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92_HB1700eng HB1700 Engrossed LRB9201032SMpk 1 AN ACT in relation to taxes, amending named Acts. 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 HB1700 Engrossed -2- LRB9201032SMpk 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, for 21 the purpose of use, and not for the purpose of resale in any 22 form as tangible personal property to the extent not first 23 subjected to a use for which it was purchased, for a valuable 24 consideration: Provided that the property purchased is deemed 25 to be purchased for the purpose of resale, despite first 26 being used, to the extent to which it is resold as an 27 ingredient of an intentionally produced product or by-product 28 of manufacturing. For this purpose, slag produced as an 29 incident to manufacturing pig iron or steel and sold is 30 considered to be an intentionally produced by-product of 31 manufacturing. "Sale at retail" includes any such transfer 32 made for resale unless made in compliance with Section 2c of 33 the Retailers' Occupation Tax Act, as incorporated by 34 reference into Section 12 of this Act. Transactions whereby HB1700 Engrossed -3- LRB9201032SMpk 1 the possession of the property is transferred but the seller 2 retains the title as security for payment of the selling 3 price are sales. 4 "Sale at retail" shall also be construed to include any 5 Illinois florist's sales transaction in which the purchase 6 order is received in Illinois by a florist and the sale is 7 for use or consumption, but the Illinois florist has a 8 florist in another state deliver the property to the 9 purchaser or the purchaser's donee in such other state. 10 Nonreusable tangible personal property that is used by 11 persons engaged in the business of operating a restaurant, 12 cafeteria, or drive-in is a sale for resale when it is 13 transferred to customers in the ordinary course of business 14 as part of the sale of food or beverages and is used to 15 deliver, package, or consume food or beverages, regardless of 16 where consumption of the food or beverages occurs. Examples 17 of those items include, but are not limited to nonreusable, 18 paper and plastic cups, plates, baskets, boxes, sleeves, 19 buckets or other containers, utensils, straws, placemats, 20 napkins, doggie bags, and wrapping or packaging materials 21 that are transferred to customers as part of the sale of food 22 or beverages in the ordinary course of business. 23 The purchase, employment and transfer of such tangible 24 personal property as newsprint and ink for the primary 25 purpose of conveying news (with or without other information) 26 is not a purchase, use or sale of tangible personal property. 27 "Selling price" means the consideration for a sale valued 28 in money whether received in money or otherwise, including 29 cash, credits, property other than as hereinafter provided, 30 and services, but not including the value of or credit given 31 for traded-in tangible personal property where the item that 32 is traded-in is of like kind and character as that which is 33 being sold, and shall be determined without any deduction on 34 account of the cost of the property sold, the cost of HB1700 Engrossed -4- LRB9201032SMpk 1 materials used, labor or service cost or any other expense 2 whatsoever, but does not include interest or finance charges 3 which appear as separate items on the bill of sale or sales 4 contract nor charges that are added to prices by sellers on 5 account of the seller's tax liability under the "Retailers' 6 Occupation Tax Act", or on account of the seller's duty to 7 collect, from the purchaser, the tax that is imposed by this 8 Act, or on account of the seller's tax liability under 9 Section 8-11-1 of the Illinois Municipal Code, as heretofore 10 and hereafter amended, or on account of the seller's tax 11 liability under the "County Retailers' Occupation Tax Act". 12 Effective December 1, 1985, "selling price" shall include 13 charges that are added to prices by sellers on account of the 14 seller's tax liability under the Cigarette Tax Act, on 15 account of the seller's duty to collect, from the purchaser, 16 the tax imposed under the Cigarette Use Tax Act, and on 17 account of the seller's duty to collect, from the purchaser, 18 any cigarette tax imposed by a home rule unit. 19 The phrase "like kind and character" shall be liberally 20 construed (including but not limited to any form of motor 21 vehicle for any form of motor vehicle, or any kind of farm or 22 agricultural implement for any other kind of farm or 23 agricultural implement), while not including a kind of item 24 which, if sold at retail by that retailer, would be exempt 25 from retailers' occupation tax and use tax as an isolated or 26 occasional sale. 27 "Department" means the Department of Revenue. 28 "Person" means any natural individual, firm, partnership, 29 association, joint stock company, joint adventure, public or 30 private corporation, limited liability company, or a 31 receiver, executor, trustee, guardian or other representative 32 appointed by order of any court. 