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91_HB4121
LRB9112185SMdv
1 AN ACT concerning taxation.
2 Be it enacted by the People of the State of Illinois,
3 represented in the General Assembly:
4 Section 5. The Use Tax Act is amended by changing
5 Section 2 as follows:
6 (35 ILCS 105/2) (from Ch. 120, par. 439.2)
7 Sec. 2. "Use" means the exercise by any person of any
8 right or power over tangible personal property incident to
9 the ownership of that property, except that it does not
10 include the sale of such property in any form as tangible
11 personal property in the regular course of business to the
12 extent that such property is not first subjected to a use for
13 which it was purchased, and does not include the use of such
14 property by its owner for demonstration purposes: Provided
15 that the property purchased is deemed to be purchased for the
16 purpose of resale, despite first being used, to the extent to
17 which it is resold as an ingredient of an intentionally
18 produced product or by-product of manufacturing. "Use" does
19 not mean the demonstration use or interim use of tangible
20 personal property by a retailer before he sells that tangible
21 personal property. For watercraft or aircraft, if the period
22 of demonstration use or interim use by the retailer exceeds
23 18 months, the retailer shall pay on the retailers' original
24 cost price the tax imposed by this Act, and no credit for
25 that tax is permitted if the watercraft or aircraft is
26 subsequently sold by the retailer. "Use" does not mean the
27 physical incorporation of tangible personal property, to the
28 extent not first subjected to a use for which it was
29 purchased, as an ingredient or constituent, into other
30 tangible personal property (a) which is sold in the regular
31 course of business or (b) which the person incorporating such
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1 ingredient or constituent therein has undertaken at the time
2 of such purchase to cause to be transported in interstate
3 commerce to destinations outside the State of Illinois:
4 Provided that the property purchased is deemed to be
5 purchased for the purpose of resale, despite first being
6 used, to the extent to which it is resold as an ingredient of
7 an intentionally produced product or by-product of
8 manufacturing.
9 "Watercraft" means a Class 2, Class 3, or Class 4
10 watercraft as defined in Section 3-2 of the Boat Registration
11 and Safety Act, a personal watercraft, or any boat equipped
12 with an inboard motor.
13 "Purchase at retail" means the acquisition of the
14 ownership of or title to tangible personal property through a
15 sale at retail.
16 "Purchaser" means anyone who, through a sale at retail,
17 acquires the ownership of tangible personal property for a
18 valuable consideration.
19 "Sale at retail" means any transfer of the ownership of
20 or title to tangible personal property to a purchaser,
21 including an Internet transfer, for the purpose of use, and
22 not for the purpose of resale in any form as tangible
23 personal property to the extent not first subjected to a use
24 for which it was purchased, for a valuable consideration:
25 Provided that the property purchased is deemed to be
26 purchased for the purpose of resale, despite first being
27 used, to the extent to which it is resold as an ingredient of
28 an intentionally produced product or by-product of
29 manufacturing. For this purpose, slag produced as an
30 incident to manufacturing pig iron or steel and sold is
31 considered to be an intentionally produced by-product of
32 manufacturing. "Sale at retail" includes any such transfer
33 made for resale unless made in compliance with Section 2c of
34 the Retailers' Occupation Tax Act, as incorporated by
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1 reference into Section 12 of this Act. Transactions whereby
2 the possession of the property is transferred but the seller
3 retains the title as security for payment of the selling
4 price are sales.
5 "Sale at retail" shall also be construed to include any
6 Illinois florist's sales transaction in which the purchase
7 order is received in Illinois by a florist and the sale is
8 for use or consumption, but the Illinois florist has a
9 florist in another state deliver the property to the
10 purchaser or the purchaser's donee in such other state.
11 Nonreusable tangible personal property that is used by
12 persons engaged in the business of operating a restaurant,
13 cafeteria, or drive-in is a sale for resale when it is
14 transferred to customers in the ordinary course of business
15 as part of the sale of food or beverages and is used to
16 deliver, package, or consume food or beverages, regardless of
17 where consumption of the food or beverages occurs. Examples
18 of those items include, but are not limited to nonreusable,
19 paper and plastic cups, plates, baskets, boxes, sleeves,
20 buckets or other containers, utensils, straws, placemats,
21 napkins, doggie bags, and wrapping or packaging materials
22 that are transferred to customers as part of the sale of food
23 or beverages in the ordinary course of business.
24 The purchase, employment and transfer of such tangible
25 personal property as newsprint and ink for the primary
26 purpose of conveying news (with or without other information)
27 is not a purchase, use or sale of tangible personal property.
28 "Selling price" means the consideration for a sale valued
29 in money whether received in money or otherwise, including
30 cash, credits, property other than as hereinafter provided,
31 and services, but not including the value of or credit given
32 for traded-in tangible personal property where the item that
33 is traded-in is of like kind and character as that which is
34 being sold, and shall be determined without any deduction on
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1 account of the cost of the property sold, the cost of
2 materials used, labor or service cost or any other expense
3 whatsoever, but does not include interest or finance charges
4 which appear as separate items on the bill of sale or sales
5 contract nor charges that are added to prices by sellers on
6 account of the seller's tax liability under the "Retailers'
7 Occupation Tax Act", or on account of the seller's duty to
8 collect, from the purchaser, the tax that is imposed by this
9 Act, or on account of the seller's tax liability under
10 Section 8-11-1 of the Illinois Municipal Code, as heretofore
11 and hereafter amended, or on account of the seller's tax
12 liability under the "County Retailers' Occupation Tax Act".
13 Effective December 1, 1985, "selling price" shall include
14 charges that are added to prices by sellers on account of the
15 seller's tax liability under the Cigarette Tax Act, on
16 account of the seller's duty to collect, from the purchaser,
17 the tax imposed under the Cigarette Use Tax Act, and on
18 account of the seller's duty to collect, from the purchaser,
19 any cigarette tax imposed by a home rule unit.
