Bill Text: IL HB3694 | 2015-2016 | 99th General Assembly | Introduced

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Bill Title: Amends the Use Tax Act, the Service Use Tax Act, and the Retailers' Occupation Tax Act. Provides that the term "selling price" does not include any fee charged by the retailer for the disposal of tires if that fee is a separately stated charge on the customer's invoice.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Introduced - Dead) 2016-04-08 - Rule 19(a) / Re-referred to Rules Committee [HB3694 Detail]

Download: Illinois-2015-HB3694-Introduced.html

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99TH GENERAL ASSEMBLY State of Illinois 2015 and 2016 HB3694 Introduced , by Rep. Katherine Cloonen 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 120/1 from Ch. 120, par. 440
Amends the Use Tax Act, the Service Use Tax Act, and the Retailers' Occupation Tax Act. Provides that the term "selling price" does not include any fee charged by the retailer for the disposal of tires if that fee is a separately stated charge on the customer's invoice.
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FISCAL NOTE ACT MAY APPLY
A BILL FOR
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AN ACT concerning revenue.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 5. The Use Tax Act is amended by changing Section 2
as follows:
(35 ILCS 105/2) (from Ch. 120, par. 439.2)
Sec. 2. Definitions.
"Use" means the exercise by any person of any right or
power over tangible personal property incident to the ownership
of that property, except that it does not include the sale of
such property in any form as tangible personal property in the
regular course of business to the extent that such property is
not first subjected to a use for which it was purchased, and
does not include the use of such property by its owner for
demonstration purposes: Provided that the property purchased
is deemed to be purchased for the purpose of resale, despite
first being used, to the extent to which it is resold as an
ingredient of an intentionally produced product or by-product
of manufacturing. "Use" does not mean the demonstration use or
interim use of tangible personal property by a retailer before
he sells that tangible personal property. For watercraft or
aircraft, if the period of demonstration use or interim use by
the retailer exceeds 18 months, the retailer shall pay on the

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retailers' original cost price the tax imposed by this Act, and
no credit for that tax is permitted if the watercraft or
aircraft is subsequently sold by the retailer. "Use" does not
mean the physical incorporation of tangible personal property,
to the extent not first subjected to a use for which it was
purchased, as an ingredient or constituent, into other tangible
personal property (a) which is sold in the regular course of
business or (b) which the person incorporating such ingredient
or constituent therein has undertaken at the time of such
purchase to cause to be transported in interstate commerce to
destinations outside the State of Illinois: Provided that the
property purchased is deemed to be purchased for the purpose of
resale, despite first being used, to the extent to which it is
resold as an ingredient of an intentionally produced product or
by-product of manufacturing.
"Watercraft" means a Class 2, Class 3, or Class 4
watercraft as defined in Section 3-2 of the Boat Registration
and Safety Act, a personal watercraft, or any boat equipped
with an inboard motor.
"Purchase at retail" means the acquisition of the ownership
of or title to tangible personal property through a sale at
retail.
"Purchaser" means anyone who, through a sale at retail,
acquires the ownership of tangible personal property for a
valuable consideration.
"Sale at retail" means any transfer of the ownership of or

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title to tangible personal property to a purchaser, for the
purpose of use, and not for the purpose of resale in any form
as tangible personal property to the extent not first subjected
to a use for which it was purchased, for a valuable
consideration: Provided that the property purchased is deemed
to be purchased for the purpose of resale, despite first being
used, to the extent to which it is resold as an ingredient of
an intentionally produced product or by-product of
manufacturing. For this purpose, slag produced as an incident
to manufacturing pig iron or steel and sold is considered to be
an intentionally produced by-product of manufacturing. "Sale
at retail" includes any such transfer made for resale unless
made in compliance with Section 2c of the Retailers' Occupation
Tax Act, as incorporated by reference into Section 12 of this
Act. Transactions whereby the possession of the property is
transferred but the seller retains the title as security for
payment of the selling price are sales.
"Sale at retail" shall also be construed to include any
Illinois florist's sales transaction in which the purchase
order is received in Illinois by a florist and the sale is for
use or consumption, but the Illinois florist has a florist in
another state deliver the property to the purchaser or the
purchaser's donee in such other state.
Nonreusable tangible personal property that is used by
persons engaged in the business of operating a restaurant,
cafeteria, or drive-in is a sale for resale when it is

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transferred to customers in the ordinary course of business as
part of the sale of food or beverages and is used to deliver,
package, or consume food or beverages, regardless of where
consumption of the food or beverages occurs. Examples of those
items include, but are not limited to nonreusable, paper and
plastic cups, plates, baskets, boxes, sleeves, buckets or other
containers, utensils, straws, placemats, napkins, doggie bags,
and wrapping or packaging materials that are transferred to
customers as part of the sale of food or beverages in the
ordinary course of business.
The purchase, employment and transfer of such tangible
personal property as newsprint and ink for the primary purpose
of conveying news (with or without other information) is not a
purchase, use or sale of tangible personal property.
"Selling price" means the consideration for a sale valued
in money whether received in money or otherwise, including
cash, credits, property other than as hereinafter provided, and
services, but not including the value of or credit given for
traded-in tangible personal property where the item that is
traded-in is of like kind and character as that which is being
sold, and shall be determined without any deduction on account
of the cost of the property sold, the cost of materials used,
labor or service cost or any other expense whatsoever, but does
not include interest or finance charges which appear as
separate items on the bill of sale or sales contract nor
charges that are added to prices by sellers on account of the