33 "Retailer" means and includes every person engaged in the 34 business of making sales at retail as defined in this HB1700 Engrossed -5- LRB9201032SMpk 1 Section. 2 A person who holds himself or herself out as being 3 engaged (or who habitually engages) in selling tangible 4 personal property at retail is a retailer hereunder with 5 respect to such sales (and not primarily in a service 6 occupation) notwithstanding the fact that such person designs 7 and produces such tangible personal property on special order 8 for the purchaser and in such a way as to render the property 9 of value only to such purchaser, if such tangible personal 10 property so produced on special order serves substantially 11 the same function as stock or standard items of tangible 12 personal property that are sold at retail. 13 A person whose activities are organized and conducted 14 primarily as a not-for-profit service enterprise, and who 15 engages in selling tangible personal property at retail 16 (whether to the public or merely to members and their guests) 17 is a retailer with respect to such transactions, excepting 18 only a person organized and operated exclusively for 19 charitable, religious or educational purposes either (1), to 20 the extent of sales by such person to its members, students, 21 patients or inmates of tangible personal property to be used 22 primarily for the purposes of such person, or (2), to the 23 extent of sales by such person of tangible personal property 24 which is not sold or offered for sale by persons organized 25 for profit. The selling of school books and school supplies 26 by schools at retail to students is not "primarily for the 27 purposes of" the school which does such selling. This 28 paragraph does not apply to nor subject to taxation 29 occasional dinners, social or similar activities of a person 30 organized and operated exclusively for charitable, religious 31 or educational purposes, whether or not such activities are 32 open to the public. 33 A person who is the recipient of a grant or contract 34 under Title VII of the Older Americans Act of 1965 (P.L. HB1700 Engrossed -6- LRB9201032SMpk 1 92-258) and serves meals to participants in the federal 2 Nutrition Program for the Elderly in return for contributions 3 established in amount by the individual participant pursuant 4 to a schedule of suggested fees as provided for in the 5 federal Act is not a retailer under this Act with respect to 6 such transactions. 7 Persons who engage in the business of transferring 8 tangible personal property upon the redemption of trading 9 stamps are retailers hereunder when engaged in such business. 10 The isolated or occasional sale of tangible personal 11 property at retail by a person who does not hold himself out 12 as being engaged (or who does not habitually engage) in 13 selling such tangible personal property at retail or a sale 14 through a bulk vending machine does not make such person a 15 retailer hereunder. However, any person who is engaged in a 16 business which is not subject to the tax imposed by the 17 "Retailers' Occupation Tax Act" because of involving the sale 18 of or a contract to sell real estate or a construction 19 contract to improve real estate, but who, in the course of 20 conducting such business, transfers tangible personal 21 property to users or consumers in the finished form in which 22 it was purchased, and which does not become real estate, 23 under any provision of a construction contract or real estate 24 sale or real estate sales agreement entered into with some 25 other person arising out of or because of such nontaxable 26 business, is a retailer to the extent of the value of the 27 tangible personal property so transferred. If, in such 28 transaction, a separate charge is made for the tangible 29 personal property so transferred, the value of such property, 30 for the purposes of this Act, is the amount so separately 31 charged, but not less than the cost of such property to the 32 transferor; if no separate charge is made, the value of such 33 property, for the purposes of this Act, is the cost to the 34 transferor of such tangible personal property. HB1700 Engrossed -7- LRB9201032SMpk 1 "Retailer maintaining a place of business in this State", 2 or any like term, means and includes any of the following 3 retailers: 4 1. A retailer having or maintaining within this 5 State, directly or by a subsidiary, an office, 6 distribution house, sales house, warehouse or other place 7 of business, or any agent or other representative 8 operating within this State under the authority of the 9 retailer or its subsidiary, irrespective of whether such 10 place of business or agent or other representative is 11 located here permanently or temporarily, or whether such 12 retailer or subsidiary is licensed to do business in this 13 State. However, the ownership of property that is located 14 at the premises of a printer with which the retailer has 15 contracted for printing and that consists of the final 16 printed product, property that becomes a part of the 17 final printed product, or copy from which the printed 18 product is produced shall not result in the retailer 19 being deemed to have or maintain an office, distribution 20 house, sales house, warehouse, or other place of business 21 within this State. 