20 The phrase "like kind and character" shall be liberally
21 construed (including but not limited to any form of motor
22 vehicle for any form of motor vehicle, or any kind of farm or
23 agricultural implement for any other kind of farm or
24 agricultural implement), while not including a kind of item
25 which, if sold at retail by that retailer, would be exempt
26 from retailers' occupation tax and use tax as an isolated or
27 occasional sale.
28 "Department" means the Department of Revenue.
29 "Person" means any natural individual, firm, partnership,
30 association, joint stock company, joint adventure, public or
31 private corporation, limited liability company, or a
32 receiver, executor, trustee, guardian or other representative
33 appointed by order of any court.
34 "Retailer" means and includes every person engaged in the
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1 business of making sales at retail as defined in this
2 Section.
3 A person who holds himself or herself out as being
4 engaged (or who habitually engages) in selling tangible
5 personal property at retail is a retailer hereunder with
6 respect to such sales (and not primarily in a service
7 occupation) notwithstanding the fact that such person designs
8 and produces such tangible personal property on special order
9 for the purchaser and in such a way as to render the property
10 of value only to such purchaser, if such tangible personal
11 property so produced on special order serves substantially
12 the same function as stock or standard items of tangible
13 personal property that are sold at retail.
14 A person whose activities are organized and conducted
15 primarily as a not-for-profit service enterprise, and who
16 engages in selling tangible personal property at retail
17 (whether to the public or merely to members and their guests)
18 is a retailer with respect to such transactions, excepting
19 only a person organized and operated exclusively for
20 charitable, religious or educational purposes either (1), to
21 the extent of sales by such person to its members, students,
22 patients or inmates of tangible personal property to be used
23 primarily for the purposes of such person, or (2), to the
24 extent of sales by such person of tangible personal property
25 which is not sold or offered for sale by persons organized
26 for profit. The selling of school books and school supplies
27 by schools at retail to students is not "primarily for the
28 purposes of" the school which does such selling. This
29 paragraph does not apply to nor subject to taxation
30 occasional dinners, social or similar activities of a person
31 organized and operated exclusively for charitable, religious
32 or educational purposes, whether or not such activities are
33 open to the public.
34 A person who is the recipient of a grant or contract
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1 under Title VII of the Older Americans Act of 1965 (P.L.
2 92-258) and serves meals to participants in the federal
3 Nutrition Program for the Elderly in return for contributions
4 established in amount by the individual participant pursuant
5 to a schedule of suggested fees as provided for in the
6 federal Act is not a retailer under this Act with respect to
7 such transactions.
8 Persons who engage in the business of transferring
9 tangible personal property upon the redemption of trading
10 stamps are retailers hereunder when engaged in such business.
11 The isolated or occasional sale of tangible personal
12 property at retail by a person who does not hold himself out
13 as being engaged (or who does not habitually engage) in
14 selling such tangible personal property at retail or a sale
15 through a bulk vending machine does not make such person a
16 retailer hereunder. However, any person who is engaged in a
17 business which is not subject to the tax imposed by the
18 "Retailers' Occupation Tax Act" because of involving the sale
19 of or a contract to sell real estate or a construction
20 contract to improve real estate, but who, in the course of
21 conducting such business, transfers tangible personal
22 property to users or consumers in the finished form in which
23 it was purchased, and which does not become real estate,
24 under any provision of a construction contract or real estate
25 sale or real estate sales agreement entered into with some
26 other person arising out of or because of such nontaxable
27 business, is a retailer to the extent of the value of the
28 tangible personal property so transferred. If, in such
29 transaction, a separate charge is made for the tangible
30 personal property so transferred, the value of such property,
31 for the purposes of this Act, is the amount so separately
32 charged, but not less than the cost of such property to the
33 transferor; if no separate charge is made, the value of such
34 property, for the purposes of this Act, is the cost to the
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1 transferor of such tangible personal property.
2 "Retailer maintaining a place of business in this State",
3 or any like term, means and includes any of the following
4 retailers:
5 1. A retailer having or maintaining within this
6 State, directly or by a subsidiary, an office,
7 distribution house, sales house, warehouse or other place
8 of business, or any agent or other representative
9 operating within this State under the authority of the
10 retailer or its subsidiary, irrespective of whether such
11 place of business or agent or other representative is
12 located here permanently or temporarily, or whether such
13 retailer or subsidiary is licensed to do business in this
14 State. However, the ownership of property that is located
15 at the premises of a printer with which the retailer has
16 contracted for printing and that consists of the final
17 printed product, property that becomes a part of the
18 final printed product, or copy from which the printed
19 product is produced shall not result in the retailer
20 being deemed to have or maintain an office, distribution
21 house, sales house, warehouse, or other place of business
22 within this State.
23 2. A retailer soliciting orders for tangible
24 personal property by means of a telecommunication or
25 television shopping system (which utilizes toll free
26 numbers) which is intended by the retailer to be
27 broadcast by cable television or other means of
28 broadcasting, to consumers located in this State.
29 3. A retailer, pursuant to a contract with a
30 broadcaster or publisher located in this State,
31 soliciting orders for tangible personal property by means
32 of advertising which is disseminated primarily to
33 consumers located in this State and only secondarily to
34 bordering jurisdictions.
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1 4. A retailer soliciting orders for tangible
2 personal property by mail if the solicitations are
3 substantial and recurring and if the retailer benefits
4 from any banking, financing, debt collection,
5 telecommunication, or marketing activities occurring in
6 this State or benefits from the location in this State of
7 authorized installation, servicing, or repair facilities.
8 5. A retailer that is owned or controlled by the
9 same interests that own or control any retailer engaging
10 in business in the same or similar line of business in
11 this State.
12 6. A retailer having a franchisee or licensee
13 operating under its trade name if the franchisee or
14 licensee is required to collect the tax under this
15 Section.
16 7. A retailer, pursuant to a contract with a cable
17 television operator located in this State, soliciting
18 orders for tangible personal property by means of
19 advertising which is transmitted or distributed over a
20 cable television system in this State.