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seller's tax liability under the "Retailers' Occupation Tax
Act", or on account of the seller's duty to collect, from the
purchaser, the tax that is imposed by this Act, or, except as
otherwise provided with respect to any cigarette tax imposed by
a home rule unit, on account of the seller's tax liability
under any local occupation tax administered by the Department,
or, except as otherwise provided with respect to any cigarette
tax imposed by a home rule unit on account of the seller's duty
to collect, from the purchasers, the tax that is imposed under
any local use tax administered by the Department. Effective
December 1, 1985, "selling price" shall include charges that
are added to prices by sellers on account of the seller's tax
liability under the Cigarette Tax Act, on account of the
seller's duty to collect, from the purchaser, the tax imposed
under the Cigarette Use Tax Act, and on account of the seller's
duty to collect, from the purchaser, any cigarette tax imposed
by a home rule unit.
Notwithstanding any other provision of law, "selling
price" does not include any fee charged by the retailer for the
disposal of tires if that fee is a separately stated charge on
the customer's invoice.
Notwithstanding any law to the contrary, for any motor
vehicle, as defined in Section 1-146 of the Vehicle Code, that
is sold on or after January 1, 2015 for the purpose of leasing
the vehicle for a defined period that is longer than one year
and (1) is a motor vehicle of the second division that: (A) is

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a self-contained motor vehicle designed or permanently
converted to provide living quarters for recreational,
camping, or travel use, with direct walk through access to the
living quarters from the driver's seat; (B) is of the van
configuration designed for the transportation of not less than
7 nor more than 16 passengers; or (C) has a gross vehicle
weight rating of 8,000 pounds or less or (2) is a motor vehicle
of the first division, "selling price" or "amount of sale"
means the consideration received by the lessor pursuant to the
lease contract, including amounts due at lease signing and all
monthly or other regular payments charged over the term of the
lease. Also included in the selling price is any amount
received by the lessor from the lessee for the leased vehicle
that is not calculated at the time the lease is executed,
including, but not limited to, excess mileage charges and
charges for excess wear and tear. For sales that occur in
Illinois, with respect to any amount received by the lessor
from the lessee for the leased vehicle that is not calculated
at the time the lease is executed, the lessor who purchased the
motor vehicle does not incur the tax imposed by the Use Tax Act
on those amounts, and the retailer who makes the retail sale of
the motor vehicle to the lessor is not required to collect the
tax imposed by this Act or to pay the tax imposed by the
Retailers' Occupation Tax Act on those amounts. However, the
lessor who purchased the motor vehicle assumes the liability
for reporting and paying the tax on those amounts directly to

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the Department in the same form (Illinois Retailers' Occupation
Tax, and local retailers' occupation taxes, if applicable) in
which the retailer would have reported and paid such tax if the
retailer had accounted for the tax to the Department. For
amounts received by the lessor from the lessee that are not
calculated at the time the lease is executed, the lessor must
file the return and pay the tax to the Department by the due
date otherwise required by this Act for returns other than
transaction returns. If the retailer is entitled under this Act
to a discount for collecting and remitting the tax imposed
under this Act to the Department with respect to the sale of
the motor vehicle to the lessor, then the right to the discount
provided in this Act shall be transferred to the lessor with
respect to the tax paid by the lessor for any amount received
by the lessor from the lessee for the leased vehicle that is
not calculated at the time the lease is executed; provided that
the discount is only allowed if the return is timely filed and
for amounts timely paid. The "selling price" of a motor vehicle
that is sold on or after January 1, 2015 for the purpose of
leasing for a defined period of longer than one year shall not
be reduced by the value of or credit given for traded-in
tangible personal property owned by the lessor, nor shall it be
reduced by the value of or credit given for traded-in tangible
personal property owned by the lessee, regardless of whether
the trade-in value thereof is assigned by the lessee to the
lessor. In the case of a motor vehicle that is sold for the

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purpose of leasing for a defined period of longer than one
year, the sale occurs at the time of the delivery of the
vehicle, regardless of the due date of any lease payments. A
lessor who incurs a Retailers' Occupation Tax liability on the
sale of a motor vehicle coming off lease may not take a credit
against that liability for the Use Tax the lessor paid upon the
purchase of the motor vehicle (or for any tax the lessor paid
with respect to any amount received by the lessor from the
lessee for the leased vehicle that was not calculated at the
time the lease was executed) if the selling price of the motor
vehicle at the time of purchase was calculated using the
definition of "selling price" as defined in this paragraph.
Notwithstanding any other provision of this Act to the
contrary, lessors shall file all returns and make all payments
required under this paragraph to the Department by electronic
means in the manner and form as required by the Department.
This paragraph does not apply to leases of motor vehicles for
which, at the time the lease is entered into, the term of the
lease is not a defined period, including leases with a defined
initial period with the option to continue the lease on a
month-to-month or other basis beyond the initial defined
period.
The phrase "like kind and character" shall be liberally
construed (including but not limited to any form of motor
vehicle for any form of motor vehicle, or any kind of farm or
agricultural implement for any other kind of farm or

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agricultural implement), while not including a kind of item
which, if sold at retail by that retailer, would be exempt from
retailers' occupation tax and use tax as an isolated or
occasional sale.
"Department" means the Department of Revenue.
"Person" means any natural individual, firm, partnership,
association, joint stock company, joint adventure, public or
private corporation, limited liability company, or a receiver,
executor, trustee, guardian or other representative appointed
by order of any court.
"Retailer" means and includes every person engaged in the
business of making sales at retail as defined in this Section.
A person who holds himself or herself out as being engaged
(or who habitually engages) in selling tangible personal
property at retail is a retailer hereunder with respect to such
sales (and not primarily in a service occupation)
notwithstanding the fact that such person designs and produces
such tangible personal property on special order for the
purchaser and in such a way as to render the property of value
only to such purchaser, if such tangible personal property so
produced on special order serves substantially the same
function as stock or standard items of tangible personal
property that are sold at retail.
A person whose activities are organized and conducted
primarily as a not-for-profit service enterprise, and who
engages in selling tangible personal property at retail

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(whether to the public or merely to members and their guests)
is a retailer with respect to such transactions, excepting only
a person organized and operated exclusively for charitable,
religious or educational purposes either (1), to the extent of
sales by such person to its members, students, patients or
inmates of tangible personal property to be used primarily for
the purposes of such person, or (2), to the extent of sales by
such person of tangible personal property which is not sold or
offered for sale by persons organized for profit. The selling
of school books and school supplies by schools at retail to
students is not "primarily for the purposes of" the school
which does such selling. This paragraph does not apply to nor
subject to taxation occasional dinners, social or similar
activities of a person organized and operated exclusively for
charitable, religious or educational purposes, whether or not
such activities are open to the public.
A person who is the recipient of a grant or contract under
Title VII of the Older Americans Act of 1965 (P.L. 92-258) and
serves meals to participants in the federal Nutrition Program
for the Elderly in return for contributions established in
amount by the individual participant pursuant to a schedule of
suggested fees as provided for in the federal Act is not a
retailer under this Act with respect to such transactions.
Persons who engage in the business of transferring tangible
personal property upon the redemption of trading stamps are
retailers hereunder when engaged in such business.

