SB2577eng 100TH GENERAL ASSEMBLY

  
  
  

 


 
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1    AN ACT concerning revenue.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 1. This Act may be referred to as the Marketplace
5Fairness Act.
 
6    Section 5. The Use Tax Act is amended by changing Section 2
7as follows:
 
8    (35 ILCS 105/2)  (from Ch. 120, par. 439.2)
9    Sec. 2. Definitions.
10    "Use" means the exercise by any person of any right or
11power over tangible personal property incident to the ownership
12of that property, except that it does not include the sale of
13such property in any form as tangible personal property in the
14regular course of business to the extent that such property is
15not first subjected to a use for which it was purchased, and
16does not include the use of such property by its owner for
17demonstration purposes: Provided that the property purchased
18is deemed to be purchased for the purpose of resale, despite
19first being used, to the extent to which it is resold as an
20ingredient of an intentionally produced product or by-product
21of manufacturing. "Use" does not mean the demonstration use or
22interim use of tangible personal property by a retailer before

 

 

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1he sells that tangible personal property. For watercraft or
2aircraft, if the period of demonstration use or interim use by
3the retailer exceeds 18 months, the retailer shall pay on the
4retailers' original cost price the tax imposed by this Act, and
5no credit for that tax is permitted if the watercraft or
6aircraft is subsequently sold by the retailer. "Use" does not
7mean the physical incorporation of tangible personal property,
8to the extent not first subjected to a use for which it was
9purchased, as an ingredient or constituent, into other tangible
10personal property (a) which is sold in the regular course of
11business or (b) which the person incorporating such ingredient
12or constituent therein has undertaken at the time of such
13purchase to cause to be transported in interstate commerce to
14destinations outside the State of Illinois: Provided that the
15property purchased is deemed to be purchased for the purpose of
16resale, despite first being used, to the extent to which it is
17resold as an ingredient of an intentionally produced product or
18by-product of manufacturing.
19    "Watercraft" means a Class 2, Class 3, or Class 4
20watercraft as defined in Section 3-2 of the Boat Registration
21and Safety Act, a personal watercraft, or any boat equipped
22with an inboard motor.
23    "Purchase at retail" means the acquisition of the ownership
24of or title to tangible personal property through a sale at
25retail.
26    "Purchaser" means anyone who, through a sale at retail,

 

 

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1acquires the ownership of tangible personal property for a
2valuable consideration.
3    "Sale at retail" means any transfer of the ownership of or
4title to tangible personal property to a purchaser, for the
5purpose of use, and not for the purpose of resale in any form
6as tangible personal property to the extent not first subjected
7to a use for which it was purchased, for a valuable
8consideration: Provided that the property purchased is deemed
9to be purchased for the purpose of resale, despite first being
10used, to the extent to which it is resold as an ingredient of
11an intentionally produced product or by-product of
12manufacturing. For this purpose, slag produced as an incident
13to manufacturing pig iron or steel and sold is considered to be
14an intentionally produced by-product of manufacturing. "Sale
15at retail" includes any such transfer made for resale unless
16made in compliance with Section 2c of the Retailers' Occupation
17Tax Act, as incorporated by reference into Section 12 of this
18Act. Transactions whereby the possession of the property is
19transferred but the seller retains the title as security for
20payment of the selling price are sales.
21    "Sale at retail" shall also be construed to include any
22Illinois florist's sales transaction in which the purchase
23order is received in Illinois by a florist and the sale is for
24use or consumption, but the Illinois florist has a florist in
25another state deliver the property to the purchaser or the
26purchaser's donee in such other state.

