Illinois-2023-HB3111-Introduced

103RD GENERAL ASSEMBLY State of Illinois 2023 and 2024 HB3111

Introduced , by Rep. Norine K. Hammond

SYNOPSIS AS INTRODUCED:

`35 ILCS 105/2`	`from Ch. 120, par. 439.2`
`35 ILCS 110/2`	`from Ch. 120, par. 439.32`
`35 ILCS 115/2`	`from Ch. 120, par. 439.102`
`35 ILCS 120/1`	`from Ch. 120, par. 440`
`35 ILCS 120/2-55`	`from Ch. 120, par. 441-55`

Amends the Use Tax Act, the Service Use Tax Act, the Service Occupation Tax Act, and the Retailers' Occupation Tax Act. Provides that motor carriers that sell items of tangible personal property to purchasers for use or consumption in addition to rendering service as a motor carrier are engaged in a profession or service occupation as a motor carrier and are not engaged in the business of selling tangible personal property to purchasers for use or consumption within the meaning of this Act. Effective immediately.

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A BILL FOR

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1 AN ACT concerning revenue.

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 Section 2

5 as follows:

6 (35 ILCS 105/2) (from Ch. 120, par. 439.2)

7 Sec. 2. Definitions.

8 "Use" means the exercise by any person of any right or

9 power over tangible personal property incident to the

10 ownership of that property, except that it does not include

11 the sale of such property in any form as tangible personal

12 property in the regular course of business to the extent that

13 such property is not first subjected to a use for which it was

14 purchased, and does not include the use of such property by its

15 owner for demonstration purposes: Provided that the property

16 purchased is deemed to be purchased for the purpose of resale,

17 despite first being used, to the extent to which it is resold

18 as an ingredient of an intentionally produced product or

19 by-product of manufacturing. "Use" does not mean the

20 demonstration use or interim use of tangible personal property

21 by a retailer before he sells that tangible personal property.

22 For watercraft or aircraft, if the period of demonstration use

23 or interim use by the retailer exceeds 18 months, the retailer

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1 shall pay on the retailers' original cost price the tax

2 imposed by this Act, and no credit for that tax is permitted if

3 the watercraft or aircraft is subsequently sold by the

4 retailer. "Use" does not mean the physical incorporation of

5 tangible personal property, to the extent not first subjected

6 to a use for which it was purchased, as an ingredient or

7 constituent, into other tangible personal property (a) which

8 is sold in the regular course of business or (b) which the

9 person incorporating such ingredient or constituent therein

10 has undertaken at the time of such purchase to cause to be

11 transported in interstate commerce to destinations outside the

12 State of Illinois: Provided that the property purchased is

13 deemed to be purchased for the purpose of resale, despite

14 first being used, to the extent to which it is resold as an

15 ingredient of an intentionally produced product or by-product

16 of manufacturing.

17 "Watercraft" means a Class 2, Class 3, or Class 4

18 watercraft as defined in Section 3-2 of the Boat Registration

19 and Safety Act, a personal watercraft, or any boat equipped

20 with an inboard motor.

21 "Purchase at retail" means the acquisition of the

22 ownership of or title to tangible personal property through a

23 sale at retail.

24 "Purchaser" means anyone who, through a sale at retail,

25 acquires the ownership of tangible personal property for a

26 valuable consideration.

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1 "Sale at retail" means any transfer of the ownership of or

2 title to tangible personal property to a purchaser, for the

3 purpose of use, and not for the purpose of resale in any form

4 as tangible personal property to the extent not first

5 subjected to a use for which it was purchased, for a valuable

6 consideration: Provided that the property purchased is deemed

7 to be purchased for the purpose of resale, despite first being

8 used, to the extent to which it is resold as an ingredient of

9 an intentionally produced product or by-product of

10 manufacturing. For this purpose, slag produced as an incident

11 to manufacturing pig iron or steel and sold is considered to be

12 an intentionally produced by-product of manufacturing. "Sale

13 at retail" includes any such transfer made for resale unless

14 made in compliance with Section 2c of the Retailers'

15 Occupation Tax Act, as incorporated by reference into Section

16 12 of this Act. Transactions whereby the possession of the

17 property is transferred but the seller retains the title as

18 security for payment of the selling price are sales.

19 "Sale at retail" shall also be construed to include any

20 Illinois florist's sales transaction in which the purchase

21 order is received in Illinois by a florist and the sale is for

22 use or consumption, but the Illinois florist has a florist in

23 another state deliver the property to the purchaser or the

24 purchaser's donee in such other state.

25 Nonreusable tangible personal property that is used by

26 persons engaged in the business of operating a restaurant,

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1 cafeteria, or drive-in is a sale for resale when it is

2 transferred to customers in the ordinary course of business as

3 part of the sale of food or beverages and is used to deliver,

4 package, or consume food or beverages, regardless of where

5 consumption of the food or beverages occurs. Examples of those

6 items include, but are not limited to nonreusable, paper and

7 plastic cups, plates, baskets, boxes, sleeves, buckets or

8 other containers, utensils, straws, placemats, napkins, doggie

9 bags, and wrapping or packaging materials that are transferred

10 to customers as part of the sale of food or beverages in the

11 ordinary course of business.

12 The purchase, employment and transfer of such tangible

13 personal property as newsprint and ink for the primary purpose

14 of conveying news (with or without other information) is not a

15 purchase, use or sale of tangible personal property.

16 "Selling price" means the consideration for a sale valued

17 in money whether received in money or otherwise, including

18 cash, credits, property other than as hereinafter provided,

19 and services, but, prior to January 1, 2020 and beginning

20 again on January 1, 2022, not including the value of or credit

21 given for traded-in tangible personal property where the item

22 that is traded-in is of like kind and character as that which

23 is being sold; beginning January 1, 2020 and until January 1,

24 2022, "selling price" includes the portion of the value of or

25 credit given for traded-in motor vehicles of the First

26 Division as defined in Section 1-146 of the Illinois Vehicle

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1 Code of like kind and character as that which is being sold

2 that exceeds $10,000. "Selling price" shall be determined

3 without any deduction on account of the cost of the property

4 sold, the cost of materials used, labor or service cost or any

5 other expense whatsoever, but does not include interest or

6 finance charges which appear as separate items on the bill of

7 sale or sales contract nor charges that are added to prices by

8 sellers on account of the seller's tax liability under the

9 Retailers' Occupation Tax Act, or on account of the seller's

10 duty to collect, from the purchaser, the tax that is imposed by

11 this Act, or, except as otherwise provided with respect to any

12 cigarette tax imposed by a home rule unit, on account of the

13 seller's tax liability under any local occupation tax

14 administered by the Department, or, except as otherwise

15 provided with respect to any cigarette tax imposed by a home

16 rule unit on account of the seller's duty to collect, from the

17 purchasers, the tax that is imposed under any local use tax

18 administered by the Department. Effective December 1, 1985,

19 "selling price" shall include charges that are added to prices

20 by sellers on account of the seller's tax liability under the

21 Cigarette Tax Act, on account of the seller's duty to collect,

22 from the purchaser, the tax imposed under the Cigarette Use

23 Tax Act, and on account of the seller's duty to collect, from

24 the purchaser, any cigarette tax imposed by a home rule unit.