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The isolated or occasional sale of tangible personal
property at retail by a person who does not hold himself out as
being engaged (or who does not habitually engage) in selling
such tangible personal property at retail or a sale through a
bulk vending machine does not make such person a retailer
hereunder. However, any person who is engaged in a business
which is not subject to the tax imposed by the "Retailers'
Occupation Tax Act" because of involving the sale of or a
contract to sell real estate or a construction contract to
improve real estate, but who, in the course of conducting such
business, transfers tangible personal property to users or
consumers in the finished form in which it was purchased, and
which does not become real estate, under any provision of a
construction contract or real estate sale or real estate sales
agreement entered into with some other person arising out of or
because of such nontaxable business, is a retailer to the
extent of the value of the tangible personal property so
transferred. If, in such transaction, a separate charge is made
for the tangible personal property so transferred, the value of
such property, for the purposes of this Act, is the amount so
separately charged, but not less than the cost of such property
to the transferor; if no separate charge is made, the value of
such property, for the purposes of this Act, is the cost to the
transferor of such tangible personal property.
"Retailer maintaining a place of business in this State",
or any like term, means and includes any of the following

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retailers:
1. A retailer having or maintaining within this State,
directly or by a subsidiary, an office, distribution house,
sales house, warehouse or other place of business, or any
agent or other representative operating within this State
under the authority of the retailer or its subsidiary,
irrespective of whether such place of business or agent or
other representative is located here permanently or
temporarily, or whether such retailer or subsidiary is
licensed to do business in this State. However, the
ownership of property that is located at the premises of a
printer with which the retailer has contracted for printing
and that consists of the final printed product, property
that becomes a part of the final printed product, or copy
from which the printed product is produced shall not result
in the retailer being deemed to have or maintain an office,
distribution house, sales house, warehouse, or other place
of business within this State.
1.1. A retailer having a contract with a person located
in this State under which the person, for a commission or
other consideration based upon the sale of tangible
personal property by the retailer, directly or indirectly
refers potential customers to the retailer by providing to
the potential customers a promotional code or other
mechanism that allows the retailer to track purchases
referred by such persons. Examples of mechanisms that allow

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the retailer to track purchases referred by such persons
include but are not limited to the use of a link on the
person's Internet website, promotional codes distributed
through the person's hand-delivered or mailed material,
and promotional codes distributed by the person through
radio or other broadcast media. The provisions of this
paragraph 1.1 shall apply only if the cumulative gross
receipts from sales of tangible personal property by the
retailer to customers who are referred to the retailer by
all persons in this State under such contracts exceed
$10,000 during the preceding 4 quarterly periods ending on
the last day of March, June, September, and December. A
retailer meeting the requirements of this paragraph 1.1
shall be presumed to be maintaining a place of business in
this State but may rebut this presumption by submitting
proof that the referrals or other activities pursued within
this State by such persons were not sufficient to meet the
nexus standards of the United States Constitution during
the preceding 4 quarterly periods.
1.2. Beginning July 1, 2011, a retailer having a
contract with a person located in this State under which:
A. the retailer sells the same or substantially
similar line of products as the person located in this
State and does so using an identical or substantially
similar name, trade name, or trademark as the person
located in this State; and

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B. the retailer provides a commission or other
consideration to the person located in this State based
upon the sale of tangible personal property by the
retailer.
The provisions of this paragraph 1.2 shall apply only if
the cumulative gross receipts from sales of tangible
personal property by the retailer to customers in this
State under all such contracts exceed $10,000 during the
preceding 4 quarterly periods ending on the last day of
March, June, September, and December.
2. A retailer soliciting orders for tangible personal
property by means of a telecommunication or television
shopping system (which utilizes toll free numbers) which is
intended by the retailer to be broadcast by cable
television or other means of broadcasting, to consumers
located in this State.
3. A retailer, pursuant to a contract with a
broadcaster or publisher located in this State, soliciting
orders for tangible personal property by means of
advertising which is disseminated primarily to consumers
located in this State and only secondarily to bordering
jurisdictions.
4. A retailer soliciting orders for tangible personal
property by mail if the solicitations are substantial and
recurring and if the retailer benefits from any banking,
financing, debt collection, telecommunication, or

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marketing activities occurring in this State or benefits
from the location in this State of authorized installation,
servicing, or repair facilities.
5. A retailer that is owned or controlled by the same
interests that own or control any retailer engaging in
business in the same or similar line of business in this
State.
6. A retailer having a franchisee or licensee operating
under its trade name if the franchisee or licensee is
required to collect the tax under this Section.
7. A retailer, pursuant to a contract with a cable
television operator located in this State, soliciting
orders for tangible personal property by means of
advertising which is transmitted or distributed over a
cable television system in this State.
8. A retailer engaging in activities in Illinois, which
activities in the state in which the retail business
engaging in such activities is located would constitute
maintaining a place of business in that state.
"Bulk vending machine" means a vending machine, containing
unsorted confections, nuts, toys, or other items designed
primarily to be used or played with by children which, when a
coin or coins of a denomination not larger than $0.50 are
inserted, are dispensed in equal portions, at random and
without selection by the customer.
(Source: P.A. 98-628, eff. 1-1-15; 98-1080, eff. 8-26-14;

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98-1089, eff. 1-1-15; revised 10-1-14.)
Section 10. The Service Use Tax Act is amended by changing
Section 2 as follows:
(35 ILCS 110/2) (from Ch. 120, par. 439.32)
Sec. 2. Definitions.
"Use" means the exercise by any person of any right or
power over tangible personal property incident to the ownership
of that property, but does not include the sale or use for
demonstration by him of that property in any form as tangible
personal property in the regular course of business. "Use" does
not mean the interim use of tangible personal property nor the
physical incorporation of tangible personal property, as an
ingredient or constituent, into other tangible personal
property, (a) which is sold in the regular course of business
or (b) which the person incorporating such ingredient or
constituent therein has undertaken at the time of such purchase
to cause to be transported in interstate commerce to
destinations outside the State of Illinois.
"Purchased from a serviceman" means the acquisition of the
ownership of, or title to, tangible personal property through a
sale of service.
"Purchaser" means any person who, through a sale of
service, acquires the ownership of, or title to, any tangible
personal property.