22 2. A retailer soliciting orders for tangible 23 personal property by means of a telecommunication or 24 television shopping system (which utilizes toll free 25 numbers) which is intended by the retailer to be 26 broadcast by cable television or other means of 27 broadcasting, to consumers located in this State. 28 3. A retailer, pursuant to a contract with a 29 broadcaster or publisher located in this State, 30 soliciting orders for tangible personal property by means 31 of advertising which is disseminated primarily to 32 consumers located in this State and only secondarily to 33 bordering jurisdictions. 34 4. A retailer soliciting orders for tangible HB1700 Engrossed -8- LRB9201032SMpk 1 personal property by mail if the solicitations are 2 substantial and recurring and if the retailer benefits 3 from any banking, financing, debt collection, 4 telecommunication, or marketing activities occurring in 5 this State or benefits from the location in this State of 6 authorized installation, servicing, or repair facilities. 7 5. A retailer that is owned or controlled by the 8 same interests that own or control any retailer engaging 9 in business in the same or similar line of business in 10 this State. 11 6. A retailer having a franchisee or licensee 12 operating under its trade name if the franchisee or 13 licensee is required to collect the tax under this 14 Section. 15 7. A retailer, pursuant to a contract with a cable 16 television operator located in this State, soliciting 17 orders for tangible personal property by means of 18 advertising which is transmitted or distributed over a 19 cable television system in this State. 20 8. A retailer engaging in activities in Illinois, 21 which activities in the state in which the retail 22 business engaging in such activities is located would 23 constitute maintaining a place of business in that state. 24 "Bulk vending machine" means anonelectrically operated25 vending machine, containing unsorted confections, nuts, toys, 26 or other items designed primarily to be used or played with 27 by childrenor other merchandisewhich, when a coin or coins 28 of a denomination not larger than $0.50 areone cent is29 inserted, are dispensed in equal portions, at random and 30 without selection by the customer. 31 (Source: P.A. 90-289, eff. 8-1-97.) 32 Section 10. The Retailers' Occupation Tax Act is amended 33 by changing Section 1 as follows: HB1700 Engrossed -9- LRB9201032SMpk 1 (35 ILCS 120/1) (from Ch. 120, par. 440) 2 Sec. 1. Definitions. "Sale at retail" means any 3 transfer of the ownership of or title to tangible personal 4 property to a purchaser, for the purpose of use or 5 consumption, and not for the purpose of resale in any form as 6 tangible personal property to the extent not first subjected 7 to a use for which it was purchased, for a valuable 8 consideration: Provided that the property purchased is 9 deemed to be purchased for the purpose of resale, despite 10 first being used, to the extent to which it is resold as an 11 ingredient of an intentionally produced product or byproduct 12 of manufacturing. For this purpose, slag produced as an 13 incident to manufacturing pig iron or steel and sold is 14 considered to be an intentionally produced byproduct of 15 manufacturing. Transactions whereby the possession of the 16 property is transferred but the seller retains the title as 17 security for payment of the selling price shall be deemed to 18 be sales. 19 "Sale at retail" shall be construed to include any 20 transfer of the ownership of or title to tangible personal 21 property to a purchaser, for use or consumption by any other 22 person to whom such purchaser may transfer the tangible 23 personal property without a valuable consideration, and to 24 include any transfer, whether made for or without a valuable 25 consideration, for resale in any form as tangible personal 26 property unless made in compliance with Section 2c of this 27 Act. 28 Sales of tangible personal property, which property, to 29 the extent not first subjected to a use for which it was 30 purchased, as an ingredient or constituent, goes into and 31 forms a part of tangible personal property subsequently the 32 subject of a "Sale at retail", are not sales at retail as 33 defined in this Act: Provided that the property purchased is 34 deemed to be purchased for the purpose of resale, despite HB1700 Engrossed -10- LRB9201032SMpk 1 first being used, to the extent to which it is resold as an 2 ingredient of an intentionally produced product or byproduct 3 of manufacturing. 4 "Sale at retail" shall be construed to include any 5 Illinois florist's sales transaction in which the purchase 6 order is received in Illinois by a florist and the sale is 7 for use or consumption, but the Illinois florist has a 8 florist in another state deliver the property to the 9 purchaser or the purchaser's donee in such other state. 