retailer to be broadcast by cable television or
26    other means of broadcasting, to consumers located in this

 

 

HB3573- 38 -LRB101 07573 HLH 52618 b

1    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 is
5    disseminated primarily to consumers located in this State
6    and only secondarily to bordering jurisdictions;
7        (4) soliciting orders for tangible personal property
8    by mail if the solicitations are substantial and recurring
9    and if the retailer benefits from any banking, financing,
10    debt collection, telecommunication, or marketing
11    activities occurring in this State or benefits from the
12    location in this State of authorized installation,
13    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 its
18    trade name if the franchisee or licensee is required to
19    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 is
23    transmitted or distributed over a cable television system
24    in this State;
25        (8) engaging in activities in Illinois, which
26    activities in the state in which the supply business

 

 

HB3573- 39 -LRB101 07573 HLH 52618 b

1    engaging in such activities is located would constitute
2    maintaining a place of business in that state; or
3        (9) beginning October 1, 2018, making sales of service
4    to purchasers in Illinois from outside of Illinois if:
5            (A) the cumulative gross receipts from sales of
6        service to purchasers in Illinois are $100,000 or more;
7        or
8            (B) the serviceman enters into 200 or more separate
9        transactions for sales of service to purchasers in
10        Illinois.
11        The serviceman shall determine on a quarterly basis,
12    ending on the last day of March, June, September, and
13    December, whether he or she meets the criteria of either
14    subparagraph (A) or (B) of this paragraph (9) for the
15    preceding 12-month period. If the serviceman meets the
16    criteria of either subparagraph (A) or (B) for a 12-month
17    period, he or she is considered a serviceman maintaining a
18    place of business in this State and is required to collect
19    and remit the tax imposed under this Act and file returns
20    for one year. At the end of that one-year period, the
21    serviceman shall determine whether the serviceman met the
22    criteria of either subparagraph (A) or (B) during the
23    preceding 12-month period. If the serviceman met the
24    criteria in either subparagraph (A) or (B) for the
25    preceding 12-month period, he or she is considered a
26    serviceman maintaining a place of business in this State

 

 

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1    and is required to collect and remit the tax imposed under
2    this Act and file returns for the subsequent year. If at
3    the end of a one-year period a serviceman that was required
4    to collect and remit the tax imposed under this Act
5    determines that he or she did not meet the criteria in
6    either subparagraph (A) or (B) during the preceding
7    12-month period, the serviceman subsequently shall
8    determine on a quarterly basis, ending on the last day of
9    March, June, September, and December, whether he or she
10    meets the criteria of either subparagraph (A) or (B) for
11    the preceding 12-month period.
12(Source: P.A. 100-22, eff. 7-6-17; 100-321, eff. 8-24-17;
13100-587, eff. 6-4-18; 100-863, eff. 8-14-18.)
 
14    Section 15. The Service Occupation Tax Act is amended by
15changing Section 2 as follows:
 
16    (35 ILCS 115/2)  (from Ch. 120, par. 439.102)
17    Sec. 2. In this Act:
18    "Transfer" means any transfer of the title to property or
19of the ownership of property whether or not the transferor
20retains title as security for the payment of amounts due him
21from the transferee.
22    "Cost Price" means the consideration paid by the serviceman
23for a purchase valued in money, whether paid in money or
24otherwise, including cash, credits and services, and shall be

 

 

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1determined without any deduction on account of the supplier's
2cost of the property sold or on account of any other expense
3incurred by the supplier. When a serviceman contracts out part
4or all of the services required in his sale of service, it
5shall be presumed that the cost price to the serviceman of the
6property transferred to him by his or her subcontractor is
7equal to 50% of the subcontractor's charges to the serviceman
8in the absence of proof of the consideration paid by the
9subcontractor for the purchase of such property.
10    "Department" means the Department of Revenue.
11    "Person" means any natural individual, firm, partnership,
12association, joint stock company, joint venture, public or
13private corporation, limited liability company, and any
14receiver, executor, trustee, guardian or other representative
15appointed by order of any court.
16    "Sale of Service" means any transaction except:
17    (a) A retail sale of tangible personal property taxable
18under the Retailers' Occupation Tax Act or under the Use Tax
19Act.
20    (b) A sale of tangible personal property for the purpose of
21resale made in compliance with Section 2c of the Retailers'
22Occupation Tax Act.
23    (c) Except as hereinafter provided, a sale or transfer of
24tangible personal property as an incident to the rendering of
25service for or by any governmental body or for or by any
26corporation, society, association, foundation or institution

 

 