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"Cost price" means the consideration paid by the serviceman
for a purchase valued in money, whether paid in money or
otherwise, including cash, credits and services, and shall be
determined without any deduction on account of the supplier's
cost of the property sold or on account of any other expense
incurred by the supplier. When a serviceman contracts out part
or all of the services required in his sale of service, it
shall be presumed that the cost price to the serviceman of the
property transferred to him or her by his or her subcontractor
is equal to 50% of the subcontractor's charges to the
serviceman in the absence of proof of the consideration paid by
the subcontractor for the purchase of such property.
"Selling price" means the consideration for a sale valued
in money whether received in money or otherwise, including
cash, credits and service, and shall be determined without any
deduction on account of the serviceman's cost of the property
sold, the cost of materials used, labor or service cost or any
other expense whatsoever, but does not include interest or
finance charges which appear as separate items on the bill of
sale or sales contract nor charges that are added to prices by
sellers on account of the seller's duty to collect, from the
purchaser, the tax that is imposed by this Act.
Notwithstanding any other provision of law, "selling
price" does not include any fee charged by the retailer for the
disposal of tires if that fee is a separately stated charge on
the customer's invoice.

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"Department" means the Department of Revenue.
"Person" means any natural individual, firm, partnership,
association, joint stock company, joint venture, public or
private corporation, limited liability company, and any
receiver, executor, trustee, guardian or other representative
appointed by order of any court.
"Sale of service" means any transaction except:
(1) a retail sale of tangible personal property taxable
under the Retailers' Occupation Tax Act or under the Use
Tax Act.
(2) a sale of tangible personal property for the
purpose of resale made in compliance with Section 2c of the
Retailers' Occupation Tax Act.
(3) except as hereinafter provided, a sale or transfer
of tangible personal property as an incident to the
rendering of service for or by any governmental body, or
for or by any corporation, society, association,
foundation or institution organized and operated
exclusively for charitable, religious or educational
purposes or any not-for-profit corporation, society,
association, foundation, institution or organization which
has no compensated officers or employees and which is
organized and operated primarily for the recreation of
persons 55 years of age or older. A limited liability
company may qualify for the exemption under this paragraph
only if the limited liability company is organized and

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operated exclusively for educational purposes.
(4) a sale or transfer of tangible personal property as
an incident to the rendering of service for interstate
carriers for hire for use as rolling stock moving in
interstate commerce or by lessors under a lease of one year
or longer, executed or in effect at the time of purchase of
personal property, to interstate carriers for hire for use
as rolling stock moving in interstate commerce so long as
so used by such interstate carriers for hire, and equipment
operated by a telecommunications provider, licensed as a
common carrier by the Federal Communications Commission,
which is permanently installed in or affixed to aircraft
moving in interstate commerce.
(4a) a sale or transfer of tangible personal property
as an incident to the rendering of service for owners,
lessors, or shippers of tangible personal property which is
utilized by interstate carriers for hire for use as rolling
stock moving in interstate commerce so long as so used by
interstate carriers for hire, and equipment operated by a
telecommunications provider, licensed as a common carrier
by the Federal Communications Commission, which is
permanently installed in or affixed to aircraft moving in
interstate commerce.
(4a-5) on and after July 1, 2003 and through June 30,
2004, a sale or transfer of a motor vehicle of the second
division with a gross vehicle weight in excess of 8,000

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pounds as an incident to the rendering of service if that
motor vehicle is subject to the commercial distribution fee
imposed under Section 3-815.1 of the Illinois Vehicle Code.
Beginning on July 1, 2004 and through June 30, 2005, the
use in this State of motor vehicles of the second division:
(i) with a gross vehicle weight rating in excess of 8,000
pounds; (ii) that are subject to the commercial
distribution fee imposed under Section 3-815.1 of the
Illinois Vehicle Code; and (iii) that are primarily used
for commercial purposes. Through June 30, 2005, this
exemption applies to repair and replacement parts added
after the initial purchase of such a motor vehicle if that
motor vehicle is used in a manner that would qualify for
the rolling stock exemption otherwise provided for in this
Act. For purposes of this paragraph, "used for commercial
purposes" means the transportation of persons or property
in furtherance of any commercial or industrial enterprise
whether for-hire or not.
(5) a sale or transfer of machinery and equipment used
primarily in the process of the manufacturing or
assembling, either in an existing, an expanded or a new
manufacturing facility, of tangible personal property for
wholesale or retail sale or lease, whether such sale or
lease is made directly by the manufacturer or by some other
person, whether the materials used in the process are owned
by the manufacturer or some other person, or whether such

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sale or lease is made apart from or as an incident to the
seller's engaging in a service occupation and the
applicable tax is a Service Use Tax or Service Occupation
Tax, rather than Use Tax or Retailers' Occupation Tax. The
exemption provided by this paragraph (5) does not include
machinery and equipment used in (i) the generation of
electricity for wholesale or retail sale; (ii) the
generation or treatment of natural or artificial gas for
wholesale or retail sale that is delivered to customers
through pipes, pipelines, or mains; or (iii) the treatment
of water for wholesale or retail sale that is delivered to
customers through pipes, pipelines, or mains. The
provisions of this amendatory Act of the 98th General
Assembly are declaratory of existing law as to the meaning
and scope of this exemption.
(5a) the repairing, reconditioning or remodeling, for
a common carrier by rail, of tangible personal property
which belongs to such carrier for hire, and as to which
such carrier receives the physical possession of the
repaired, reconditioned or remodeled item of tangible
personal property in Illinois, and which such carrier
transports, or shares with another common carrier in the
transportation of such property, out of Illinois on a
standard uniform bill of lading showing the person who
repaired, reconditioned or remodeled the property to a
destination outside Illinois, for use outside Illinois.