10 Nonreusable tangible personal property that is used by 11 persons engaged in the business of operating a restaurant, 12 cafeteria, or drive-in is a sale for resale when it is 13 transferred to customers in the ordinary course of business 14 as part of the sale of food or beverages and is used to 15 deliver, package, or consume food or beverages, regardless of 16 where consumption of the food or beverages occurs. Examples 17 of those items include, but are not limited to nonreusable, 18 paper and plastic cups, plates, baskets, boxes, sleeves, 19 buckets or other containers, utensils, straws, placemats, 20 napkins, doggie bags, and wrapping or packaging materials 21 that are transferred to customers as part of the sale of food 22 or beverages in the ordinary course of business. 23 The purchase, employment and transfer of such tangible 24 personal property as newsprint and ink for the primary 25 purpose of conveying news (with or without other information) 26 is not a purchase, use or sale of tangible personal property. 27 A person whose activities are organized and conducted 28 primarily as a not-for-profit service enterprise, and who 29 engages in selling tangible personal property at retail 30 (whether to the public or merely to members and their guests) 31 is engaged in the business of selling tangible personal 32 property at retail with respect to such transactions, 33 excepting only a person organized and operated exclusively 34 for charitable, religious or educational purposes either (1), HB1700 Engrossed -11- LRB9201032SMpk 1 to the extent of sales by such person to its members, 2 students, patients or inmates of tangible personal property 3 to be used primarily for the purposes of such person, or (2), 4 to the extent of sales by such person of tangible personal 5 property which is not sold or offered for sale by persons 6 organized for profit. The selling of school books and school 7 supplies by schools at retail to students is not "primarily 8 for the purposes of" the school which does such selling. The 9 provisions of this paragraph shall not apply to nor subject 10 to taxation occasional dinners, socials or similar activities 11 of a person organized and operated exclusively for 12 charitable, religious or educational purposes, whether or not 13 such activities are open to the public. 14 A person who is the recipient of a grant or contract 15 under Title VII of the Older Americans Act of 1965 (P.L. 16 92-258) and serves meals to participants in the federal 17 Nutrition Program for the Elderly in return for contributions 18 established in amount by the individual participant pursuant 19 to a schedule of suggested fees as provided for in the 20 federal Act is not engaged in the business of selling 21 tangible personal property at retail with respect to such 22 transactions. 23 "Purchaser" means anyone who, through a sale at retail, 24 acquires the ownership of or title to tangible personal 25 property for a valuable consideration. 26 "Reseller of motor fuel" means any person engaged in the 27 business of selling or delivering or transferring title of 28 motor fuel to another person other than for use or 29 consumption. No person shall act as a reseller of motor fuel 30 within this State without first being registered as a 31 reseller pursuant to Section 2c or a retailer pursuant to 32 Section 2a. 33 "Selling price" or the "amount of sale" means the 34 consideration for a sale valued in money whether received in HB1700 Engrossed -12- LRB9201032SMpk 1 money or otherwise, including cash, credits, property, other 2 than as hereinafter provided, and services, but not including 3 the value of or credit given for traded-in tangible personal 4 property where the item that is traded-in is of like kind and 5 character as that which is being sold, and shall be 6 determined without any deduction on account of the cost of 7 the property sold, the cost of materials used, labor or 8 service cost or any other expense whatsoever, but does not 9 include charges that are added to prices by sellers on 10 account of the seller's tax liability under this Act, or on 11 account of the seller's duty to collect, from the purchaser, 12 the tax that is imposed by the Use Tax Act, or on account of 13 the seller's tax liability under Section 8-11-1 of the 14 Illinois Municipal Code, as heretofore and hereafter amended, 15 or on account of the seller's tax liability under the County 16 Retailers' Occupation Tax Act, or on account of the seller's 17 tax liability under the Home Rule Municipal Soft Drink 18 Retailers' Occupation Tax, or on account of the seller's tax 19 liability under any tax imposed under the "Regional 20 Transportation Authority Act", approved December 12, 1973. 