25 Notwithstanding any law to the contrary, for any motor

26 vehicle, as defined in Section 1-146 of the Vehicle Code, that

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1 is sold on or after January 1, 2015 for the purpose of leasing

2 the vehicle for a defined period that is longer than one year

3 and (1) is a motor vehicle of the second division that: (A) is

4 a self-contained motor vehicle designed or permanently

5 converted to provide living quarters for recreational,

6 camping, or travel use, with direct walk through access to the

7 living quarters from the driver's seat; (B) is of the van

8 configuration designed for the transportation of not less than

9 7 nor more than 16 passengers; or (C) has a gross vehicle

10 weight rating of 8,000 pounds or less or (2) is a motor vehicle

11 of the first division, "selling price" or "amount of sale"

12 means the consideration received by the lessor pursuant to the

13 lease contract, including amounts due at lease signing and all

14 monthly or other regular payments charged over the term of the

15 lease. Also included in the selling price is any amount

16 received by the lessor from the lessee for the leased vehicle

17 that is not calculated at the time the lease is executed,

18 including, but not limited to, excess mileage charges and

19 charges for excess wear and tear. For sales that occur in

20 Illinois, with respect to any amount received by the lessor

21 from the lessee for the leased vehicle that is not calculated

22 at the time the lease is executed, the lessor who purchased the

23 motor vehicle does not incur the tax imposed by the Use Tax Act

24 on those amounts, and the retailer who makes the retail sale of

25 the motor vehicle to the lessor is not required to collect the

26 tax imposed by this Act or to pay the tax imposed by the

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1 Retailers' Occupation Tax Act on those amounts. However, the

2 lessor who purchased the motor vehicle assumes the liability

3 for reporting and paying the tax on those amounts directly to

4 the Department in the same form (Illinois Retailers'

5 Occupation Tax, and local retailers' occupation taxes, if

6 applicable) in which the retailer would have reported and paid

7 such tax if the retailer had accounted for the tax to the

8 Department. For amounts received by the lessor from the lessee

9 that are not calculated at the time the lease is executed, the

10 lessor must file the return and pay the tax to the Department

11 by the due date otherwise required by this Act for returns

12 other than transaction returns. If the retailer is entitled

13 under this Act to a discount for collecting and remitting the

14 tax imposed under this Act to the Department with respect to

15 the sale of the motor vehicle to the lessor, then the right to

16 the discount provided in this Act shall be transferred to the

17 lessor with respect to the tax paid by the lessor for any

18 amount received by the lessor from the lessee for the leased

19 vehicle that is not calculated at the time the lease is

20 executed; provided that the discount is only allowed if the

21 return is timely filed and for amounts timely paid. The

22 "selling price" of a motor vehicle that is sold on or after

23 January 1, 2015 for the purpose of leasing for a defined period

24 of longer than one year shall not be reduced by the value of or

25 credit given for traded-in tangible personal property owned by

26 the lessor, nor shall it be reduced by the value of or credit

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1 given for traded-in tangible personal property owned by the

2 lessee, regardless of whether the trade-in value thereof is

3 assigned by the lessee to the lessor. In the case of a motor

4 vehicle that is sold for the purpose of leasing for a defined

5 period of longer than one year, the sale occurs at the time of

6 the delivery of the vehicle, regardless of the due date of any

7 lease payments. A lessor who incurs a Retailers' Occupation

8 Tax liability on the sale of a motor vehicle coming off lease

9 may not take a credit against that liability for the Use Tax

10 the lessor paid upon the purchase of the motor vehicle (or for

11 any tax the lessor paid with respect to any amount received by

12 the lessor from the lessee for the leased vehicle that was not

13 calculated at the time the lease was executed) if the selling

14 price of the motor vehicle at the time of purchase was

15 calculated using the definition of "selling price" as defined

16 in this paragraph. Notwithstanding any other provision of this

17 Act to the contrary, lessors shall file all returns and make

18 all payments required under this paragraph to the Department

19 by electronic means in the manner and form as required by the

20 Department. This paragraph does not apply to leases of motor

21 vehicles for which, at the time the lease is entered into, the

22 term of the lease is not a defined period, including leases

23 with a defined initial period with the option to continue the

24 lease on a month-to-month or other basis beyond the initial

25 defined period.

26 The phrase "like kind and character" shall be liberally

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1 construed (including but not limited to any form of motor

2 vehicle for any form of motor vehicle, or any kind of farm or

3 agricultural implement for any other kind of farm or

4 agricultural implement), while not including a kind of item

5 which, if sold at retail by that retailer, would be exempt from

6 retailers' occupation tax and use tax as an isolated or

7 occasional sale.

8 "Department" means the Department of Revenue.

9 "Person" means any natural individual, firm, partnership,

10 association, joint stock company, joint adventure, public or

11 private corporation, limited liability company, or a receiver,

12 executor, trustee, guardian or other representative appointed

13 by order of any court.

14 "Retailer" means and includes every person engaged in the

15 business of making sales at retail as defined in this Section.

16 A person who holds himself or herself out as being engaged

17 (or who habitually engages) in selling tangible personal

18 property at retail is a retailer hereunder with respect to

19 such sales (and not primarily in a service occupation)

20 notwithstanding the fact that such person designs and produces

21 such tangible personal property on special order for the

22 purchaser and in such a way as to render the property of value

23 only to such purchaser, if such tangible personal property so

24 produced on special order serves substantially the same

25 function as stock or standard items of tangible personal

26 property that are sold at retail.

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1 A person whose activities are organized and conducted

2 primarily as a not-for-profit service enterprise, and who

3 engages in selling tangible personal property at retail

4 (whether to the public or merely to members and their guests)

5 is a retailer with respect to such transactions, excepting

6 only a person organized and operated exclusively for

7 charitable, religious or educational purposes either (1), to

8 the extent of sales by such person to its members, students,

9 patients or inmates of tangible personal property to be used

10 primarily for the purposes of such person, or (2), to the

11 extent of sales by such person of tangible personal property

12 which is not sold or offered for sale by persons organized for

13 profit. The selling of school books and school supplies by

14 schools at retail to students is not "primarily for the

15 purposes of" the school which does such selling. This

16 paragraph does not apply to nor subject to taxation occasional

17 dinners, social or similar activities of a person organized

18 and operated exclusively for charitable, religious or

19 educational purposes, whether or not such activities are open

20 to the public.

21 A person who is the recipient of a grant or contract under

22 Title VII of the Older Americans Act of 1965 (P.L. 92-258) and

23 serves meals to participants in the federal Nutrition Program

24 for the Elderly in return for contributions established in

25 amount by the individual participant pursuant to a schedule of

26 suggested fees as provided for in the federal Act is not a

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1 retailer under this Act with respect to such transactions.

2 Persons who engage in the business of transferring

3 tangible personal property upon the redemption of trading

4 stamps are retailers hereunder when engaged in such business.

5 The isolated or occasional sale of tangible personal

6 property at retail by a person who does not hold himself out as

7 being engaged (or who does not habitually engage) in selling

8 such tangible personal property at retail or a sale through a

9 bulk vending machine does not make such person a retailer

10 hereunder. However, any person who is engaged in a business

11 which is not subject to the tax imposed by the Retailers'

12 Occupation Tax Act because of involving the sale of or a

13 contract to sell real estate or a construction contract to

14 improve real estate, but who, in the course of conducting such

15 business, transfers tangible personal property to users or

16 consumers in the finished form in which it was purchased, and

17 which does not become real estate, under any provision of a

18 construction contract or real estate sale or real estate sales

19 agreement entered into with some other person arising out of

20 or because of such nontaxable business, is a retailer to the

21 extent of the value of the tangible personal property so

22 transferred. If, in such transaction, a separate charge is

23 made for the tangible personal property so transferred, the

24 value of such property, for the purposes of this Act, is the

25 amount so separately charged, but not less than the cost of

26 such property to the transferor; if no separate charge is

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1 made, the value of such property, for the purposes of this Act,

2 is the cost to the transferor of such tangible personal

3 property.