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1organized and operated exclusively for charitable, religious
2or educational purposes or any not-for-profit corporation,
3society, association, foundation, institution or organization
4which has no compensated officers or employees and which is
5organized and operated primarily for the recreation of persons
655 years of age or older. A limited liability company may
7qualify for the exemption under this paragraph only if the
8limited liability company is organized and operated
9exclusively for educational purposes.
10    (d) (Blank).
11    (d-1) A sale or transfer of tangible personal property as
12an incident to the rendering of service for owners, lessors or
13shippers of tangible personal property which is utilized by
14interstate carriers for hire for use as rolling stock moving in
15interstate commerce, and equipment operated by a
16telecommunications provider, licensed as a common carrier by
17the Federal Communications Commission, which is permanently
18installed in or affixed to aircraft moving in interstate
19commerce.
20    (d-1.1) On and after July 1, 2003 and through June 30,
212004, a sale or transfer of a motor vehicle of the second
22division with a gross vehicle weight in excess of 8,000 pounds
23as an incident to the rendering of service if that motor
24vehicle is subject to the commercial distribution fee imposed
25under Section 3-815.1 of the Illinois Vehicle Code. Beginning
26on July 1, 2004 and through June 30, 2005, the use in this

 

 

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1State of motor vehicles of the second division: (i) with a
2gross vehicle weight rating in excess of 8,000 pounds; (ii)
3that are subject to the commercial distribution fee imposed
4under Section 3-815.1 of the Illinois Vehicle Code; and (iii)
5that are primarily used for commercial purposes. Through June
630, 2005, this exemption applies to repair and replacement
7parts added after the initial purchase of such a motor vehicle
8if that motor vehicle is used in a manner that would qualify
9for the rolling stock exemption otherwise provided for in this
10Act. For purposes of this paragraph, "used for commercial
11purposes" means the transportation of persons or property in
12furtherance of any commercial or industrial enterprise whether
13for-hire or not.
14    (d-2) The repairing, reconditioning or remodeling, for a
15common carrier by rail, of tangible personal property which
16belongs to such carrier for hire, and as to which such carrier
17receives the physical possession of the repaired,
18reconditioned or remodeled item of tangible personal property
19in Illinois, and which such carrier transports, or shares with
20another common carrier in the transportation of such property,
21out of Illinois on a standard uniform bill of lading showing
22the person who repaired, reconditioned or remodeled the
23property as the shipper or consignor of such property to a
24destination outside Illinois, for use outside Illinois.
25    (d-3) A sale or transfer of tangible personal property
26which is produced by the seller thereof on special order in

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1purchase. The purchaser of such machinery and equipment and
2tools without an active resale registration number shall
3furnish to the seller a certificate of exemption for each
4transaction stating facts establishing the exemption for that
5transaction, which certificate shall be available to the
6Department for inspection or audit.
7    Except as provided in Section 2d of this Act, the rolling
8stock exemption applies to rolling stock used by an interstate
9carrier for hire, even just between points in Illinois, if such
10rolling stock transports, for hire, persons whose journeys or
11property whose shipments originate or terminate outside
12Illinois.
13    Any informal rulings, opinions or letters issued by the
14Department in response to an inquiry or request for any opinion
15from any person regarding the coverage and applicability of
16exemption (e) to specific devices shall be published,
17maintained as a public record, and made available for public
18inspection and copying. If the informal ruling, opinion or
19letter contains trade secrets or other confidential
20information, where possible the Department shall delete such
21information prior to publication. Whenever such informal
22rulings, opinions, or letters contain any policy of general
23applicability, the Department shall formulate and adopt such
24policy as a rule in accordance with the provisions of the
25Illinois Administrative Procedure Act.
26    On and after July 1, 1987, no entity otherwise eligible

 

 

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1under exemption (c) of this Section shall make tax-free
2purchases unless it has an active exemption identification
3number issued by the Department.
4    "Serviceman" means any person who is engaged in the
5occupation of making sales of service.
6    "Sale at Retail" means "sale at retail" as defined in the
7Retailers' Occupation Tax Act.
8    "Supplier" means any person who makes sales of tangible
9personal property to servicemen for the purpose of resale as an
10incident to a sale of service.
11(Source: P.A. 100-22, eff. 7-6-17; 100-321, eff. 8-24-17;
12100-863, eff. 8-14-18.)
 
13    Section 20. The Retailers' Occupation Tax Act is amended by
14changing Section 2-45 as follows:
 
15    (35 ILCS 120/2-45)  (from Ch. 120, par. 441-45)
16    Sec. 2-45. Manufacturing and assembly exemption. The
17manufacturing and assembly machinery and equipment exemption
18includes machinery and equipment that replaces machinery and
19equipment in an existing manufacturing facility as well as
20machinery and equipment that are for use in an expanded or new
21manufacturing facility.
22    The machinery and equipment exemption also includes
23machinery and equipment used in the general maintenance or
24repair of exempt machinery and equipment or for in-house

 

 

HB3573- 51 -LRB101 07573 HLH 52618 b

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

 

 

HB3573- 52 -LRB101 07573 HLH 52618 b

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

 

 

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

 

 

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

 

 

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

 

 

HB3573- 56 -LRB101 07573 HLH 52618 b

1informal rulings, opinions, or letters contain a policy of
2general applicability, the Department shall formulate and
3adopt that policy as a rule in accordance with the Illinois
4Administrative Procedure Act.
5    The manufacturing and assembling machinery and equipment
6exemption is exempt from the provisions of Section 2-70.
7(Source: P.A. 100-22, eff. 7-6-17.)
 
8    Section 99. Effective date. This Act takes effect upon
9becoming law.