21 Effective December 1, 1985, "selling price" shall include 22 charges that are added to prices by sellers on account of the 23 seller's tax liability under the Cigarette Tax Act, on 24 account of the sellers' duty to collect, from the purchaser, 25 the tax imposed under the Cigarette Use Tax Act, and on 26 account of the seller's duty to collect, from the purchaser, 27 any cigarette tax imposed by a home rule unit. 28 The phrase "like kind and character" shall be liberally 29 construed (including but not limited to any form of motor 30 vehicle for any form of motor vehicle, or any kind of farm or 31 agricultural implement for any other kind of farm or 32 agricultural implement), while not including a kind of item 33 which, if sold at retail by that retailer, would be exempt 34 from retailers' occupation tax and use tax as an isolated or HB1700 Engrossed -13- LRB9201032SMpk 1 occasional sale. 2 "Gross receipts" from the sales of tangible personal 3 property at retail means the total selling price or the 4 amount of such sales, as hereinbefore defined. In the case 5 of charge and time sales, the amount thereof shall be 6 included only as and when payments are received by the 7 seller. Receipts or other consideration derived by a seller 8 from the sale, transfer or assignment of accounts receivable 9 to a wholly owned subsidiary will not be deemed payments 10 prior to the time the purchaser makes payment on such 11 accounts. 12 "Department" means the Department of Revenue. 13 "Person" means any natural individual, firm, partnership, 14 association, joint stock company, joint adventure, public or 15 private corporation, limited liability company, or a 16 receiver, executor, trustee, guardian or other representative 17 appointed by order of any court. 18 The isolated or occasional sale of tangible personal 19 property at retail by a person who does not hold himself out 20 as being engaged (or who does not habitually engage) in 21 selling such tangible personal property at retail, or a sale 22 through a bulk vending machine, does not constitute engaging 23 in a business of selling such tangible personal property at 24 retail within the meaning of this Act; provided that any 25 person who is engaged in a business which is not subject to 26 the tax imposed by this Act because of involving the sale of 27 or a contract to sell real estate or a construction contract 28 to improve real estate or a construction contract to 29 engineer, install, and maintain an integrated system of 30 products, but who, in the course of conducting such business, 31 transfers tangible personal property to users or consumers in 32 the finished form in which it was purchased, and which does 33 not become real estate or was not engineered and installed, 34 under any provision of a construction contract or real estate HB1700 Engrossed -14- LRB9201032SMpk 1 sale or real estate sales agreement entered into with some 2 other person arising out of or because of such nontaxable 3 business, is engaged in the business of selling tangible 4 personal property at retail to the extent of the value of the 5 tangible personal property so transferred. If, in such a 6 transaction, a separate charge is made for the tangible 7 personal property so transferred, the value of such property, 8 for the purpose of this Act, shall be the amount so 9 separately charged, but not less than the cost of such 10 property to the transferor; if no separate charge is made, 11 the value of such property, for the purposes of this Act, is 12 the cost to the transferor of such tangible personal 13 property. Construction contracts for the improvement of real 14 estate consisting of engineering, installation, and 15 maintenance of voice, data, video, security, and all 16 telecommunication systems do not constitute engaging in a 17 business of selling tangible personal property at retail 18 within the meaning of this Act if they are sold at one 19 specified contract price. 20 A person who holds himself or herself out as being 21 engaged (or who habitually engages) in selling tangible 22 personal property at retail is a person engaged in the 23 business of selling tangible personal property at retail 24 hereunder with respect to such sales (and not primarily in a 25 service occupation) notwithstanding the fact that such person 26 designs and produces such tangible personal property on 27 special order for the purchaser and in such a way as to 28 render the property of value only to such purchaser, if such 29 tangible personal property so produced on special order 30 serves substantially the same function as stock or standard 31 items of tangible personal property that are sold at retail. 32 Persons who engage in the business of transferring 33 tangible personal property upon the redemption of trading 34 stamps are engaged in the business of selling such property HB1700 Engrossed -15- LRB9201032SMpk 1 at retail and shall be liable for and shall pay the tax 2 imposed by this Act on the basis of the retail value of the 3 property transferred upon redemption of such stamps. 4 "Bulk vending machine" means anonelectrically operated5 vending machine, containing unsorted confections, nuts, toys, 6 or other items designed primarily to be used or played with 7 by childrenor other merchandisewhich, when a coin or coins 8 of a denomination not larger than $0.50 areone cent is9 inserted, are dispensed in equal portions, at random and 10 without selection by the customer. 11 (Source: P.A. 90-289, eff. 8-1-97.) 12 Section 99. Effective date. This Act takes effect on 13 January 1, 2002.