4 "Retailer maintaining a place of business in this State",

5 or any like term, means and includes any of the following

6 retailers:

7 (1) A retailer having or maintaining within this

8 State, directly or by a subsidiary, an office,

9 distribution house, sales house, warehouse or other place

10 of business, or any agent or other representative

11 operating within this State under the authority of the

12 retailer or its subsidiary, irrespective of whether such

13 place of business or agent or other representative is

14 located here permanently or temporarily, or whether such

15 retailer or subsidiary is licensed to do business in this

16 State. However, the ownership of property that is located

17 at the premises of a printer with which the retailer has

18 contracted for printing and that consists of the final

19 printed product, property that becomes a part of the final

20 printed product, or copy from which the printed product is

21 produced shall not result in the retailer being deemed to

22 have or maintain an office, distribution house, sales

23 house, warehouse, or other place of business within this

24 State.

25 (1.1) A retailer having a contract with a person

26 located in this State under which the person, for a

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1 commission or other consideration based upon the sale of

2 tangible personal property by the retailer, directly or

3 indirectly refers potential customers to the retailer by

4 providing to the potential customers a promotional code or

5 other mechanism that allows the retailer to track

6 purchases referred by such persons. Examples of mechanisms

7 that allow the retailer to track purchases referred by

8 such persons include but are not limited to the use of a

9 link on the person's Internet website, promotional codes

10 distributed through the person's hand-delivered or mailed

11 material, and promotional codes distributed by the person

12 through radio or other broadcast media. The provisions of

13 this paragraph (1.1) shall apply only if the cumulative

14 gross receipts from sales of tangible personal property by

15 the retailer to customers who are referred to the retailer

16 by all persons in this State under such contracts exceed

17 $10,000 during the preceding 4 quarterly periods ending on

18 the last day of March, June, September, and December. A

19 retailer meeting the requirements of this paragraph (1.1)

20 shall be presumed to be maintaining a place of business in

21 this State but may rebut this presumption by submitting

22 proof that the referrals or other activities pursued

23 within this State by such persons were not sufficient to

24 meet the nexus standards of the United States Constitution

25 during the preceding 4 quarterly periods.

26 (1.2) Beginning July 1, 2011, a retailer having a

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1 contract with a person located in this State under which:

2 (A) the retailer sells the same or substantially

3 similar line of products as the person located in this

4 State and does so using an identical or substantially

5 similar name, trade name, or trademark as the person

6 located in this State; and

7 (B) the retailer provides a commission or other

8 consideration to the person located in this State

9 based upon the sale of tangible personal property by

10 the retailer.

11 The provisions of this paragraph (1.2) shall apply

12 only if the cumulative gross receipts from sales of

13 tangible personal property by the retailer to customers in

14 this State under all such contracts exceed $10,000 during

15 the preceding 4 quarterly periods ending on the last day

16 of March, June, September, and December.

17 (2) (Blank).

18 (3) (Blank).

19 (4) (Blank).

20 (5) (Blank).

21 (6) (Blank).

22 (7) (Blank).

23 (8) (Blank).

24 (9) Beginning October 1, 2018, a retailer making sales

25 of tangible personal property to purchasers in Illinois

26 from outside of Illinois if:

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1 (A) the cumulative gross receipts from sales of

2 tangible personal property to purchasers in Illinois

3 are $100,000 or more; or

4 (B) the retailer enters into 200 or more separate

5 transactions for the sale of tangible personal

6 property to purchasers in Illinois.

7 The retailer shall determine on a quarterly basis,

8 ending on the last day of March, June, September, and

9 December, whether he or she meets the criteria of either

10 subparagraph (A) or (B) of this paragraph (9) for the

11 preceding 12-month period. If the retailer meets the

12 threshold of either subparagraph (A) or (B) for a 12-month

13 period, he or she is considered a retailer maintaining a

14 place of business in this State and is required to collect

15 and remit the tax imposed under this Act and file returns

16 for one year. At the end of that one-year period, the

17 retailer shall determine whether he or she met the

18 threshold of either subparagraph (A) or (B) during the

19 preceding 12-month period. If the retailer met the

20 criteria in either subparagraph (A) or (B) for the

21 preceding 12-month period, he or she is considered a

22 retailer maintaining a place of business in this State and

23 is required to collect and remit the tax imposed under

24 this Act and file returns for the subsequent year. If at

25 the end of a one-year period a retailer that was required

26 to collect and remit the tax imposed under this Act

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1 determines that he or she did not meet the threshold in

2 either subparagraph (A) or (B) during the preceding

3 12-month period, the retailer shall subsequently determine

4 on a quarterly basis, ending on the last day of March,

5 June, September, and December, whether he or she meets the

6 threshold of either subparagraph (A) or (B) for the

7 preceding 12-month period.

8 Beginning January 1, 2020, neither the gross receipts

9 from nor the number of separate transactions for sales of

10 tangible personal property to purchasers in Illinois that

11 a retailer makes through a marketplace facilitator and for

12 which the retailer has received a certification from the

13 marketplace facilitator pursuant to Section 2d of this Act

14 shall be included for purposes of determining whether he

15 or she has met the thresholds of this paragraph (9).

16 (10) Beginning January 1, 2020, a marketplace

17 facilitator that meets a threshold set forth in subsection

18 (b) of Section 2d of this Act.

19 Motor carriers, as defined in Section 18c-1104 of the

20 Vehicle Code, that sell items of tangible personal property to

21 purchasers for use or consumption in addition to rendering

22 service as a motor carrier are engaged in a profession or

23 service occupation as a motor carrier and are not engaged in

24 the business of selling tangible personal property to

25 purchasers for use or consumption within the meaning of this

26 Act. Those motor carriers are not required to remit retailers'

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1 occupation taxes measured by their receipts from engaging in

2 such profession or service occupation, including receipts from

3 both services and tangible personal property.

4 "Bulk vending machine" means a vending machine, containing

5 unsorted confections, nuts, toys, or other items designed

6 primarily to be used or played with by children which, when a

7 coin or coins of a denomination not larger than $0.50 are

8 inserted, are dispensed in equal portions, at random and

9 without selection by the customer.

10 (Source: P.A. 101-9, eff. 6-5-19; 101-31, eff. 1-1-20;

11 101-604, eff. 1-1-20; 102-353, eff. 1-1-22.)

12 Section 10. The Service Use Tax Act is amended by changing

13 Section 2 as follows:

14 (35 ILCS 110/2) (from Ch. 120, par. 439.32)

15 Sec. 2. Definitions. In this Act:

16 "Use" means the exercise by any person of any right or

17 power over tangible personal property incident to the

18 ownership of that property, but does not include the sale or

19 use for demonstration by him of that property in any form as

20 tangible personal property in the regular course of business.

