SB0397ham001 97TH GENERAL ASSEMBLY

Rep. Barbara Flynn Currie

Filed: 5/25/2011

09700SB0397ham001 LRB097 04209 HLH 56200 a

AMENDMENT TO SENATE BILL 397

AMENDMENT NO. ______. Amend Senate Bill 397 by replacing everything after the enacting clause with the following:

"Section 5. The Retailers' Occupation Tax Act is amended by adding Section 2-1 as follows:

(35 ILCS 120/2-1 new)

Sec. 2-1. Local sourcing.

(a) The provisions of this Section apply exclusively for the purpose of sourcing sales of tangible personal property. The tax imposed under this Act is imposed upon persons engaged in the business of selling tangible personal property at retail in this State. For a seller to incur a retailers' occupation tax liability at a given location, the seller must be engaged in the business of selling tangible personal property at retail at that location. In allocating or sourcing the local share of the State tax imposed under this Act or any municipal, county, or special district retailers' occupation taxes administered by the Department of Revenue, the sourcing rules in this Section apply to determine where a sale occurs. The provisions of subsections (b) through (g) apply to specific types of sales. If a sale does not fall within the activities described in subsections (b) through (g) of this Section, then the provisions of subsection (h) of this Section apply.

(b) Over-the-counter sales. When a person makes an over-the-counter sale of tangible personal property at a retail location and either (i) the purchaser takes possession of that property at that retail location or (ii) the seller ships that property to the purchaser from that location to a location in Illinois or arranges for delivery from another location to a location in Illinois, then the sale occurs at that retail location regardless of the method of payment for that sale.

(c) Prior shipments. If the tangible personal property ordered by the purchaser is shipped or delivered to, or installed for, the purchaser before the performance of 3 of the 5 activities listed in paragraphs (A) through (E) of item (1) of subsection (h) of this Section by the retailer or its authorized representative, then the Illinois location from which the tangible personal property was shipped or delivered, or from which it was removed before installation, is deemed to be the location of the sale.

(d) Out-of-State sales. If at least 3 of the 5 activities listed in paragraphs (A) through (E) of item (1) of subsection (h) of this Section occur outside of Illinois, or if the sale is made through contact centers as described in subsection (g) that are located outside of Illinois, but the tangible personal property being sold is in the inventory of the seller at a location within Illinois at the time of sale (or is subsequently produced by the seller at a location in Illinois), then the inventory location is deemed to be the location of the sale.

(e) Coal and other minerals. For sales to end users by a producer of coal or other minerals mined in this State, the sale is deemed to occur at the place where the coal or other minerals mined in this State are extracted from the earth. With respect to minerals, (i) the term "extracted from the earth" means the location at which the coal or other mineral is extracted from the mouth of the mine and (ii) a "mineral" includes not only coal, but also oil, sand, stone taken from a quarry, gravel, and any other thing commonly regarded as a mineral and extracted from the earth.

(f) Long-term blanket or master contracts. Under a long-term blanket or master contract that (although it may be definite as to price, quantity, or both) must be implemented by the purchaser's placing of specific orders when goods are wanted, the seller is deemed to be engaged in the business of selling for any specific orders placed under that contract at an office location determined in accordance with subsection (h) of this Section.

(g) Sales made from orders placed through contact centers.

(1) A sale of tangible personal property made from an order placed through a contact center is not subject to tax under this Act, provided that the retailer's only activity in this State with respect to that sale is the maintenance of a contact center that is a centralized office used exclusively for receiving customer orders by means of telephone or Internet and recording the following: name and address of purchaser; price, type, and quantity of items; and method of payment and delivery. Under these conditions, those sales are subject to tax under the Use Tax Act. However, those sales are subject to Retailers' Occupation Tax if the tangible personal property that is sold is in an inventory of the retailer located in Illinois at the time of its sale (or is subsequently produced in this State) and is then delivered in Illinois to a purchaser. Such sales must be sourced to the location of the inventory or the location from which the item is subsequently produced. This item (1) does not apply to over-the-counter sales made at a retail location in Illinois by means of telephone or Internet. Those sales must be sourced as provided in subsection (b) of this Section.

(2) If the retailer maintains any other location in Illinois at which any of the activities listed in paragraphs (A) through (D) of item (1) of subsection (h) of this Section occur, or if the contact center performs any of the activities listed in paragraphs (A) through (D) of item (1) subsection (h) of this Section, the provisions of item (1) of this subsection (g) do not apply and the sale must be sourced according to the provisions of subsection (h).

(h) All other sales. For all sales other than those listed in subsections (b) through (g) of this Section, when sourcing the local share of the State tax imposed under this Act or any municipal, county, or special district retailers' occupation taxes administered by the Department of Revenue, enough of the selling activity must occur at a given office location to justify concluding that the seller is engaged in the business of selling at that office location.

(1) A seller is deemed to be engaged in the business of selling at an office location for purchase orders received there by means, including, but not limited to, mail, telephone, e-mail, or facsimile transmission, if there is present at that office location one or more individuals who are exclusively employees of the retailer or its authorized representative and who continuously perform, for all sales, at least 3 of the activities listed in paragraphs (A) through (E) of this item (1) on behalf of the retailer. An employee or an authorized representative may perform these activities on behalf of only one retailer.

(A) Determination of appropriate pricing of the item, taking into account various factors such as, but not limited to, application of discounts, surcharges, shipping costs, and calculation of whether the high or low rate of tax applies to items purchased.

(B) Determination of whether sufficient inventory exists, or can be obtained consistent with customer requirements, to fill the order.

(C) Determination of whether the order can be shipped and delivered in the manner and within the timeframes required by the customer.

(D) Determination of the creditworthiness of the purchaser, including bankruptcy screening.

(E) Processing of the order.

(2) If a retailer has no single Illinois location that meets the requirements of item (1) of subsection (h) of this Section, it is presumed that the retailer's principal Illinois office location is the location at which the retailer is engaged in the business of selling. This presumption may be rebutted if the Department or the retailer clearly proves that another location is the location at which enough selling activities occur to justify concluding that the seller is engaged in the business of selling at that other location. The activities listed in paragraphs (A) through (E) of item (1) of subsection (h) of this Section shall be considered in rebutting the presumption created in this item (2).

(i) The Department of Revenue is authorized to promulgate rules to implement the provisions of this Section.

Section 99. Effective date. This Act takes effect January 1, 2012.".