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(5b) a sale or transfer of tangible personal property
which is produced by the seller thereof on special order in
such a way as to have made the applicable tax the Service
Occupation Tax or the Service Use Tax, rather than the
Retailers' Occupation Tax or the Use Tax, for an interstate
carrier by rail which receives the physical possession of
such property in Illinois, and which transports such
property, or shares with another common carrier in the
transportation of such property, out of Illinois on a
standard uniform bill of lading showing the seller of the
property as the shipper or consignor of such property to a
destination outside Illinois, for use outside Illinois.
(6) until July 1, 2003, a sale or transfer of
distillation machinery and equipment, sold as a unit or kit
and assembled or installed by the retailer, which machinery
and equipment is certified by the user to be used only for
the production of ethyl alcohol that will be used for
consumption as motor fuel or as a component of motor fuel
for the personal use of such user and not subject to sale
or resale.
(7) at the election of any serviceman not required to
be otherwise registered as a retailer under Section 2a of
the Retailers' Occupation Tax Act, made for each fiscal
year sales of service in which the aggregate annual cost
price of tangible personal property transferred as an
incident to the sales of service is less than 35%, or 75%

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in the case of servicemen transferring prescription drugs
or servicemen engaged in graphic arts production, of the
aggregate annual total gross receipts from all sales of
service. The purchase of such tangible personal property by
the serviceman shall be subject to tax under the Retailers'
Occupation Tax Act and the Use Tax Act. However, if a
primary serviceman who has made the election described in
this paragraph subcontracts service work to a secondary
serviceman who has also made the election described in this
paragraph, the primary serviceman does not incur a Use Tax
liability if the secondary serviceman (i) has paid or will
pay Use Tax on his or her cost price of any tangible
personal property transferred to the primary serviceman
and (ii) certifies that fact in writing to the primary
serviceman.
Tangible personal property transferred incident to the
completion of a maintenance agreement is exempt from the tax
imposed pursuant to this Act.
Exemption (5) also includes machinery and equipment used in
the general maintenance or repair of such exempt machinery and
equipment or for in-house manufacture of exempt machinery and
equipment. The machinery and equipment exemption does not
include machinery and equipment used in (i) the generation of
electricity for wholesale or retail sale; (ii) the generation
or treatment of natural or artificial gas for wholesale or
retail sale that is delivered to customers through pipes,

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pipelines, or mains; or (iii) the treatment of water for
wholesale or retail sale that is delivered to customers through
pipes, pipelines, or mains. The provisions of this amendatory
Act of the 98th General Assembly are declaratory of existing
law as to the meaning and scope of this exemption. For the
purposes of exemption (5), each of these terms shall have the
following meanings: (1) "manufacturing process" shall mean the
production of any article of tangible personal property,
whether such article is a finished product or an article for
use in the process of manufacturing or assembling a different
article of tangible personal property, by procedures commonly
regarded as manufacturing, processing, fabricating, or
refining which changes some existing material or materials into
a material with a different form, use or name. In relation to a
recognized integrated business composed of a series of
operations which collectively constitute manufacturing, or
individually constitute manufacturing operations, the
manufacturing process shall be deemed to commence with the
first operation or stage of production in the series, and shall
not be deemed to end until the completion of the final product
in the last operation or stage of production in the series; and
further, for purposes of exemption (5), photoprocessing is
deemed to be a manufacturing process of tangible personal
property for wholesale or retail sale; (2) "assembling process"
shall mean the production of any article of tangible personal
property, whether such article is a finished product or an

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article for use in the process of manufacturing or assembling a
different article of tangible personal property, by the
combination of existing materials in a manner commonly regarded
as assembling which results in a material of a different form,
use or name; (3) "machinery" shall mean major mechanical
machines or major components of such machines contributing to a
manufacturing or assembling process; and (4) "equipment" shall
include any independent device or tool separate from any
machinery but essential to an integrated manufacturing or
assembly process; including computers used primarily in a
manufacturer's computer assisted design, computer assisted
manufacturing (CAD/CAM) system; or any subunit or assembly
comprising a component of any machinery or auxiliary, adjunct
or attachment parts of machinery, such as tools, dies, jigs,
fixtures, patterns and molds; or any parts which require
periodic replacement in the course of normal operation; but
shall not include hand tools. Equipment includes chemicals or
chemicals acting as catalysts but only if the chemicals or
chemicals acting as catalysts effect a direct and immediate
change upon a product being manufactured or assembled for
wholesale or retail sale or lease. The purchaser of such
machinery and equipment who has an active resale registration
number shall furnish such number to the seller at the time of
purchase. The user of such machinery and equipment and tools
without an active resale registration number shall prepare a
certificate of exemption for each transaction stating facts

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establishing the exemption for that transaction, which
certificate shall be available to the Department for inspection
or audit. The Department shall prescribe the form of the
certificate.
Any informal rulings, opinions or letters issued by the
Department in response to an inquiry or request for any opinion
from any person regarding the coverage and applicability of
exemption (5) to specific devices shall be published,
maintained as a public record, and made available for public
inspection and copying. If the informal ruling, opinion or
letter contains trade secrets or other confidential
information, where possible the Department shall delete such
information prior to publication. Whenever such informal
rulings, opinions, or letters contain any policy of general
applicability, the Department shall formulate and adopt such
policy as a rule in accordance with the provisions of the
Illinois Administrative Procedure Act.
On and after July 1, 1987, no entity otherwise eligible
under exemption (3) of this Section shall make tax free
purchases unless it has an active exemption identification
number issued by the Department.
The purchase, employment and transfer of such tangible
personal property as newsprint and ink for the primary purpose
of conveying news (with or without other information) is not a
purchase, use or sale of service or of tangible personal
property within the meaning of this Act.