 

 

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1    Nonreusable tangible personal property that is used by
2persons engaged in the business of operating a restaurant,
3cafeteria, or drive-in is a sale for resale when it is
4transferred to customers in the ordinary course of business as
5part of the sale of food or beverages and is used to deliver,
6package, or consume food or beverages, regardless of where
7consumption of the food or beverages occurs. Examples of those
8items include, but are not limited to nonreusable, paper and
9plastic cups, plates, baskets, boxes, sleeves, buckets or other
10containers, utensils, straws, placemats, napkins, doggie bags,
11and wrapping or packaging materials that are transferred to
12customers as part of the sale of food or beverages in the
13ordinary course of business.
14    The purchase, employment and transfer of such tangible
15personal property as newsprint and ink for the primary purpose
16of conveying news (with or without other information) is not a
17purchase, use or sale of tangible personal property.
18    "Selling price" means the consideration for a sale valued
19in money whether received in money or otherwise, including
20cash, credits, property other than as hereinafter provided, and
21services, but not including the value of or credit given for
22traded-in tangible personal property where the item that is
23traded-in is of like kind and character as that which is being
24sold, and shall be determined without any deduction on account
25of the cost of the property sold, the cost of materials used,
26labor or service cost or any other expense whatsoever, but does

 

 

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1not include interest or finance charges which appear as
2separate items on the bill of sale or sales contract nor
3charges that are added to prices by sellers on account of the
4seller's tax liability under the "Retailers' Occupation Tax
5Act", or on account of the seller's duty to collect, from the
6purchaser, the tax that is imposed by this Act, or, except as
7otherwise provided with respect to any cigarette tax imposed by
8a home rule unit, on account of the seller's tax liability
9under any local occupation tax administered by the Department,
10or, except as otherwise provided with respect to any cigarette
11tax imposed by a home rule unit on account of the seller's duty
12to collect, from the purchasers, the tax that is imposed under
13any local use tax administered by the Department. Effective
14December 1, 1985, "selling price" shall include charges that
15are added to prices by sellers on account of the seller's tax
16liability under the Cigarette Tax Act, on account of the
17seller's duty to collect, from the purchaser, the tax imposed
18under the Cigarette Use Tax Act, and on account of the seller's
19duty to collect, from the purchaser, any cigarette tax imposed
20by a home rule unit.
21    Notwithstanding any law to the contrary, for any motor
22vehicle, as defined in Section 1-146 of the Vehicle Code, that
23is sold on or after January 1, 2015 for the purpose of leasing
24the vehicle for a defined period that is longer than one year
25and (1) is a motor vehicle of the second division that: (A) is
26a self-contained motor vehicle designed or permanently

 

 

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1converted to provide living quarters for recreational,
2camping, or travel use, with direct walk through access to the
3living quarters from the driver's seat; (B) is of the van
4configuration designed for the transportation of not less than
57 nor more than 16 passengers; or (C) has a gross vehicle
6weight rating of 8,000 pounds or less or (2) is a motor vehicle
7of the first division, "selling price" or "amount of sale"
8means the consideration received by the lessor pursuant to the
9lease contract, including amounts due at lease signing and all
10monthly or other regular payments charged over the term of the
11lease. Also included in the selling price is any amount
12received by the lessor from the lessee for the leased vehicle
13that is not calculated at the time the lease is executed,
14including, but not limited to, excess mileage charges and
15charges for excess wear and tear. For sales that occur in
16Illinois, with respect to any amount received by the lessor
17from the lessee for the leased vehicle that is not calculated
18at the time the lease is executed, the lessor who purchased the
19motor vehicle does not incur the tax imposed by the Use Tax Act
20on those amounts, and the retailer who makes the retail sale of
21the motor vehicle to the lessor is not required to collect the
22tax imposed by this Act or to pay the tax imposed by the
23Retailers' Occupation Tax Act on those amounts. However, the
24lessor who purchased the motor vehicle assumes the liability
25for reporting and paying the tax on those amounts directly to
26the Department in the same form (Illinois Retailers' Occupation

 

 