21 8. A retailer engaging in activities in Illinois,
22 which activities in the state in which the retail
23 business engaging in such activities is located would
24 constitute maintaining a place of business in that state.
25 9. A retailer soliciting orders for tangible
26 personal property by means of the Internet that is
27 intended to be transmitted to consumers located in this
28 State.
29 "Bulk vending machine" means a nonelectrically operated
30 vending machine, containing unsorted confections, nuts or
31 other merchandise which, when a coin of a denomination not
32 larger than one cent is inserted, are dispensed in equal
33 portions, at random and without selection by the customer.
34 (Source: P.A. 90-289, eff. 8-1-97.)
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1 Section 10. The Service Use Tax Act is amended by
2 changing Section 2 as follows:
3 (35 ILCS 110/2) (from Ch. 120, par. 439.32)
4 Sec. 2. "Use" means the exercise by any person of any
5 right or power over tangible personal property incident to
6 the ownership of that property, but does not include the sale
7 or use for demonstration by him of that property in any form
8 as tangible personal property in the regular course of
9 business. "Use" does not mean the interim use of tangible
10 personal property nor the physical incorporation of tangible
11 personal property, as an ingredient or constituent, into
12 other tangible personal property, (a) which is sold in the
13 regular course of business or (b) which the person
14 incorporating such ingredient or constituent therein has
15 undertaken at the time of such purchase to cause to be
16 transported in interstate commerce to destinations outside
17 the State of Illinois.
18 "Purchased from a serviceman" means the acquisition of
19 the ownership of, or title to, tangible personal property
20 through a sale of service.
21 "Purchaser" means any person who, through a sale of
22 service, acquires the ownership of, or title to, any tangible
23 personal property.
24 "Cost price" means the consideration paid by the
25 serviceman for a purchase valued in money, whether paid in
26 money or otherwise, including cash, credits and services, and
27 shall be determined without any deduction on account of the
28 supplier's cost of the property sold or on account of any
29 other expense incurred by the supplier. When a serviceman
30 contracts out part or all of the services required in his
31 sale of service, it shall be presumed that the cost price to
32 the serviceman of the property transferred to him or her by
33 his or her subcontractor is equal to 50% of the
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1 subcontractor's charges to the serviceman in the absence of
2 proof of the consideration paid by the subcontractor for the
3 purchase of such property.
4 "Selling price" means the consideration for a sale valued
5 in money whether received in money or otherwise, including
6 cash, credits and service, and shall be determined without
7 any deduction on account of the serviceman's cost of the
8 property sold, the cost of materials used, labor or service
9 cost or any other expense whatsoever, but does not include
10 interest or finance charges which appear as separate items on
11 the bill of sale or sales contract nor charges that are added
12 to prices by sellers on account of the seller's duty to
13 collect, from the purchaser, the tax that is imposed by this
14 Act.
15 "Department" means the Department of Revenue.
16 "Person" means any natural individual, firm, partnership,
17 association, joint stock company, joint venture, public or
18 private corporation, limited liability company, and any
19 receiver, executor, trustee, guardian or other representative
20 appointed by order of any court.
21 "Sale of service" means any transaction except:
22 (1) a retail sale of tangible personal property
23 taxable under the Retailers' Occupation Tax Act or under
24 the Use Tax Act.
25 (2) a sale of tangible personal property for the
26 purpose of resale made in compliance with Section 2c of
27 the Retailers' Occupation Tax Act.
28 (3) except as hereinafter provided, a sale or
29 transfer of tangible personal property as an incident to
30 the rendering of service for or by any governmental body,
31 or for or by any corporation, society, association,
32 foundation or institution organized and operated
33 exclusively for charitable, religious or educational
34 purposes or any not-for-profit corporation, society,
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1 association, foundation, institution or organization
2 which has no compensated officers or employees and which
3 is organized and operated primarily for the recreation of
4 persons 55 years of age or older. A limited liability
5 company may qualify for the exemption under this
6 paragraph only if the limited liability company is
7 organized and operated exclusively for educational
8 purposes.
9 (4) a sale or transfer of tangible personal
10 property as an incident to the rendering of service for
11 interstate carriers for hire for use as rolling stock
12 moving in interstate commerce or by lessors under a lease
13 of one year or longer, executed or in effect at the time
14 of purchase of personal property, to interstate carriers
15 for hire for use as rolling stock moving in interstate
16 commerce so long as so used by such interstate carriers
17 for hire, and equipment operated by a telecommunications
18 provider, licensed as a common carrier by the Federal
19 Communications Commission, which is permanently installed
20 in or affixed to aircraft moving in interstate commerce.
21 (4a) a sale or transfer of tangible personal
22 property as an incident to the rendering of service for
23 owners, lessors, or shippers of tangible personal
24 property which is utilized by interstate carriers for
25 hire for use as rolling stock moving in interstate
26 commerce so long as so used by interstate carriers for
27 hire, and equipment operated by a telecommunications
28 provider, licensed as a common carrier by the Federal
29 Communications Commission, which is permanently installed
30 in or affixed to aircraft moving in interstate commerce.
31 (5) a sale or transfer of machinery and equipment
32 used primarily in the process of the manufacturing or
33 assembling, either in an existing, an expanded or a new
34 manufacturing facility, of tangible personal property for
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1 wholesale or retail sale or lease, whether such sale or
2 lease is made directly by the manufacturer or by some
3 other person, whether the materials used in the process
4 are owned by the manufacturer or some other person, or
5 whether such sale or lease is made apart from or as an
6 incident to the seller's engaging in a service occupation
7 and the applicable tax is a Service Use Tax or Service
8 Occupation Tax, rather than Use Tax or Retailers'
9 Occupation Tax.
10 (5a) the repairing, reconditioning or remodeling,
11 for a common carrier by rail, of tangible personal
12 property which belongs to such carrier for hire, and as
13 to which such carrier receives the physical possession of
14 the repaired, reconditioned or remodeled item of tangible
15 personal property in Illinois, and which such carrier
16 transports, or shares with another common carrier in the
17 transportation of such property, out of Illinois on a
18 standard uniform bill of lading showing the person who
19 repaired, reconditioned or remodeled the property to a
20 destination outside Illinois, for use outside Illinois.