21 "Use" does not mean the interim use of tangible personal

22 property nor the physical incorporation of tangible personal

23 property, as an ingredient or constituent, into other tangible

24 personal property, (a) which is sold in the regular course of

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1 business or (b) which the person incorporating such ingredient

2 or constituent therein has undertaken at the time of such

3 purchase to cause to be transported in interstate commerce to

4 destinations outside the State of Illinois.

5 "Purchased from a serviceman" means the acquisition of the

6 ownership of, or title to, tangible personal property through

7 a sale of service.

8 "Purchaser" means any person who, through a sale of

9 service, acquires the ownership of, or title to, any tangible

10 personal property.

11 "Cost price" means the consideration paid by the

12 serviceman for a purchase valued in money, whether paid in

13 money or otherwise, including cash, credits and services, and

14 shall be determined without any deduction on account of the

15 supplier's cost of the property sold or on account of any other

16 expense incurred by the supplier. When a serviceman contracts

17 out part or all of the services required in his sale of

18 service, it shall be presumed that the cost price to the

19 serviceman of the property transferred to him or her by his or

20 her subcontractor is equal to 50% of the subcontractor's

21 charges to the serviceman in the absence of proof of the

22 consideration paid by the subcontractor for the purchase of

23 such property.

24 "Selling price" means the consideration for a sale valued

25 in money whether received in money or otherwise, including

26 cash, credits and service, and shall be determined without any

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1 deduction on account of the serviceman's cost of the property

2 sold, the cost of materials used, labor or service cost or any

3 other expense whatsoever, but does not include interest or

4 finance charges which appear as separate items on the bill of

5 sale or sales contract nor charges that are added to prices by

6 sellers on account of the seller's duty to collect, from the

7 purchaser, the tax that is imposed by this Act.

8 "Department" means the Department of Revenue.

9 "Person" means any natural individual, firm, partnership,

10 association, joint stock company, joint venture, public or

11 private corporation, limited liability company, and any

12 receiver, executor, trustee, guardian or other representative

13 appointed by order of any court.

14 "Sale of service" means any transaction except:

15 (1) a retail sale of tangible personal property

16 taxable under the Retailers' Occupation Tax Act or under

17 the Use Tax Act.

18 (2) a sale of tangible personal property for the

19 purpose of resale made in compliance with Section 2c of

20 the Retailers' Occupation Tax Act.

21 (3) except as hereinafter provided, a sale or transfer

22 of tangible personal property as an incident to the

23 rendering of service for or by any governmental body, or

24 for or by any corporation, society, association,

25 foundation or institution organized and operated

26 exclusively for charitable, religious or educational

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1 purposes or any not-for-profit corporation, society,

2 association, foundation, institution or organization which

3 has no compensated officers or employees and which is

4 organized and operated primarily for the recreation of

5 persons 55 years of age or older. A limited liability

6 company may qualify for the exemption under this paragraph

7 only if the limited liability company is organized and

8 operated exclusively for educational purposes.

9 (4) (blank).

10 (4a) a sale or transfer of tangible personal property

11 as an incident to the rendering of service for owners,

12 lessors, or shippers of tangible personal property which

13 is utilized by interstate carriers for hire for use as

14 rolling stock moving in interstate commerce so long as so

15 used by interstate carriers for hire, and equipment

16 operated by a telecommunications provider, licensed as a

17 common carrier by the Federal Communications Commission,

18 which is permanently installed in or affixed to aircraft

19 moving in interstate commerce.

20 (4a-5) on and after July 1, 2003 and through June 30,

21 2004, a sale or transfer of a motor vehicle of the second

22 division with a gross vehicle weight in excess of 8,000

23 pounds as an incident to the rendering of service if that

24 motor vehicle is subject to the commercial distribution

25 fee imposed under Section 3-815.1 of the Illinois Vehicle

26 Code. Beginning on July 1, 2004 and through June 30, 2005,

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1 the use in this State of motor vehicles of the second

2 division: (i) with a gross vehicle weight rating in excess

3 of 8,000 pounds; (ii) that are subject to the commercial

4 distribution fee imposed under Section 3-815.1 of the

5 Illinois Vehicle Code; and (iii) that are primarily used

6 for commercial purposes. Through June 30, 2005, this

7 exemption applies to repair and replacement parts added

8 after the initial purchase of such a motor vehicle if that

9 motor vehicle is used in a manner that would qualify for

10 the rolling stock exemption otherwise provided for in this

11 Act. For purposes of this paragraph, "used for commercial

12 purposes" means the transportation of persons or property

13 in furtherance of any commercial or industrial enterprise

14 whether for-hire or not.

15 (5) a sale or transfer of machinery and equipment used

16 primarily in the process of the manufacturing or

17 assembling, either in an existing, an expanded or a new

18 manufacturing facility, of tangible personal property for

19 wholesale or retail sale or lease, whether such sale or

20 lease is made directly by the manufacturer or by some

21 other person, whether the materials used in the process

22 are owned by the manufacturer or some other person, or

23 whether such sale or lease is made apart from or as an

24 incident to the seller's engaging in a service occupation

25 and the applicable tax is a Service Use Tax or Service

26 Occupation Tax, rather than Use Tax or Retailers'

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1 Occupation Tax. The exemption provided by this paragraph

2 (5) includes production related tangible personal

3 property, as defined in Section 3-50 of the Use Tax Act,

4 purchased on or after July 1, 2019. The exemption provided

5 by this paragraph (5) does not include machinery and

6 equipment used in (i) the generation of electricity for

7 wholesale or retail sale; (ii) the generation or treatment

8 of natural or artificial gas for wholesale or retail sale

9 that is delivered to customers through pipes, pipelines,

10 or mains; or (iii) the treatment of water for wholesale or

11 retail sale that is delivered to customers through pipes,

12 pipelines, or mains. The provisions of Public Act 98-583

13 are declaratory of existing law as to the meaning and

14 scope of this exemption. The exemption under this

15 paragraph (5) is exempt from the provisions of Section

16 3-75.

17 (5a) the repairing, reconditioning or remodeling, for

18 a common carrier by rail, of tangible personal property

19 which belongs to such carrier for hire, and as to which

20 such carrier receives the physical possession of the

21 repaired, reconditioned or remodeled item of tangible

22 personal property in Illinois, and which such carrier

23 transports, or shares with another common carrier in the

24 transportation of such property, out of Illinois on a

25 standard uniform bill of lading showing the person who

26 repaired, reconditioned or remodeled the property to a

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1 destination outside Illinois, for use outside Illinois.

2 (5b) a sale or transfer of tangible personal property

3 which is produced by the seller thereof on special order

4 in such a way as to have made the applicable tax the

5 Service Occupation Tax or the Service Use Tax, rather than

6 the Retailers' Occupation Tax or the Use Tax, for an

7 interstate carrier by rail which receives the physical

8 possession of such property in Illinois, and which

9 transports such property, or shares with another common

10 carrier in the transportation of such property, out of

11 Illinois on a standard uniform bill of lading showing the

12 seller of the property as the shipper or consignor of such

13 property to a destination outside Illinois, for use

14 outside Illinois.

15 (6) until July 1, 2003, a sale or transfer of

16 distillation machinery and equipment, sold as a unit or

17 kit and assembled or installed by the retailer, which

18 machinery and equipment is certified by the user to be

19 used only for the production of ethyl alcohol that will be

20 used for consumption as motor fuel or as a component of

21 motor fuel for the personal use of such user and not

22 subject to sale or resale.