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1Tax, and local retailers' occupation taxes, if applicable) in
2which the retailer would have reported and paid such tax if the
3retailer had accounted for the tax to the Department. For
4amounts received by the lessor from the lessee that are not
5calculated at the time the lease is executed, the lessor must
6file the return and pay the tax to the Department by the due
7date otherwise required by this Act for returns other than
8transaction returns. If the retailer is entitled under this Act
9to a discount for collecting and remitting the tax imposed
10under this Act to the Department with respect to the sale of
11the motor vehicle to the lessor, then the right to the discount
12provided in this Act shall be transferred to the lessor with
13respect to the tax paid by the lessor for any amount received
14by the lessor from the lessee for the leased vehicle that is
15not calculated at the time the lease is executed; provided that
16the discount is only allowed if the return is timely filed and
17for amounts timely paid. The "selling price" of a motor vehicle
18that is sold on or after January 1, 2015 for the purpose of
19leasing for a defined period of longer than one year shall not
20be reduced by the value of or credit given for traded-in
21tangible personal property owned by the lessor, nor shall it be
22reduced by the value of or credit given for traded-in tangible
23personal property owned by the lessee, regardless of whether
24the trade-in value thereof is assigned by the lessee to the
25lessor. In the case of a motor vehicle that is sold for the
26purpose of leasing for a defined period of longer than one

 

 

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1year, the sale occurs at the time of the delivery of the
2vehicle, regardless of the due date of any lease payments. A
3lessor who incurs a Retailers' Occupation Tax liability on the
4sale of a motor vehicle coming off lease may not take a credit
5against that liability for the Use Tax the lessor paid upon the
6purchase of the motor vehicle (or for any tax the lessor paid
7with respect to any amount received by the lessor from the
8lessee for the leased vehicle that was not calculated at the
9time the lease was executed) if the selling price of the motor
10vehicle at the time of purchase was calculated using the
11definition of "selling price" as defined in this paragraph.
12Notwithstanding any other provision of this Act to the
13contrary, lessors shall file all returns and make all payments
14required under this paragraph to the Department by electronic
15means in the manner and form as required by the Department.
16This paragraph does not apply to leases of motor vehicles for
17which, at the time the lease is entered into, the term of the
18lease is not a defined period, including leases with a defined
19initial period with the option to continue the lease on a
20month-to-month or other basis beyond the initial defined
21period.
22    The phrase "like kind and character" shall be liberally
23construed (including but not limited to any form of motor
24vehicle for any form of motor vehicle, or any kind of farm or
25agricultural implement for any other kind of farm or
26agricultural implement), while not including a kind of item

 

 

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1which, if sold at retail by that retailer, would be exempt from
2retailers' occupation tax and use tax as an isolated or
3occasional sale.
4    "Department" means the Department of Revenue.
5    "Person" means any natural individual, firm, partnership,
6association, joint stock company, joint adventure, public or
7private corporation, limited liability company, or a receiver,
8executor, trustee, guardian or other representative appointed
9by order of any court.
10    "Retailer" means and includes every person engaged in the
11business of making sales at retail as defined in this Section.
12    A person who holds himself or herself out as being engaged
13(or who habitually engages) in selling tangible personal
14property at retail is a retailer hereunder with respect to such
15sales (and not primarily in a service occupation)
16notwithstanding the fact that such person designs and produces
17such tangible personal property on special order for the
18purchaser and in such a way as to render the property of value
19only to such purchaser, if such tangible personal property so
20produced on special order serves substantially the same
21function as stock or standard items of tangible personal
22property that are sold at retail.
23    A person whose activities are organized and conducted
24primarily as a not-for-profit service enterprise, and who
25engages in selling tangible personal property at retail
26(whether to the public or merely to members and their guests)

 

 