21 (5b) a sale or transfer of tangible personal
22 property which is produced by the seller thereof on
23 special order in such a way as to have made the
24 applicable tax the Service Occupation Tax or the Service
25 Use Tax, rather than the Retailers' Occupation Tax or the
26 Use Tax, for an interstate carrier by rail which receives
27 the physical possession of such property in Illinois, and
28 which transports such property, or shares with another
29 common carrier in the transportation of such property,
30 out of Illinois on a standard uniform bill of lading
31 showing the seller of the property as the shipper or
32 consignor of such property to a destination outside
33 Illinois, for use outside Illinois.
34 (6) a sale or transfer of distillation machinery
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1 and equipment, sold as a unit or kit and assembled or
2 installed by the retailer, which machinery and equipment
3 is certified by the user to be used only for the
4 production of ethyl alcohol that will be used for
5 consumption as motor fuel or as a component of motor fuel
6 for the personal use of such user and not subject to sale
7 or resale.
8 (7) at the election of any serviceman not required
9 to be otherwise registered as a retailer under Section 2a
10 of the Retailers' Occupation Tax Act, made for each
11 fiscal year sales of service in which the aggregate
12 annual cost price of tangible personal property
13 transferred as an incident to the sales of service is
14 less than 35%, or 75% in the case of servicemen
15 transferring prescription drugs or servicemen engaged in
16 graphic arts production, of the aggregate annual total
17 gross receipts from all sales of service. The purchase of
18 such tangible personal property by the serviceman shall
19 be subject to tax under the Retailers' Occupation Tax Act
20 and the Use Tax Act. However, if a primary serviceman
21 who has made the election described in this paragraph
22 subcontracts service work to a secondary serviceman who
23 has also made the election described in this paragraph,
24 the primary serviceman does not incur a Use Tax liability
25 if the secondary serviceman (i) has paid or will pay Use
26 Tax on his or her cost price of any tangible personal
27 property transferred to the primary serviceman and (ii)
28 certifies that fact in writing to the primary serviceman.
29 Tangible personal property transferred incident to the
30 completion of a maintenance agreement is exempt from the tax
31 imposed pursuant to this Act.
32 Exemption (5) also includes machinery and equipment used
33 in the general maintenance or repair of such exempt machinery
34 and equipment or for in-house manufacture of exempt machinery
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1 and equipment. For the purposes of exemption (5), each of
2 these terms shall have the following meanings: (1)
3 "manufacturing process" shall mean the production of any
4 article of tangible personal property, whether such article
5 is a finished product or an article for use in the process of
6 manufacturing or assembling a different article of tangible
7 personal property, by procedures commonly regarded as
8 manufacturing, processing, fabricating, or refining which
9 changes some existing material or materials into a material
10 with a different form, use or name. In relation to a
11 recognized integrated business composed of a series of
12 operations which collectively constitute manufacturing, or
13 individually constitute manufacturing operations, the
14 manufacturing process shall be deemed to commence with the
15 first operation or stage of production in the series, and
16 shall not be deemed to end until the completion of the final
17 product in the last operation or stage of production in the
18 series; and further, for purposes of exemption (5),
19 photoprocessing is deemed to be a manufacturing process of
20 tangible personal property for wholesale or retail sale; (2)
21 "assembling process" shall mean the production of any article
22 of tangible personal property, whether such article is a
23 finished product or an article for use in the process of
24 manufacturing or assembling a different article of tangible
25 personal property, by the combination of existing materials
26 in a manner commonly regarded as assembling which results in
27 a material of a different form, use or name; (3) "machinery"
28 shall mean major mechanical machines or major components of
29 such machines contributing to a manufacturing or assembling
30 process; and (4) "equipment" shall include any independent
31 device or tool separate from any machinery but essential to
32 an integrated manufacturing or assembly process; including
33 computers used primarily in operating exempt machinery and
34 equipment in a computer assisted design, computer assisted
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1 manufacturing (CAD/CAM) system; or any subunit or assembly
2 comprising a component of any machinery or auxiliary, adjunct
3 or attachment parts of machinery, such as tools, dies, jigs,
4 fixtures, patterns and molds; or any parts which require
5 periodic replacement in the course of normal operation; but
6 shall not include hand tools. The purchaser of such machinery
7 and equipment who has an active resale registration number
8 shall furnish such number to the seller at the time of
9 purchase. The user of such machinery and equipment and tools
10 without an active resale registration number shall prepare a
11 certificate of exemption for each transaction stating facts
12 establishing the exemption for that transaction, which
13 certificate shall be available to the Department for
14 inspection or audit. The Department shall prescribe the form
15 of the certificate.
16 Any informal rulings, opinions or letters issued by the
17 Department in response to an inquiry or request for any
18 opinion from any person regarding the coverage and
19 applicability of exemption (5) to specific devices shall be
20 published, maintained as a public record, and made available
21 for public inspection and copying. If the informal ruling,
22 opinion or letter contains trade secrets or other
23 confidential information, where possible the Department shall
24 delete such information prior to publication. Whenever such
25 informal rulings, opinions, or letters contain any policy of
26 general applicability, the Department shall formulate and
27 adopt such policy as a rule in accordance with the provisions
28 of the Illinois Administrative Procedure Act.
29 On and after July 1, 1987, no entity otherwise eligible
30 under exemption (3) of this Section shall make tax free
31 purchases unless it has an active exemption identification
32 number issued by the Department.