23 (7) at the election of any serviceman not required to

24 be otherwise registered as a retailer under Section 2a of

25 the Retailers' Occupation Tax Act, made for each fiscal

26 year sales of service in which the aggregate annual cost

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1 price of tangible personal property transferred as an

2 incident to the sales of service is less than 35%, or 75%

3 in the case of servicemen transferring prescription drugs

4 or servicemen engaged in graphic arts production, of the

5 aggregate annual total gross receipts from all sales of

6 service. The purchase of such tangible personal property

7 by the serviceman shall be subject to tax under the

8 Retailers' Occupation Tax Act and the Use Tax Act.

9 However, if a primary serviceman who has made the election

10 described in this paragraph subcontracts service work to a

11 secondary serviceman who has also made the election

12 described in this paragraph, the primary serviceman does

13 not incur a Use Tax liability if the secondary serviceman

14 (i) has paid or will pay Use Tax on his or her cost price

15 of any tangible personal property transferred to the

16 primary serviceman and (ii) certifies that fact in writing

17 to the primary serviceman.

18 Tangible personal property transferred incident to the

19 completion of a maintenance agreement is exempt from the tax

20 imposed pursuant to this Act.

21 Exemption (5) also includes machinery and equipment used

22 in the general maintenance or repair of such exempt machinery

23 and equipment or for in-house manufacture of exempt machinery

24 and equipment. On and after July 1, 2017, exemption (5) also

25 includes graphic arts machinery and equipment, as defined in

26 paragraph (5) of Section 3-5. The machinery and equipment

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1 exemption does not include machinery and equipment used in (i)

2 the generation of electricity for wholesale or retail sale;

3 (ii) the generation or treatment of natural or artificial gas

4 for wholesale or retail sale that is delivered to customers

5 through pipes, pipelines, or mains; or (iii) the treatment of

6 water for wholesale or retail sale that is delivered to

7 customers through pipes, pipelines, or mains. The provisions

8 of Public Act 98-583 are declaratory of existing law as to the

9 meaning and scope of this exemption. For the purposes of

10 exemption (5), each of these terms shall have the following

11 meanings: (1) "manufacturing process" shall mean the

12 production of any article of tangible personal property,

13 whether such article is a finished product or an article for

14 use in the process of manufacturing or assembling a different

15 article of tangible personal property, by procedures commonly

16 regarded as manufacturing, processing, fabricating, or

17 refining which changes some existing material or materials

18 into a material with a different form, use or name. In relation

19 to a recognized integrated business composed of a series of

20 operations which collectively constitute manufacturing, or

21 individually constitute manufacturing operations, the

22 manufacturing process shall be deemed to commence with the

23 first operation or stage of production in the series, and

24 shall not be deemed to end until the completion of the final

25 product in the last operation or stage of production in the

26 series; and further, for purposes of exemption (5),

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1 photoprocessing is deemed to be a manufacturing process of

2 tangible personal property for wholesale or retail sale; (2)

3 "assembling process" shall mean the production of any article

4 of tangible personal property, whether such article is a

5 finished product or an article for use in the process of

6 manufacturing or assembling a different article of tangible

7 personal property, by the combination of existing materials in

8 a manner commonly regarded as assembling which results in a

9 material of a different form, use or name; (3) "machinery"

10 shall mean major mechanical machines or major components of

11 such machines contributing to a manufacturing or assembling

12 process; and (4) "equipment" shall include any independent

13 device or tool separate from any machinery but essential to an

14 integrated manufacturing or assembly process; including

15 computers used primarily in a manufacturer's computer assisted

16 design, computer assisted manufacturing (CAD/CAM) system; or

17 any subunit or assembly comprising a component of any

18 machinery or auxiliary, adjunct or attachment parts of

19 machinery, such as tools, dies, jigs, fixtures, patterns and

20 molds; or any parts which require periodic replacement in the

21 course of normal operation; but shall not include hand tools.

22 Equipment includes chemicals or chemicals acting as catalysts

23 but only if the chemicals or chemicals acting as catalysts

24 effect a direct and immediate change upon a product being

25 manufactured or assembled for wholesale or retail sale or

26 lease. The purchaser of such machinery and equipment who has

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1 an active resale registration number shall furnish such number

2 to the seller at the time of purchase. The purchaser of such

3 machinery and equipment and tools without an active resale

4 registration number shall prepare a certificate of exemption

5 stating facts establishing the exemption, which certificate

6 shall be available to the Department for inspection or audit.

7 The Department shall prescribe the form of the certificate.

8 Any informal rulings, opinions or letters issued by the

9 Department in response to an inquiry or request for any

10 opinion from any person regarding the coverage and

11 applicability of exemption (5) to specific devices shall be

12 published, maintained as a public record, and made available

13 for public inspection and copying. If the informal ruling,

14 opinion or letter contains trade secrets or other confidential

15 information, where possible the Department shall delete such

16 information prior to publication. Whenever such informal

17 rulings, opinions, or letters contain any policy of general

18 applicability, the Department shall formulate and adopt such

19 policy as a rule in accordance with the provisions of the

20 Illinois Administrative Procedure Act.

21 On and after July 1, 1987, no entity otherwise eligible

22 under exemption (3) of this Section shall make tax-free

23 purchases unless it has an active exemption identification

24 number issued by the Department.

25 The purchase, employment and transfer of such tangible

26 personal property as newsprint and ink for the primary purpose

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1 of conveying news (with or without other information) is not a

2 purchase, use or sale of service or of tangible personal

3 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 Motor carriers, as defined in Section 18c-1104 of the

7 Vehicle Code, that sell items of tangible personal property to

8 purchasers for use or consumption in addition to rendering

9 service as a motor carrier are engaged in a profession or

10 service occupation as a motor carrier and are not engaged in

11 the business of selling tangible personal property to

12 purchasers for use or consumption within the meaning of this

13 Act. Those motor carriers are not required to remit retailers'

14 occupation taxes measured by their receipts from engaging in

15 such profession or service occupation, including receipts from

16 both services and tangible personal property.

17 "Sale at retail" means "sale at retail" as defined in the

18 Retailers' Occupation Tax Act.

19 "Supplier" means any person who makes sales of tangible

20 personal property to servicemen for the purpose of resale as

21 an incident to a sale of service.

22 "Serviceman maintaining a place of business in this

23 State", or any like term, means and includes any serviceman:

24 (1) having or maintaining within this State, directly

25 or by a subsidiary, an office, distribution house, sales

26 house, warehouse or other place of business, or any agent

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1 or other representative operating within this State under

2 the authority of the serviceman or its subsidiary,

3 irrespective of whether such place of business or agent or

4 other representative is located here permanently or

5 temporarily, or whether such serviceman or subsidiary is

6 licensed to do business in this State;

7 (1.1) having a contract with a person located in this

8 State under which the person, for a commission or other

9 consideration based on the sale of service by the

10 serviceman, directly or indirectly refers potential

11 customers to the serviceman by providing to the potential

12 customers a promotional code or other mechanism that

13 allows the serviceman to track purchases referred by such

14 persons. Examples of mechanisms that allow the serviceman

15 to track purchases referred by such persons include but

16 are not limited to the use of a link on the person's

17 Internet website, promotional codes distributed through

18 the person's hand-delivered or mailed material, and

19 promotional codes distributed by the person through radio

20 or other broadcast media. The provisions of this paragraph

21 (1.1) shall apply only if the cumulative gross receipts

22 from sales of service by the serviceman to customers who

23 are referred to the serviceman by all persons in this

24 State under such contracts exceed $10,000 during the

25 preceding 4 quarterly periods ending on the last day of

26 March, June, September, and December; a serviceman meeting

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1 the requirements of this paragraph (1.1) shall be presumed

2 to be maintaining a place of business in this State but may

3 rebut this presumption by submitting proof that the

4 referrals or other activities pursued within this State by

5 such persons were not sufficient to meet the nexus

6 standards of the United States Constitution during the

7 preceding 4 quarterly periods;

8 (1.2) beginning July 1, 2011, having a contract with a

9 person located in this State under which:

10 (A) the serviceman sells the same or substantially

11 similar line of services as the person located in this

12 State and does so using an identical or substantially

13 similar name, trade name, or trademark as the person

14 located in this State; and

15 (B) the serviceman provides a commission or other

16 consideration to the person located in this State

17 based upon the sale of services by the serviceman.