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1is a retailer with respect to such transactions, excepting only
2a person organized and operated exclusively for charitable,
3religious or educational purposes either (1), to the extent of
4sales by such person to its members, students, patients or
5inmates of tangible personal property to be used primarily for
6the purposes of such person, or (2), to the extent of sales by
7such person of tangible personal property which is not sold or
8offered for sale by persons organized for profit. The selling
9of school books and school supplies by schools at retail to
10students is not "primarily for the purposes of" the school
11which does such selling. This paragraph does not apply to nor
12subject to taxation occasional dinners, social or similar
13activities of a person organized and operated exclusively for
14charitable, religious or educational purposes, whether or not
15such activities are open to the public.
16    A person who is the recipient of a grant or contract under
17Title VII of the Older Americans Act of 1965 (P.L. 92-258) and
18serves meals to participants in the federal Nutrition Program
19for the Elderly in return for contributions established in
20amount by the individual participant pursuant to a schedule of
21suggested fees as provided for in the federal Act is not a
22retailer under this Act with respect to such transactions.
23    Persons who engage in the business of transferring tangible
24personal property upon the redemption of trading stamps are
25retailers hereunder when engaged in such business.
26    The isolated or occasional sale of tangible personal

 

 

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1property at retail by a person who does not hold himself out as
2being engaged (or who does not habitually engage) in selling
3such tangible personal property at retail or a sale through a
4bulk vending machine does not make such person a retailer
5hereunder. However, any person who is engaged in a business
6which is not subject to the tax imposed by the "Retailers'
7Occupation Tax Act" because of involving the sale of or a
8contract to sell real estate or a construction contract to
9improve real estate, but who, in the course of conducting such
10business, transfers tangible personal property to users or
11consumers in the finished form in which it was purchased, and
12which does not become real estate, under any provision of a
13construction contract or real estate sale or real estate sales
14agreement entered into with some other person arising out of or
15because of such nontaxable business, is a retailer to the
16extent of the value of the tangible personal property so
17transferred. If, in such transaction, a separate charge is made
18for the tangible personal property so transferred, the value of
19such property, for the purposes of this Act, is the amount so
20separately charged, but not less than the cost of such property
21to the transferor; if no separate charge is made, the value of
22such property, for the purposes of this Act, is the cost to the
23transferor of such tangible personal property.
24    "Retailer maintaining a place of business in this State",
25or any like term, means and includes any of the following
26retailers:

 

 

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1        (1) 1. A retailer having or maintaining within this
2    State, directly or by a subsidiary, an office, distribution
3    house, sales house, warehouse or other place of business,
4    or any agent or other representative operating within this
5    State under the authority of the retailer or its
6    subsidiary, irrespective of whether such place of business
7    or agent or other representative is located here
8    permanently or temporarily, or whether such retailer or
9    subsidiary is licensed to do business in this State.
10    However, the ownership of property that is located at the
11    premises of a printer with which the retailer has
12    contracted for printing and that consists of the final
13    printed product, property that becomes a part of the final
14    printed product, or copy from which the printed product is
15    produced shall not result in the retailer being deemed to
16    have or maintain an office, distribution house, sales
17    house, warehouse, or other place of business within this
18    State.
19        (1.1) 1.1. A retailer having a contract with a person
20    located in this State under which the person, for a
21    commission or other consideration based upon the sale of
22    tangible personal property by the retailer, directly or
23    indirectly refers potential customers to the retailer by
24    providing to the potential customers a promotional code or
25    other mechanism that allows the retailer to track purchases
26    referred by such persons. Examples of mechanisms that allow

 

 

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1    the retailer to track purchases referred by such persons
2    include but are not limited to the use of a link on the
3    person's Internet website, promotional codes distributed
4    through the person's hand-delivered or mailed material,
5    and promotional codes distributed by the person through
6    radio or other broadcast media. The provisions of this
7    paragraph (1.1) 1.1 shall apply only if the cumulative
8    gross receipts from sales of tangible personal property by
9    the retailer to customers who are referred to the retailer
10    by all persons in this State under such contracts exceed
11    $10,000 during the preceding 4 quarterly periods ending on
12    the last day of March, June, September, and December. A
13    retailer meeting the requirements of this paragraph (1.1)
14    1.1 shall be presumed to be maintaining a place of business
15    in this State but may rebut this presumption by submitting
16    proof that the referrals or other activities pursued within
17    this State by such persons were not sufficient to meet the
18    nexus standards of the United States Constitution during
19    the preceding 4 quarterly periods.
20        (1.2) 1.2. Beginning July 1, 2011, a retailer having a
21    contract with a person located in this State under which:
22            (A) A. the retailer sells the same or substantially
23        similar line of products as the person located in this
24        State and does so using an identical or substantially
25        similar name, trade name, or trademark as the person
26        located in this State; and