33 The purchase, employment and transfer of such tangible
34 personal property as newsprint and ink for the primary
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1 purpose of conveying news (with or without other information)
2 is not a purchase, use or sale of service or of tangible
3 personal property within the meaning of this Act.
4 "Serviceman" means any person who is engaged in the
5 occupation of making sales of service.
6 "Sale at retail" means "sale at retail" as defined in the
7 Retailers' Occupation Tax Act.
8 "Supplier" means any person who makes sales of tangible
9 personal property to servicemen for the purpose of resale as
10 an incident to a sale of service.
11 "Serviceman maintaining a place of business in this
12 State", or any like term, means and includes any serviceman:
13 1. having or maintaining within this State,
14 directly or by a subsidiary, an office, distribution
15 house, sales house, warehouse or other place of business,
16 or any agent or other representative operating within
17 this State under the authority of the serviceman or its
18 subsidiary, irrespective of whether such place of
19 business or agent or other representative is located here
20 permanently or temporarily, or whether such serviceman or
21 subsidiary is licensed to do business in this State;
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
25 intended by the retailer to be broadcast by cable
26 television or other means of broadcasting, to consumers
27 located in this State;
28 3. pursuant to a contract with a broadcaster or
29 publisher located in this State, soliciting orders for
30 tangible personal property by means of advertising which
31 is disseminated primarily to consumers located in this
32 State and only secondarily to bordering jurisdictions;
33 4. soliciting orders for tangible personal property
34 by mail if the solicitations are substantial and
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1 recurring and if the retailer benefits from any banking,
2 financing, debt collection, telecommunication, or
3 marketing activities occurring in this State or benefits
4 from the location in this State of authorized
5 installation, servicing, or repair facilities;
6 5. being owned or controlled by the same interests
7 which own or control any retailer engaging in business in
8 the same or similar line of business in this State;
9 6. having a franchisee or licensee operating under
10 its trade name if the franchisee or licensee is required
11 to collect the tax under this Section;
12 7. pursuant to a contract with a cable television
13 operator located in this State, soliciting orders for
14 tangible personal property by means of advertising which
15 is transmitted or distributed over a cable television
16 system in this State; or
17 8. engaging in activities in Illinois, which
18 activities in the state in which the supply business
19 engaging in such activities is located would constitute
20 maintaining a place of business in that state; or
21 9. soliciting orders for tangible personal property
22 by means of the Internet that is intended to be
23 transmitted to consumers in this State.
24 (Source: P.A. 91-51, eff. 6-30-99.)
25 Section 15. The Service Occupation Tax Act is amended by
26 changing Section 2 as follows:
27 (35 ILCS 115/2) (from Ch. 120, par. 439.102)
28 Sec. 2. "Transfer" means any transfer of the title to
29 property or of the ownership of property, including an
30 Internet transfer, whether or not the transferor retains
31 title as security for the payment of amounts due him from the
32 transferee.
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1 "Cost Price" means the consideration paid by the
2 serviceman for a purchase valued in money, whether paid in
3 money or otherwise, including cash, credits and services, and
4 shall be determined without any deduction on account of the
5 supplier's cost of the property sold or on account of any
6 other expense incurred by the supplier. When a serviceman
7 contracts out part or all of the services required in his
8 sale of service, it shall be presumed that the cost price to
9 the serviceman of the property transferred to him by his or
10 her subcontractor is equal to 50% of the subcontractor's
11 charges to the serviceman in the absence of proof of the
12 consideration paid by the subcontractor for the purchase of
13 such property.
14 "Department" means the Department of Revenue.
15 "Person" means any natural individual, firm, partnership,
16 association, joint stock company, joint venture, public or
17 private corporation, limited liability company, and any
18 receiver, executor, trustee, guardian or other representative
19 appointed by order of any court.
20 "Sale of Service" means any transaction except:
21 (a) A retail sale of tangible personal property taxable
22 under the Retailers' Occupation Tax Act or under the Use Tax
23 Act.
24 (b) A sale of tangible personal property for the purpose
25 of resale made in compliance with Section 2c of the
26 Retailers' Occupation Tax Act.
27 (c) Except as hereinafter provided, a sale or transfer
28 of tangible personal property as an incident to the rendering
29 of service for or by any governmental body or for or by any
30 corporation, society, association, foundation or institution
31 organized and operated exclusively for charitable, religious
32 or educational purposes or any not-for-profit corporation,
33 society, association, foundation, institution or organization
34 which has no compensated officers or employees and which is
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1 organized and operated primarily for the recreation of
2 persons 55 years of age or older. A limited liability company
3 may qualify for the exemption under this paragraph only if
4 the limited liability company is organized and operated
5 exclusively for educational purposes.
6 (d) A sale or transfer of tangible personal property as
7 an incident to the rendering of service for interstate
8 carriers for hire for use as rolling stock moving in
9 interstate commerce or lessors under leases of one year or
10 longer, executed or in effect at the time of purchase, to
11 interstate carriers for hire for use as rolling stock moving
12 in interstate commerce, and equipment operated by a
13 telecommunications provider, licensed as a common carrier by
14 the Federal Communications Commission, which is permanently
15 installed in or affixed to aircraft moving in interstate
16 commerce.
17 (d-1) A sale or transfer of tangible personal property
18 as an incident to the rendering of service for owners,
19 lessors or shippers of tangible personal property which is
20 utilized by interstate carriers for hire for use as rolling
21 stock moving in interstate commerce, and equipment operated
22 by a telecommunications provider, licensed as a common
23 carrier by the Federal Communications Commission, which is
24 permanently installed in or affixed to aircraft moving in
25 interstate commerce.