18 The provisions of this paragraph (1.2) shall apply only if

19 the cumulative gross receipts from sales of service by the

20 serviceman to customers in this State under all such

21 contracts exceed $10,000 during the preceding 4 quarterly

22 periods ending on the last day of March, June, September,

23 and December;

24 (2) soliciting orders for tangible personal property

25 by means of a telecommunication or television shopping

26 system (which utilizes toll free numbers) which is

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1 intended by the retailer to be broadcast by cable

2 television or other means of broadcasting, to consumers

3 located in this State;

4 (3) pursuant to a contract with a broadcaster or

5 publisher located in this State, soliciting orders for

6 tangible personal property by means of advertising which

7 is disseminated primarily to consumers located in this

8 State and only secondarily to bordering jurisdictions;

9 (4) soliciting orders for tangible personal property

10 by mail if the solicitations are substantial and recurring

11 and if the retailer benefits from any banking, financing,

12 debt collection, telecommunication, or marketing

13 activities occurring in this State or benefits from the

14 location in this State of authorized installation,

15 servicing, or repair facilities;

16 (5) being owned or controlled by the same interests

17 which own or control any retailer engaging in business in

18 the same or similar line of business in this State;

19 (6) having a franchisee or licensee operating under

20 its trade name if the franchisee or licensee is required

21 to collect the tax under this Section;

22 (7) pursuant to a contract with a cable television

23 operator located in this State, soliciting orders for

24 tangible personal property by means of advertising which

25 is transmitted or distributed over a cable television

26 system in this State;

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1 (8) engaging in activities in Illinois, which

2 activities in the state in which the supply business

3 engaging in such activities is located would constitute

4 maintaining a place of business in that state; or

5 (9) beginning October 1, 2018, making sales of service

6 to purchasers in Illinois from outside of Illinois if:

7 (A) the cumulative gross receipts from sales of

8 service to purchasers in Illinois are $100,000 or

9 more; or

10 (B) the serviceman enters into 200 or more

11 separate transactions for sales of service to

12 purchasers in Illinois.

13 The serviceman shall determine on a quarterly basis,

14 ending on the last day of March, June, September, and

15 December, whether he or she meets the criteria of either

16 subparagraph (A) or (B) of this paragraph (9) for the

17 preceding 12-month period. If the serviceman meets the

18 criteria of either subparagraph (A) or (B) for a 12-month

19 period, he or she is considered a serviceman maintaining a

20 place of business in this State and is required to collect

21 and remit the tax imposed under this Act and file returns

22 for one year. At the end of that one-year period, the

23 serviceman shall determine whether the serviceman met the

24 criteria of either subparagraph (A) or (B) during the

25 preceding 12-month period. If the serviceman met the

26 criteria in either subparagraph (A) or (B) for the

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1 preceding 12-month period, he or she is considered a

2 serviceman maintaining a place of business in this State

3 and is required to collect and remit the tax imposed under

4 this Act and file returns for the subsequent year. If at

5 the end of a one-year period a serviceman that was

6 required to collect and remit the tax imposed under this

7 Act determines that he or she did not meet the criteria in

8 either subparagraph (A) or (B) during the preceding

9 12-month period, the serviceman subsequently shall

10 determine on a quarterly basis, ending on the last day of

11 March, June, September, and December, whether he or she

12 meets the criteria of either subparagraph (A) or (B) for

13 the preceding 12-month period.

14 Beginning January 1, 2020, neither the gross receipts

15 from nor the number of separate transactions for sales of

16 service to purchasers in Illinois that a serviceman makes

17 through a marketplace facilitator and for which the

18 serviceman has received a certification from the

19 marketplace facilitator pursuant to Section 2d of this Act

20 shall be included for purposes of determining whether he

21 or she has met the thresholds of this paragraph (9).

22 (10) Beginning January 1, 2020, a marketplace

23 facilitator, as defined in Section 2d of this Act.

24 (Source: P.A. 100-22, eff. 7-6-17; 100-321, eff. 8-24-17;

25 100-587, eff. 6-4-18; 100-863, eff. 8-14-18; 101-9, Article

26 10, Section 10-15, eff. 6-5-19; 101-9, Article 25, Section

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1 25-10, eff. 6-5-19; 101-604, eff. 12-13-19.)

2 Section 15. The Service Occupation Tax Act is amended by

3 changing Section 2 as follows:

4 (35 ILCS 115/2) (from Ch. 120, par. 439.102)

5 Sec. 2. In this Act:

6 "Transfer" means any transfer of the title to property or

7 of the ownership of property whether or not the transferor

8 retains title as security for the payment of amounts due him

9 from the transferee.

10 "Cost Price" means the consideration paid by the

11 serviceman for a purchase valued in money, whether paid in

12 money or otherwise, including cash, credits and services, and

13 shall be determined without any deduction on account of the

14 supplier's cost of the property sold or on account of any other

15 expense incurred by the supplier. When a serviceman contracts

16 out part or all of the services required in his sale of

17 service, it shall be presumed that the cost price to the

18 serviceman of the property transferred to him by his or her

19 subcontractor is equal to 50% of the subcontractor's charges

20 to the serviceman in the absence of proof of the consideration

21 paid by the subcontractor for the purchase of such property.

22 "Department" means the Department of Revenue.

23 "Person" means any natural individual, firm, partnership,

24 association, joint stock company, joint venture, public or

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1 private corporation, limited liability company, and any

2 receiver, executor, trustee, guardian or other representative

3 appointed by order of any court.

4 "Sale of Service" means any transaction except:

5 (a) A retail sale of tangible personal property taxable

6 under the Retailers' Occupation Tax Act or under the Use Tax

7 Act.

8 (b) A sale of tangible personal property for the purpose

9 of resale made in compliance with Section 2c of the Retailers'

10 Occupation Tax Act.

11 (c) Except as hereinafter provided, a sale or transfer of

12 tangible personal property as an incident to the rendering of

13 service for or by any governmental body or for or by any

14 corporation, society, association, foundation or institution

15 organized and operated exclusively for charitable, religious

16 or educational purposes or any not-for-profit corporation,

17 society, association, foundation, institution or organization

18 which has no compensated officers or employees and which is

19 organized and operated primarily for the recreation of persons

20 55 years of age or older. A limited liability company may

21 qualify for the exemption under this paragraph only if the

22 limited liability company is organized and operated

23 exclusively for educational purposes.