HB3694 - 27 - LRB099 10493 HLH 30720 b
"Serviceman" means any person who is engaged in the
occupation of making sales of service.
"Sale at retail" means "sale at retail" as defined in the
Retailers' Occupation Tax Act.
"Supplier" means any person who makes sales of tangible
personal property to servicemen for the purpose of resale as an
incident to a sale of service.
"Serviceman maintaining a place of business in this State",
or any like term, means and includes any serviceman:
1. having or maintaining within this State, directly or
by a subsidiary, an office, distribution house, sales
house, warehouse or other place of business, or any agent
or other representative operating within this State under
the authority of the serviceman or its subsidiary,
irrespective of whether such place of business or agent or
other representative is located here permanently or
temporarily, or whether such serviceman or subsidiary is
licensed to do business in this State;
1.1. having a contract with a person located in this
State under which the person, for a commission or other
consideration based on the sale of service by the
serviceman, directly or indirectly refers potential
customers to the serviceman by providing to the potential
customers a promotional code or other mechanism that allows
the serviceman to track purchases referred by such persons.
Examples of mechanisms that allow the serviceman to track

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purchases referred by such persons include but are not
limited to the use of a link on the person's Internet
website, promotional codes distributed through the
person's hand-delivered or mailed material, and
promotional codes distributed by the person through radio
or other broadcast media. The provisions of this paragraph
1.1 shall apply only if the cumulative gross receipts from
sales of service by the serviceman to customers who are
referred to the serviceman by all persons in this State
under such contracts exceed $10,000 during the preceding 4
quarterly periods ending on the last day of March, June,
September, and December; a serviceman meeting the
requirements of this paragraph 1.1 shall be presumed to be
maintaining a place of business in this State but may rebut
this presumption by submitting proof that the referrals or
other activities pursued within this State by such persons
were not sufficient to meet the nexus standards of the
United States Constitution during the preceding 4
quarterly periods;
1.2. beginning July 1, 2011, having a contract with a
person located in this State under which:
A. the serviceman sells the same or substantially
similar line of services as the person located in this
State and does so using an identical or substantially
similar name, trade name, or trademark as the person
located in this State; and

HB3694 - 29 - LRB099 10493 HLH 30720 b
B. the serviceman provides a commission or other
consideration to the person located in this State based
upon the sale of services by the serviceman.
The provisions of this paragraph 1.2 shall apply only if
the cumulative gross receipts from sales of service by the
serviceman to customers in this State under all such
contracts exceed $10,000 during the preceding 4 quarterly
periods ending on the last day of March, June, September,
and December;
2. soliciting orders for tangible personal property by
means of a telecommunication or television shopping system
(which utilizes toll free numbers) which is intended by the
retailer to be broadcast by cable television or other means
of broadcasting, to consumers located in this State;
3. pursuant to a contract with a broadcaster or
publisher located in this State, soliciting orders for
tangible personal property by means of advertising which is
disseminated primarily to consumers located in this State
and only secondarily to bordering jurisdictions;
4. soliciting orders for tangible personal property by
mail if the solicitations are substantial and recurring and
if the retailer benefits from any banking, financing, debt
collection, telecommunication, or marketing activities
occurring in this State or benefits from the location in
this State of authorized installation, servicing, or
repair facilities;

HB3694 - 30 - LRB099 10493 HLH 30720 b
5. being owned or controlled by the same interests
which own or control any retailer engaging in business in
the same or similar line of business in this State;
6. having a franchisee or licensee operating under its
trade name if the franchisee or licensee is required to
collect the tax under this Section;
7. pursuant to a contract with a cable television
operator located in this State, soliciting orders for
tangible personal property by means of advertising which is
transmitted or distributed over a cable television system
in this State; or
8. engaging in activities in Illinois, which
activities in the state in which the supply business
engaging in such activities is located would constitute
maintaining a place of business in that state.
(Source: P.A. 98-583, eff. 1-1-14; 98-1089, eff. 1-1-15.)
Section 15. The Retailers' Occupation Tax Act is amended by
changing Section 1 as follows:
(35 ILCS 120/1) (from Ch. 120, par. 440)
Sec. 1. Definitions. "Sale at retail" means any transfer of
the ownership of or title to tangible personal property to a
purchaser, for the purpose of use or consumption, and not for
the purpose of resale in any form as tangible personal property
to the extent not first subjected to a use for which it was

HB3694 - 31 - LRB099 10493 HLH 30720 b
purchased, for a valuable consideration: Provided that the
property purchased is deemed to be purchased for the purpose of
resale, despite first being used, to the extent to which it is
resold as an ingredient of an intentionally produced product or
byproduct of manufacturing. For this purpose, slag produced as
an incident to manufacturing pig iron or steel and sold is
considered to be an intentionally produced byproduct of
manufacturing. Transactions whereby the possession of the
property is transferred but the seller retains the title as
security for payment of the selling price shall be deemed to be
sales.
"Sale at retail" shall be construed to include any transfer
of the ownership of or title to tangible personal property to a
purchaser, for use or consumption by any other person to whom
such purchaser may transfer the tangible personal property
without a valuable consideration, and to include any transfer,
whether made for or without a valuable consideration, for
resale in any form as tangible personal property unless made in
compliance with Section 2c of this Act.
Sales of tangible personal property, which property, to the
extent not first subjected to a use for which it was purchased,
as an ingredient or constituent, goes into and forms a part of
tangible personal property subsequently the subject of a "Sale
at retail", are not sales at retail as defined in this Act:
Provided that the property purchased is deemed to be purchased
for the purpose of resale, despite first being used, to the