26 (d-2) The repairing, reconditioning or remodeling, for a
27 common carrier by rail, of tangible personal property which
28 belongs to such carrier for hire, and as to which such
29 carrier receives the physical possession of the repaired,
30 reconditioned or remodeled item of tangible personal property
31 in Illinois, and which such carrier transports, or shares
32 with another common carrier in the transportation of such
33 property, out of Illinois on a standard uniform bill of
34 lading showing the person who repaired, reconditioned or
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1 remodeled the property as the shipper or consignor of such
2 property to a destination outside Illinois, for use outside
3 Illinois.
4 (d-3) A sale or transfer of tangible personal property
5 which is produced by the seller thereof on special order in
6 such a way as to have made the applicable tax the Service
7 Occupation Tax or the Service Use Tax, rather than the
8 Retailers' Occupation Tax or the Use Tax, for an interstate
9 carrier by rail which receives the physical possession of
10 such property in Illinois, and which transports such
11 property, or shares with another common carrier in the
12 transportation of such property, out of Illinois on a
13 standard uniform bill of lading showing the seller of the
14 property as the shipper or consignor of such property to a
15 destination outside Illinois, for use outside Illinois.
16 (d-4) Until January 1, 1997, a sale, by a registered
17 serviceman paying tax under this Act to the Department, of
18 special order printed materials delivered outside Illinois
19 and which are not returned to this State, if delivery is made
20 by the seller or agent of the seller, including an agent who
21 causes the product to be delivered outside Illinois by a
22 common carrier or the U.S. postal service.
23 (e) A sale or transfer of machinery and equipment used
24 primarily in the process of the manufacturing or assembling,
25 either in an existing, an expanded or a new manufacturing
26 facility, of tangible personal property for wholesale or
27 retail sale or lease, whether such sale or lease is made
28 directly by the manufacturer or by some other person, whether
29 the materials used in the process are owned by the
30 manufacturer or some other person, or whether such sale or
31 lease is made apart from or as an incident to the seller's
32 engaging in a service occupation and the applicable tax is a
33 Service Occupation Tax or Service Use Tax, rather than
34 Retailers' Occupation Tax or Use Tax.
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1 (f) The sale or transfer of distillation machinery and
2 equipment, sold as a unit or kit and assembled or installed
3 by the retailer, which machinery and equipment is certified
4 by the user to be used only for the production of ethyl
5 alcohol that will be used for consumption as motor fuel or as
6 a component of motor fuel for the personal use of such user
7 and not subject to sale or resale.
8 (g) At the election of any serviceman not required to be
9 otherwise registered as a retailer under Section 2a of the
10 Retailers' Occupation Tax Act, made for each fiscal year
11 sales of service in which the aggregate annual cost price of
12 tangible personal property transferred as an incident to the
13 sales of service is less than 35% (75% in the case of
14 servicemen transferring prescription drugs or servicemen
15 engaged in graphic arts production) of the aggregate annual
16 total gross receipts from all sales of service. The purchase
17 of such tangible personal property by the serviceman shall be
18 subject to tax under the Retailers' Occupation Tax Act and
19 the Use Tax Act. However, if a primary serviceman who has
20 made the election described in this paragraph subcontracts
21 service work to a secondary serviceman who has also made the
22 election described in this paragraph, the primary serviceman
23 does not incur a Use Tax liability if the secondary
24 serviceman (i) has paid or will pay Use Tax on his or her
25 cost price of any tangible personal property transferred to
26 the primary serviceman and (ii) certifies that fact in
27 writing to the primary serviceman.
28 Tangible personal property transferred incident to the
29 completion of a maintenance agreement is exempt from the tax
30 imposed pursuant to this Act.
31 Exemption (e) also includes machinery and equipment used
32 in the general maintenance or repair of such exempt machinery
33 and equipment or for in-house manufacture of exempt machinery
34 and equipment. For the purposes of exemption (e), each of
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1 these terms shall have the following meanings: (1)
2 "manufacturing process" shall mean the production of any
3 article of tangible personal property, whether such article
4 is a finished product or an article for use in the process of
5 manufacturing or assembling a different article of tangible
6 personal property, by procedures commonly regarded as
7 manufacturing, processing, fabricating, or refining which
8 changes some existing material or materials into a material
9 with a different form, use or name. In relation to a
10 recognized integrated business composed of a series of
11 operations which collectively constitute manufacturing, or
12 individually constitute manufacturing operations, the
13 manufacturing process shall be deemed to commence with the
14 first operation or stage of production in the series, and
15 shall not be deemed to end until the completion of the final
16 product in the last operation or stage of production in the
17 series; and further for purposes of exemption (e),
18 photoprocessing is deemed to be a manufacturing process of
19 tangible personal property for wholesale or retail sale; (2)
20 "assembling process" shall mean the production of any article
21 of tangible personal property, whether such article is a
22 finished product or an article for use in the process of
23 manufacturing or assembling a different article of tangible
24 personal property, by the combination of existing materials
25 in a manner commonly regarded as assembling which results in
26 a material of a different form, use or name; (3) "machinery"
27 shall mean major mechanical machines or major components of
28 such machines contributing to a manufacturing or assembling
29 process; and (4) "equipment" shall include any independent
30 device or tool separate from any machinery but essential to
31 an integrated manufacturing or assembly process; including
32 computers used primarily in operating exempt machinery and
33 equipment in a computer assisted design, computer assisted
34 manufacturing (CAD/CAM) system; or any subunit or assembly
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1 comprising a component of any machinery or auxiliary, adjunct
2 or attachment parts of machinery, such as tools, dies, jigs,
3 fixtures, patterns and molds; or any parts which require
4 periodic replacement in the course of normal operation; but
5 shall not include hand tools. The purchaser of such machinery
6 and equipment who has an active resale registration number
7 shall furnish such number to the seller at the time of
8 purchase. The purchaser of such machinery and equipment and
9 tools without an active resale registration number shall
10 furnish to the seller a certificate of exemption for each
11 transaction stating facts establishing the exemption for that
12 transaction, which certificate shall be available to the
13 Department for inspection or audit.
14 The rolling stock exemption applies to rolling stock used
15 by an interstate carrier for hire, even just between points
16 in Illinois, if such rolling stock transports, for hire,
17 persons whose journeys or property whose shipments originate
18 or terminate outside Illinois.