24 (d) (Blank).

25 (d-1) A sale or transfer of tangible personal property as

26 an incident to the rendering of service for owners, lessors or

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1 shippers of tangible personal property which is utilized by

2 interstate carriers for hire for use as rolling stock moving

3 in interstate commerce, and equipment operated by a

4 telecommunications provider, licensed as a common carrier by

5 the Federal Communications Commission, which is permanently

6 installed in or affixed to aircraft moving in interstate

7 commerce.

8 (d-1.1) On and after July 1, 2003 and through June 30,

9 2004, a sale or transfer of a motor vehicle of the second

10 division with a gross vehicle weight in excess of 8,000 pounds

11 as an incident to the rendering of service if that motor

12 vehicle is subject to the commercial distribution fee imposed

13 under Section 3-815.1 of the Illinois Vehicle Code. Beginning

14 on July 1, 2004 and through June 30, 2005, the use in this

15 State of motor vehicles of the second division: (i) with a

16 gross vehicle weight rating in excess of 8,000 pounds; (ii)

17 that are subject to the commercial distribution fee imposed

18 under Section 3-815.1 of the Illinois Vehicle Code; and (iii)

19 that are primarily used for commercial purposes. Through June

20 30, 2005, this exemption applies to repair and replacement

21 parts added after the initial purchase of such a motor vehicle

22 if that motor vehicle is used in a manner that would qualify

23 for the rolling stock exemption otherwise provided for in this

24 Act. For purposes of this paragraph, "used for commercial

25 purposes" means the transportation of persons or property in

26 furtherance of any commercial or industrial enterprise whether

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1 for-hire or not.

2 (d-2) The repairing, reconditioning or remodeling, for a

3 common carrier by rail, of tangible personal property which

4 belongs to such carrier for hire, and as to which such carrier

5 receives the physical possession of the repaired,

6 reconditioned or remodeled item of tangible personal property

7 in Illinois, and which such carrier transports, or shares with

8 another common carrier in the transportation of such property,

9 out of Illinois on a standard uniform bill of lading showing

10 the person who repaired, reconditioned or remodeled the

11 property as the shipper or consignor of such property to a

12 destination outside Illinois, for use outside Illinois.

13 (d-3) A sale or transfer of tangible personal property

14 which is produced by the seller thereof on special order in

15 such a way as to have made the applicable tax the Service

16 Occupation Tax or the Service Use Tax, rather than the

17 Retailers' Occupation Tax or the Use Tax, for an interstate

18 carrier by rail which receives the physical possession of such

19 property in Illinois, and which transports such property, or

20 shares with another common carrier in the transportation of

21 such property, out of Illinois on a standard uniform bill of

22 lading showing the seller of the property as the shipper or

23 consignor of such property to a destination outside Illinois,

24 for use outside Illinois.

25 (d-4) Until January 1, 1997, a sale, by a registered

26 serviceman paying tax under this Act to the Department, of

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1 special order printed materials delivered outside Illinois and

2 which are not returned to this State, if delivery is made by

3 the seller or agent of the seller, including an agent who

4 causes the product to be delivered outside Illinois by a

5 common carrier or the U.S. postal service.

6 (e) A sale or transfer of machinery and equipment used

7 primarily in the process of the manufacturing or assembling,

8 either in an existing, an expanded or a new manufacturing

9 facility, of tangible personal property for wholesale or

10 retail sale or lease, whether such sale or lease is made

11 directly by the manufacturer or by some other person, whether

12 the materials used in the process are owned by the

13 manufacturer or some other person, or whether such sale or

14 lease is made apart from or as an incident to the seller's

15 engaging in a service occupation and the applicable tax is a

16 Service Occupation Tax or Service Use Tax, rather than

17 Retailers' Occupation Tax or Use Tax. The exemption provided

18 by this paragraph (e) includes production related tangible

19 personal property, as defined in Section 3-50 of the Use Tax

20 Act, purchased on or after July 1, 2019. The exemption

21 provided by this paragraph (e) does not include machinery and

22 equipment used in (i) the generation of electricity for

23 wholesale or retail sale; (ii) the generation or treatment of

24 natural or artificial gas for wholesale or retail sale that is

25 delivered to customers through pipes, pipelines, or mains; or

26 (iii) the treatment of water for wholesale or retail sale that

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1 is delivered to customers through pipes, pipelines, or mains.

2 The provisions of Public Act 98-583 are declaratory of

3 existing law as to the meaning and scope of this exemption. The

4 exemption under this subsection (e) is exempt from the

5 provisions of Section 3-75.

6 (f) Until July 1, 2003, the sale or transfer of

7 distillation machinery and equipment, sold as a unit or kit

8 and assembled or installed by the retailer, which machinery

9 and equipment is certified by the user to be used only for the

10 production of ethyl alcohol that will be used for consumption

11 as motor fuel or as a component of motor fuel for the personal

12 use of such user and not subject to sale or resale.

13 (g) At the election of any serviceman not required to be

14 otherwise registered as a retailer under Section 2a of the

15 Retailers' Occupation Tax Act, made for each fiscal year sales

16 of service in which the aggregate annual cost price of

17 tangible personal property transferred as an incident to the

18 sales of service is less than 35% (75% in the case of

19 servicemen transferring prescription drugs or servicemen

20 engaged in graphic arts production) of the aggregate annual

21 total gross receipts from all sales of service. The purchase

22 of such tangible personal property by the serviceman shall be

23 subject to tax under the Retailers' Occupation Tax Act and the

24 Use Tax Act. However, if a primary serviceman who has made the

25 election described in this paragraph subcontracts service work

26 to a secondary serviceman who has also made the election

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1 described in this paragraph, the primary serviceman does not

2 incur a Use Tax liability if the secondary serviceman (i) has

3 paid or will pay Use Tax on his or her cost price of any

4 tangible personal property transferred to the primary

5 serviceman and (ii) certifies that fact in writing to the

6 primary serviceman.

7 Tangible personal property transferred incident to the

8 completion of a maintenance agreement is exempt from the tax

9 imposed pursuant to this Act.

10 Exemption (e) also includes machinery and equipment used

11 in the general maintenance or repair of such exempt machinery

12 and equipment or for in-house manufacture of exempt machinery

13 and equipment. On and after July 1, 2017, exemption (e) also

14 includes graphic arts machinery and equipment, as defined in

15 paragraph (5) of Section 3-5. The machinery and equipment

16 exemption does not include machinery and equipment used in (i)

17 the generation of electricity for wholesale or retail sale;

18 (ii) the generation or treatment of natural or artificial gas

19 for wholesale or retail sale that is delivered to customers

20 through pipes, pipelines, or mains; or (iii) the treatment of

21 water for wholesale or retail sale that is delivered to

22 customers through pipes, pipelines, or mains. The provisions

23 of Public Act 98-583 are declaratory of existing law as to the

24 meaning and scope of this exemption. For the purposes of

25 exemption (e), each of these terms shall have the following

26 meanings: (1) "manufacturing process" shall mean the

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1 production of any article of tangible personal property,