HB3694 - 32 - LRB099 10493 HLH 30720 b
extent to which it is resold as an ingredient of an
intentionally produced product or byproduct of manufacturing.
"Sale at retail" shall be construed to include any Illinois
florist's sales transaction in which the purchase order is
received in Illinois by a florist and the sale is for use or
consumption, but the Illinois florist has a florist in another
state deliver the property to the purchaser or the purchaser's
donee in such other state.
Nonreusable tangible personal property that is used by
persons engaged in the business of operating a restaurant,
cafeteria, or drive-in is a sale for resale when it is
transferred to customers in the ordinary course of business as
part of the sale of food or beverages and is used to deliver,
package, or consume food or beverages, regardless of where
consumption of the food or beverages occurs. Examples of those
items include, but are not limited to nonreusable, paper and
plastic cups, plates, baskets, boxes, sleeves, buckets or other
containers, utensils, straws, placemats, napkins, doggie bags,
and wrapping or packaging materials that are transferred to
customers as part of the sale of food or beverages in the
ordinary course of business.
The purchase, employment and transfer of such tangible
personal property as newsprint and ink for the primary purpose
of conveying news (with or without other information) is not a
purchase, use or sale of tangible personal property.
A person whose activities are organized and conducted

HB3694 - 33 - LRB099 10493 HLH 30720 b
primarily as a not-for-profit service enterprise, and who
engages in selling tangible personal property at retail
(whether to the public or merely to members and their guests)
is engaged in the business of selling tangible personal
property at retail with respect to such transactions, excepting
only a person organized and operated exclusively for
charitable, religious or educational purposes either (1), to
the extent of sales by such person to its members, students,
patients or inmates of tangible personal property to be used
primarily for the purposes of such person, or (2), to the
extent of sales by such person of tangible personal property
which is not sold or offered for sale by persons organized for
profit. The selling of school books and school supplies by
schools at retail to students is not "primarily for the
purposes of" the school which does such selling. The provisions
of this paragraph shall not apply to nor subject to taxation
occasional dinners, socials or similar activities of a person
organized and operated exclusively for charitable, religious
or educational purposes, whether or not such activities are
open to the public.
A person who is the recipient of a grant or contract under
Title VII of the Older Americans Act of 1965 (P.L. 92-258) and
serves meals to participants in the federal Nutrition Program
for the Elderly in return for contributions established in
amount by the individual participant pursuant to a schedule of
suggested fees as provided for in the federal Act is not

HB3694 - 34 - LRB099 10493 HLH 30720 b
engaged in the business of selling tangible personal property
at retail with respect to such transactions.
"Purchaser" means anyone who, through a sale at retail,
acquires the ownership of or title to tangible personal
property for a valuable consideration.
"Reseller of motor fuel" means any person engaged in the
business of selling or delivering or transferring title of
motor fuel to another person other than for use or consumption.
No person shall act as a reseller of motor fuel within this
State without first being registered as a reseller pursuant to
Section 2c or a retailer pursuant to Section 2a.
"Selling price" or the "amount of sale" means the
consideration for a sale valued in money whether received in
money or otherwise, including cash, credits, property, other
than as hereinafter provided, and services, but not including
the value of or credit given for traded-in tangible personal
property where the item that is traded-in is of like kind and
character as that which is being sold, and shall be determined
without any deduction on account of the cost of the property
sold, the cost of materials used, labor or service cost or any
other expense whatsoever, but does not include charges that are
added to prices by sellers on account of the seller's tax
liability under this Act, or on account of the seller's duty to
collect, from the purchaser, the tax that is imposed by the Use
Tax Act, or, except as otherwise provided with respect to any
cigarette tax imposed by a home rule unit, on account of the

HB3694 - 35 - LRB099 10493 HLH 30720 b
seller's tax liability under any local occupation tax
administered by the Department, or, except as otherwise
provided with respect to any cigarette tax imposed by a home
rule unit on account of the seller's duty to collect, from the
purchasers, the tax that is imposed under any local use tax
administered by the Department. Effective December 1, 1985,
"selling price" shall include charges that are added to prices
by sellers on account of the seller's tax liability under the
Cigarette Tax Act, on account of the sellers' duty to collect,
from the purchaser, the tax imposed under the Cigarette Use Tax
Act, and on account of the seller's duty to collect, from the
purchaser, any cigarette tax imposed by a home rule unit.
Notwithstanding any other provision of law, "selling
price" does not include any fee charged by the retailer for the
disposal of tires if that fee is a separately stated charge on
the customer's invoice.
Notwithstanding any law to the contrary, for any motor
vehicle, as defined in Section 1-146 of the Vehicle Code, that
is sold on or after January 1, 2015 for the purpose of leasing
the vehicle for a defined period that is longer than one year
and (1) is a motor vehicle of the second division that: (A) is
a self-contained motor vehicle designed or permanently
converted to provide living quarters for recreational,
camping, or travel use, with direct walk through access to the
living quarters from the driver's seat; (B) is of the van
configuration designed for the transportation of not less than

HB3694 - 36 - LRB099 10493 HLH 30720 b
7 nor more than 16 passengers; or (C) has a gross vehicle
weight rating of 8,000 pounds or less or (2) is a motor vehicle
of the first division, "selling price" or "amount of sale"
means the consideration received by the lessor pursuant to the
lease contract, including amounts due at lease signing and all
monthly or other regular payments charged over the term of the
lease. Also included in the selling price is any amount
received by the lessor from the lessee for the leased vehicle
that is not calculated at the time the lease is executed,
including, but not limited to, excess mileage charges and
charges for excess wear and tear. For sales that occur in
Illinois, with respect to any amount received by the lessor
from the lessee for the leased vehicle that is not calculated
at the time the lease is executed, the lessor who purchased the
motor vehicle does not incur the tax imposed by the Use Tax Act
on those amounts, and the retailer who makes the retail sale of
the motor vehicle to the lessor is not required to collect the
tax imposed by the Use Tax Act or to pay the tax imposed by this
Act on those amounts. However, the lessor who purchased the
motor vehicle assumes the liability for reporting and paying
the tax on those amounts directly to the Department in the same
form (Illinois Retailers' Occupation Tax, and local retailers'
occupation taxes, if applicable) in which the retailer would
have reported and paid such tax if the retailer had accounted
for the tax to the Department. For amounts received by the
lessor from the lessee that are not calculated at the time the