19 Any informal rulings, opinions or letters issued by the
20 Department in response to an inquiry or request for any
21 opinion from any person regarding the coverage and
22 applicability of exemption (e) to specific devices shall be
23 published, maintained as a public record, and made available
24 for public inspection and copying. If the informal ruling,
25 opinion or letter contains trade secrets or other
26 confidential information, where possible the Department shall
27 delete such information prior to publication. Whenever such
28 informal rulings, opinions, or letters contain any policy of
29 general applicability, the Department shall formulate and
30 adopt such policy as a rule in accordance with the provisions
31 of the Illinois Administrative Procedure Act.
32 On and after July 1, 1987, no entity otherwise eligible
33 under exemption (c) of this Section shall make tax free
34 purchases unless it has an active exemption identification
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1 number issued by the Department.
2 "Serviceman" means any person who is engaged in the
3 occupation of making sales of service.
4 "Sale at Retail" means "sale at retail" as defined in the
5 Retailers' Occupation Tax Act.
6 "Supplier" means any person who makes sales of tangible
7 personal property to servicemen for the purpose of resale as
8 an incident to a sale of service.
9 (Source: P.A. 91-51, eff. 6-30-99.)
10 Section 20. The Retailers' Occupation Tax Act is amended
11 by changing Section 1 as follows:
12 (35 ILCS 120/1) (from Ch. 120, par. 440)
13 Sec. 1. Definitions.
14 "Sale at retail" means any transfer of the ownership of
15 or title to tangible personal property to a purchaser,
16 including an Internet transfer, for the purpose of use or
17 consumption, and not for the purpose of resale in any form as
18 tangible personal property to the extent not first subjected
19 to a use for which it was purchased, for a valuable
20 consideration: Provided that the property purchased is
21 deemed to be purchased for the purpose of resale, despite
22 first being used, to the extent to which it is resold as an
23 ingredient of an intentionally produced product or byproduct
24 of manufacturing. For this purpose, slag produced as an
25 incident to manufacturing pig iron or steel and sold is
26 considered to be an intentionally produced byproduct of
27 manufacturing. Transactions whereby the possession of the
28 property is transferred but the seller retains the title as
29 security for payment of the selling price shall be deemed to
30 be sales.
31 "Sale at retail" shall be construed to include any
32 transfer of the ownership of or title to tangible personal
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1 property to a purchaser, for use or consumption by any other
2 person to whom such purchaser may transfer the tangible
3 personal property without a valuable consideration, and to
4 include any transfer, whether made for or without a valuable
5 consideration, for resale in any form as tangible personal
6 property unless made in compliance with Section 2c of this
7 Act.
8 Sales of tangible personal property, which property, to
9 the extent not first subjected to a use for which it was
10 purchased, as an ingredient or constituent, goes into and
11 forms a part of tangible personal property subsequently the
12 subject of a "Sale at retail", are not sales at retail as
13 defined in this Act: Provided that the property purchased is
14 deemed to be purchased for the purpose of resale, despite
15 first being used, to the extent to which it is resold as an
16 ingredient of an intentionally produced product or byproduct
17 of manufacturing.
18 "Sale at retail" shall be construed to include any
19 Illinois florist's sales transaction in which the purchase
20 order is received in Illinois by a florist and the sale is
21 for use or consumption, but the Illinois florist has a
22 florist in another state deliver the property to the
23 purchaser or the purchaser's donee in such other state.
24 Nonreusable tangible personal property that is used by
25 persons engaged in the business of operating a restaurant,
26 cafeteria, or drive-in is a sale for resale when it is
27 transferred to customers in the ordinary course of business
28 as part of the sale of food or beverages and is used to
29 deliver, package, or consume food or beverages, regardless of
30 where consumption of the food or beverages occurs. Examples
31 of those items include, but are not limited to nonreusable,
32 paper and plastic cups, plates, baskets, boxes, sleeves,
33 buckets or other containers, utensils, straws, placemats,
34 napkins, doggie bags, and wrapping or packaging materials
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1 that are transferred to customers as part of the sale of food
2 or beverages in the ordinary course of business.
3 The purchase, employment and transfer of such tangible
4 personal property as newsprint and ink for the primary
5 purpose of conveying news (with or without other information)
6 is not a purchase, use or sale of tangible personal property.
7 A person whose activities are organized and conducted
8 primarily as a not-for-profit service enterprise, and who
9 engages in selling tangible personal property at retail
10 (whether to the public or merely to members and their guests)
11 is engaged in the business of selling tangible personal
12 property at retail with respect to such transactions,
13 excepting only a person organized and operated exclusively
14 for charitable, religious or educational purposes either (1),
15 to the extent of sales by such person to its members,
16 students, patients or inmates of tangible personal property
17 to be used primarily for the purposes of such person, or (2),
18 to the extent of sales by such person of tangible personal
19 property which is not sold or offered for sale by persons
20 organized for profit. The selling of school books and school
21 supplies by schools at retail to students is not "primarily
22 for the purposes of" the school which does such selling. The
23 provisions of this paragraph shall not apply to nor subject
24 to taxation occasional dinners, socials or similar activities
25 of a person organized and operated exclusively for
26 charitable, religious or educational purposes, whether or not
27 such activities are open to the public.
28 A person who is the recipient of a grant or contract
29 under Title VII of the Older Americans Act of 1965 (P.L.
30 92-258) and serves meals to participants in the federal
31 Nutrition Program for the Elderly in return for contributions
32 established in amount by the individual participant pursuant
33 to a schedule of suggested fees as provided for in the
34 federal Act is not engaged in the business of selling
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1 tangible personal property at retail with respect to such
2 transactions.