2 whether such article is a finished product or an article for

3 use in the process of manufacturing or assembling a different

4 article of tangible personal property, by procedures commonly

5 regarded as manufacturing, processing, fabricating, or

6 refining which changes some existing material or materials

7 into a material with a different form, use or name. In relation

8 to a recognized integrated business composed of a series of

9 operations which collectively constitute manufacturing, or

10 individually constitute manufacturing operations, the

11 manufacturing process shall be deemed to commence with the

12 first operation or stage of production in the series, and

13 shall not be deemed to end until the completion of the final

14 product in the last operation or stage of production in the

15 series; and further for purposes of exemption (e),

16 photoprocessing is deemed to be a manufacturing process of

17 tangible personal property for wholesale or retail sale; (2)

18 "assembling process" shall mean the production of any article

19 of tangible personal property, whether such article is a

20 finished product or an article for use in the process of

21 manufacturing or assembling a different article of tangible

22 personal property, by the combination of existing materials in

23 a manner commonly regarded as assembling which results in a

24 material of a different form, use or name; (3) "machinery"

25 shall mean major mechanical machines or major components of

26 such machines contributing to a manufacturing or assembling

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1 process; and (4) "equipment" shall include any independent

2 device or tool separate from any machinery but essential to an

3 integrated manufacturing or assembly process; including

4 computers used primarily in a manufacturer's computer assisted

5 design, computer assisted manufacturing (CAD/CAM) system; or

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 and

9 molds; or any parts which require periodic replacement in the

10 course of normal operation; but shall not include hand tools.

11 Equipment includes chemicals or chemicals acting as catalysts

12 but only if the chemicals or chemicals acting as catalysts

13 effect a direct and immediate change upon a product being

14 manufactured or assembled for wholesale or retail sale or

15 lease. The purchaser of such machinery and equipment who has

16 an active resale registration number shall furnish such number

17 to the seller at the time of purchase. The purchaser of such

18 machinery and equipment and tools without an active resale

19 registration number shall furnish to the seller a certificate

20 of exemption stating facts establishing the exemption, which

21 certificate shall be available to the Department for

22 inspection or audit.

23 Except as provided in Section 2d of this Act, the rolling

24 stock exemption applies to rolling stock used by an interstate

25 carrier for hire, even just between points in Illinois, if

26 such rolling stock transports, for hire, persons whose

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1 journeys or property whose shipments originate or terminate

2 outside Illinois.

3 Any informal rulings, opinions or letters issued by the

4 Department in response to an inquiry or request for any

5 opinion from any person regarding the coverage and

6 applicability of exemption (e) to specific devices shall be

7 published, maintained as a public record, and made available

8 for public inspection and copying. If the informal ruling,

9 opinion or letter contains trade secrets or other confidential

10 information, where possible the Department shall delete such

11 information prior to publication. Whenever such informal

12 rulings, opinions, or letters contain any policy of general

13 applicability, the Department shall formulate and adopt such

14 policy as a rule in accordance with the provisions of the

15 Illinois Administrative Procedure Act.

16 On and after July 1, 1987, no entity otherwise eligible

17 under exemption (c) of this Section shall make tax-free

18 purchases unless it has an active exemption identification

19 number issued by the Department.

20 "Serviceman" means any person who is engaged in the

21 occupation of making sales of service.

22 Motor carriers, as defined in Section 18c-1104 of the

23 Vehicle Code, that sell items of tangible personal property to

24 purchasers for use or consumption in addition to rendering

25 service as a motor carrier are engaged in a profession or

26 service occupation as a motor carrier and are not engaged in

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1 the business of selling tangible personal property to

2 purchasers for use or consumption within the meaning of this

3 Act. Those motor carriers are not required to remit retailers'

4 occupation taxes measured by their receipts from engaging in

5 such profession or service occupation, including receipts from

6 both services and tangible personal property.

7 "Sale at Retail" means "sale at retail" as defined in the

8 Retailers' Occupation Tax Act.

9 "Supplier" means any person who makes sales of tangible

10 personal property to servicemen for the purpose of resale as

11 an incident to a sale of service.

12 (Source: P.A. 100-22, eff. 7-6-17; 100-321, eff. 8-24-17;

13 100-863, eff. 8-14-18; 101-9, eff. 6-5-19; 101-604, eff.

14 12-13-19.)

15 Section 20. The Retailers' Occupation Tax Act is amended

16 by changing Sections 1 and 2-55 as follows:

17 (35 ILCS 120/1) (from Ch. 120, par. 440)

18 Sec. 1. Definitions. "Sale at retail" means any transfer

19 of the ownership of or title to tangible personal property to a

20 purchaser, for the purpose of use or consumption, and not for

21 the purpose of resale in any form as tangible personal

22 property to the extent not first subjected to a use for which

23 it was purchased, for a valuable consideration: Provided that

24 the property purchased is deemed to be purchased for the

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1 purpose of resale, despite first being used, to the extent to

2 which it is resold as an ingredient of an intentionally

3 produced product or byproduct of manufacturing. For this

4 purpose, slag produced as an incident to manufacturing pig

5 iron or steel and sold is considered to be an intentionally

6 produced byproduct of manufacturing. Transactions whereby the

7 possession of the property is transferred but the seller

8 retains the title as security for payment of the selling price

9 shall be deemed to be sales.

10 "Sale at retail" shall be construed to include any

11 transfer of the ownership of or title to tangible personal

12 property to a purchaser, for use or consumption by any other

13 person to whom such purchaser may transfer the tangible

14 personal property without a valuable consideration, and to

15 include any transfer, whether made for or without a valuable

16 consideration, for resale in any form as tangible personal

17 property unless made in compliance with Section 2c of this

18 Act.

19 Sales of tangible personal property, which property, to

20 the extent not first subjected to a use for which it was

21 purchased, as an ingredient or constituent, goes into and

22 forms a part of tangible personal property subsequently the

23 subject of a "Sale at retail", are not sales at retail as

24 defined in this Act: Provided that the property purchased is

25 deemed to be purchased for the purpose of resale, despite

26 first being used, to the extent to which it is resold as an

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1 ingredient of an intentionally produced product or byproduct

2 of manufacturing.

3 "Sale at retail" shall be construed to include any

4 Illinois florist's sales transaction in which the purchase

5 order is received in Illinois by a florist and the sale is for

6 use or consumption, but the Illinois florist has a florist in

7 another state deliver the property to the purchaser or the

8 purchaser's donee in such other state.

9 Nonreusable tangible personal property that is used by

10 persons engaged in the business of operating a restaurant,

11 cafeteria, or drive-in is a sale for resale when it is

12 transferred to customers in the ordinary course of business as

13 part of the sale of food or beverages and is used to deliver,

14 package, or consume food or beverages, regardless of where

15 consumption of the food or beverages occurs. Examples of those

16 items include, but are not limited to nonreusable, paper and

17 plastic cups, plates, baskets, boxes, sleeves, buckets or

18 other containers, utensils, straws, placemats, napkins, doggie

19 bags, and wrapping or packaging materials that are transferred

20 to customers as part of the sale of food or beverages in the

21 ordinary course of business.

22 The purchase, employment and transfer of such tangible

23 personal property as newsprint and ink for the primary purpose

24 of conveying news (with or without other information) is not a

25 purchase, use or sale of tangible personal property.

26 A person whose activities are organized and conducted

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1 primarily as a not-for-profit service enterprise, and who

2 engages in selling tangible personal property at retail

3 (whether to the public or merely to members and their guests)

4 is engaged in the business of selling tangible personal

5 property at retail with respect to such transactions,

6 excepting only a person organized and operated exclusively for