HB3694 - 37 - LRB099 10493 HLH 30720 b
lease is executed, the lessor must file the return and pay the
tax to the Department by the due date otherwise required by
this Act for returns other than transaction returns. If the
retailer is entitled under this Act to a discount for
collecting and remitting the tax imposed under this Act to the
Department with respect to the sale of the motor vehicle to the
lessor, then the right to the discount provided in this Act
shall be transferred to the lessor with respect to the tax paid
by the lessor for any amount received by the lessor from the
lessee for the leased vehicle that is not calculated at the
time the lease is executed; provided that the discount is only
allowed if the return is timely filed and for amounts timely
paid. The "selling price" of a motor vehicle that is sold on or
after January 1, 2015 for the purpose of leasing for a defined
period of longer than one year shall not be reduced by the
value of or credit given for traded-in tangible personal
property owned by the lessor, nor shall it be reduced by the
value of or credit given for traded-in tangible personal
property owned by the lessee, regardless of whether the
trade-in value thereof is assigned by the lessee to the lessor.
In the case of a motor vehicle that is sold for the purpose of
leasing for a defined period of longer than one year, the sale
occurs at the time of the delivery of the vehicle, regardless
of the due date of any lease payments. A lessor who incurs a
Retailers' Occupation Tax liability on the sale of a motor
vehicle coming off lease may not take a credit against that

HB3694 - 38 - LRB099 10493 HLH 30720 b
liability for the Use Tax the lessor paid upon the purchase of
the motor vehicle (or for any tax the lessor paid with respect
to any amount received by the lessor from the lessee for the
leased vehicle that was not calculated at the time the lease
was executed) if the selling price of the motor vehicle at the
time of purchase was calculated using the definition of
"selling price" as defined in this paragraph. Notwithstanding
any other provision of this Act to the contrary, lessors shall
file all returns and make all payments required under this
paragraph to the Department by electronic means in the manner
and form as required by the Department. This paragraph does not
apply to leases of motor vehicles for which, at the time the
lease is entered into, the term of the lease is not a defined
period, including leases with a defined initial period with the
option to continue the lease on a month-to-month or other basis
beyond the initial defined period.
The phrase "like kind and character" shall be liberally
construed (including but not limited to any form of motor
vehicle for any form of motor vehicle, or any kind of farm or
agricultural implement for any other kind of farm or
agricultural implement), while not including a kind of item
which, if sold at retail by that retailer, would be exempt from
retailers' occupation tax and use tax as an isolated or
occasional sale.
"Gross receipts" from the sales of tangible personal
property at retail means the total selling price or the amount

HB3694 - 39 - LRB099 10493 HLH 30720 b
of such sales, as hereinbefore defined. In the case of charge
and time sales, the amount thereof shall be included only as
and when payments are received by the seller. Receipts or other
consideration derived by a seller from the sale, transfer or
assignment of accounts receivable to a wholly owned subsidiary
will not be deemed payments prior to the time the purchaser
makes payment on such accounts.
"Department" means the Department of Revenue.
"Person" means any natural individual, firm, partnership,
association, joint stock company, joint adventure, public or
private corporation, limited liability company, or a receiver,
executor, trustee, guardian or other representative appointed
by order of any court.
The isolated or occasional sale of tangible personal
property at retail by a person who does not hold himself out as
being engaged (or who does not habitually engage) in selling
such tangible personal property at retail, or a sale through a
bulk vending machine, does not constitute engaging in a
business of selling such tangible personal property at retail
within the meaning of this Act; provided that any person who is
engaged in a business which is not subject to the tax imposed
by this Act because of involving the sale of or a contract to
sell real estate or a construction contract to improve real
estate or a construction contract to engineer, install, and
maintain an integrated system of products, but who, in the
course of conducting such business, transfers tangible

HB3694 - 40 - LRB099 10493 HLH 30720 b
personal property to users or consumers in the finished form in
which it was purchased, and which does not become real estate
or was not engineered and installed, under any provision of a
construction contract or real estate sale or real estate sales
agreement entered into with some other person arising out of or
because of such nontaxable business, is engaged in the business
of selling tangible personal property at retail to the extent
of the value of the tangible personal property so transferred.
If, in such a transaction, a separate charge is made for the
tangible personal property so transferred, the value of such
property, for the purpose of this Act, shall be the amount so
separately charged, but not less than the cost of such property
to the transferor; if no separate charge is made, the value of
such property, for the purposes of this Act, is the cost to the
transferor of such tangible personal property. Construction
contracts for the improvement of real estate consisting of
engineering, installation, and maintenance of voice, data,
video, security, and all telecommunication systems do not
constitute engaging in a business of selling tangible personal
property at retail within the meaning of this Act if they are
sold at one specified contract price.
A person who holds himself or herself out as being engaged
(or who habitually engages) in selling tangible personal
property at retail is a person engaged in the business of
selling tangible personal property at retail hereunder with
respect to such sales (and not primarily in a service

HB3694 - 41 - LRB099 10493 HLH 30720 b
occupation) notwithstanding the fact that such person designs
and produces such tangible personal property on special order
for the purchaser and in such a way as to render the property
of value only to such purchaser, if such tangible personal
property so produced on special order serves substantially the
same function as stock or standard items of tangible personal
property that are sold at retail.
Persons who engage in the business of transferring tangible
personal property upon the redemption of trading stamps are
engaged in the business of selling such property at retail and
shall be liable for and shall pay the tax imposed by this Act
on the basis of the retail value of the property transferred
upon redemption of such stamps.
"Bulk vending machine" means a vending machine, containing
unsorted confections, nuts, toys, or other items designed
primarily to be used or played with by children which, when a
coin or coins of a denomination not larger than $0.50 are
inserted, are dispensed in equal portions, at random and
without selection by the customer.
(Source: P.A. 98-628, eff. 1-1-15; 98-1080, eff. 8-26-14.)