3 "Purchaser" means anyone who, through a sale at retail,
4 acquires the ownership of or title to tangible personal
5 property for a valuable consideration.
6 "Reseller of motor fuel" means any person engaged in the
7 business of selling or delivering or transferring title of
8 motor fuel to another person other than for use or
9 consumption. No person shall act as a reseller of motor fuel
10 within this State without first being registered as a
11 reseller pursuant to Section 2c or a retailer pursuant to
12 Section 2a.
13 "Selling price" or the "amount of sale" means the
14 consideration for a sale valued in money whether received in
15 money or otherwise, including cash, credits, property, other
16 than as hereinafter provided, and services, but not including
17 the value of or credit given for traded-in tangible personal
18 property where the item that is traded-in is of like kind and
19 character as that which is being sold, and shall be
20 determined without any deduction on account of the cost of
21 the property sold, the cost of materials used, labor or
22 service cost or any other expense whatsoever, but does not
23 include charges that are added to prices by sellers on
24 account of the seller's tax liability under this Act, or on
25 account of the seller's duty to collect, from the purchaser,
26 the tax that is imposed by the Use Tax Act, or on account of
27 the seller's tax liability under Section 8-11-1 of the
28 Illinois Municipal Code, as heretofore and hereafter amended,
29 or on account of the seller's tax liability under the County
30 Retailers' Occupation Tax Act, or on account of the seller's
31 tax liability under the Home Rule Municipal Soft Drink
32 Retailers' Occupation Tax, or on account of the seller's tax
33 liability under any tax imposed under the "Regional
34 Transportation Authority Act", approved December 12, 1973.
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1 Effective December 1, 1985, "selling price" shall include
2 charges that are added to prices by sellers on account of the
3 seller's tax liability under the Cigarette Tax Act, on
4 account of the sellers' duty to collect, from the purchaser,
5 the tax imposed under the Cigarette Use Tax Act, and on
6 account of the seller's duty to collect, from the purchaser,
7 any cigarette tax imposed by a home rule unit.
8 The phrase "like kind and character" shall be liberally
9 construed (including but not limited to any form of motor
10 vehicle for any form of motor vehicle, or any kind of farm or
11 agricultural implement for any other kind of farm or
12 agricultural implement), while not including a kind of item
13 which, if sold at retail by that retailer, would be exempt
14 from retailers' occupation tax and use tax as an isolated or
15 occasional sale.
16 "Gross receipts" from the sales of tangible personal
17 property at retail means the total selling price or the
18 amount of such sales, as hereinbefore defined. In the case
19 of charge and time sales, the amount thereof shall be
20 included only as and when payments are received by the
21 seller. Receipts or other consideration derived by a seller
22 from the sale, transfer or assignment of accounts receivable
23 to a wholly owned subsidiary will not be deemed payments
24 prior to the time the purchaser makes payment on such
25 accounts.
26 "Department" means the Department of Revenue.
27 "Person" means any natural individual, firm, partnership,
28 association, joint stock company, joint adventure, public or
29 private corporation, limited liability company, or a
30 receiver, executor, trustee, guardian or other representative
31 appointed by order of any court.
32 The isolated or occasional sale of tangible personal
33 property at retail by a person who does not hold himself out
34 as being engaged (or who does not habitually engage) in
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1 selling such tangible personal property at retail, or a sale
2 through a bulk vending machine, does not constitute engaging
3 in a business of selling such tangible personal property at
4 retail within the meaning of this Act; provided that any
5 person who is engaged in a business which is not subject to
6 the tax imposed by this Act because of involving the sale of
7 or a contract to sell real estate or a construction contract
8 to improve real estate or a construction contract to
9 engineer, install, and maintain an integrated system of
10 products, but who, in the course of conducting such business,
11 transfers tangible personal property to users or consumers in
12 the finished form in which it was purchased, and which does
13 not become real estate or was not engineered and installed,
14 under any provision of a construction contract or real estate
15 sale or real estate sales agreement entered into with some
16 other person arising out of or because of such nontaxable
17 business, is engaged in the business of selling tangible
18 personal property at retail to the extent of the value of the
19 tangible personal property so transferred. If, in such a
20 transaction, a separate charge is made for the tangible
21 personal property so transferred, the value of such property,
22 for the purpose of this Act, shall be the amount so
23 separately charged, but not less than the cost of such
24 property to the transferor; if no separate charge is made,
25 the value of such property, for the purposes of this Act, is
26 the cost to the transferor of such tangible personal
27 property. Construction contracts for the improvement of real
28 estate consisting of engineering, installation, and
29 maintenance of voice, data, video, security, and all
30 telecommunication systems do not constitute engaging in a
31 business of selling tangible personal property at retail
32 within the meaning of this Act if they are sold at one
33 specified contract price.
34 A person who holds himself or herself out as being
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1 engaged (or who habitually engages) in selling tangible
2 personal property at retail is a person engaged in the
3 business of selling tangible personal property at retail
4 hereunder with respect to such sales (and not primarily in a
5 service occupation) notwithstanding the fact that such person
6 designs and produces such tangible personal property on
7 special order for the purchaser and in such a way as to
8 render the property of value only to such purchaser, if such
9 tangible personal property so produced on special order
10 serves substantially the same function as stock or standard
11 items of tangible personal property that are sold at retail.
12 Persons who engage in the business of transferring
13 tangible personal property upon the redemption of trading
14 stamps are engaged in the business of selling such property
15 at retail and shall be liable for and shall pay the tax
16 imposed by this Act on the basis of the retail value of the
17 property transferred upon redemption of such stamps.
18 "Bulk vending machine" means a nonelectrically operated
19 vending machine, containing unsorted confections, nuts or
20 other merchandise which, when a coin of a denomination not
21 larger than one cent is inserted, are dispensed in equal
22 portions, at random and without selection by the customer.
23 (Source: P.A. 90-289, eff. 8-1-97.)