 

 

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1            (B) B. the retailer provides a commission or other
2        consideration to the person located in this State based
3        upon the sale of tangible personal property by the
4        retailer.
5    The provisions of this paragraph (1.2) 1.2 shall apply only
6    if the cumulative gross receipts from sales of tangible
7    personal property by the retailer to customers in this
8    State under all such contracts exceed $10,000 during the
9    preceding 4 quarterly periods ending on the last day of
10    March, June, September, and December.
11        (2) 2. A retailer soliciting orders for tangible
12    personal property by means of a telecommunication or
13    television shopping system (which utilizes toll free
14    numbers) which is intended by the retailer to be broadcast
15    by cable television or other means of broadcasting, to
16    consumers located in this State.
17        (3) 3. A retailer, pursuant to a contract with a
18    broadcaster or publisher located in this State, soliciting
19    orders for tangible personal property by means of
20    advertising which is disseminated primarily to consumers
21    located in this State and only secondarily to bordering
22    jurisdictions.
23        (4) 4. A retailer soliciting orders for tangible
24    personal property by mail if the solicitations are
25    substantial and recurring and if the retailer benefits from
26    any banking, financing, debt collection,

 

 

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1    telecommunication, or marketing activities occurring in
2    this State or benefits from the location in this State of
3    authorized installation, servicing, or repair facilities.
4        (5) 5. A retailer that is owned or controlled by the
5    same interests that own or control any retailer engaging in
6    business in the same or similar line of business in this
7    State.
8        (6) 6. A retailer having a franchisee or licensee
9    operating under its trade name if the franchisee or
10    licensee is required to collect the tax under this Section.
11        (7) 7. A retailer, pursuant to a contract with a cable
12    television operator located in this State, soliciting
13    orders for tangible personal property by means of
14    advertising which is transmitted or distributed over a
15    cable television system in this State.
16        (8) 8. A retailer engaging in activities in Illinois,
17    which activities in the state in which the retail business
18    engaging in such activities is located would constitute
19    maintaining a place of business in that state.
20        (9) Beginning January 1, 2019, a retailer making sales
21    of tangible personal property to purchasers in Illinois
22    from outside of Illinois if:
23            (A) the cumulative gross receipts from sales of
24        tangible personal property to purchasers in Illinois
25        are $100,000 or more; or
26            (B) the retailer enters into 200 or more separate

 

 

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1        transactions for the sale of tangible personal
2        property to purchasers in Illinois.
3        The retailer shall determine on a quarterly basis,
4    ending on the last day of March, June, September, and
5    December, whether he or she meets the criteria of either
6    (A) or (B) of this paragraph (9) for the preceding 12-month
7    period. If the retailer meets the criteria of either (A) or
8    (B) for a 12-month period, he or she is considered a
9    retailer maintaining a place of business in this State and
10    is required to collect and remit the tax imposed under this
11    Act and file returns for one year. At the end of that
12    one-year period, the retailer shall determine whether the
13    retailer met the criteria of either (A) or (B) during the
14    preceding 12-month period. If the retailer met the criteria
15    in either (A) or (B) for the preceding 12-month period, he
16    or she is considered a retailer maintaining a place of
17    business in this State and is required to collect and remit
18    the tax imposed under this Act and file returns for the
19    subsequent year. If at the end of a one-year period a
20    retailer that was required to collect and remit the tax
21    imposed under this Act determines that he or she did not
22    meet the criteria in either (A) or (B) during the preceding
23    12-month period, the retailer shall subsequently determine
24    on a quarterly basis, ending on the last day of March,
25    June, September, and December, whether he or she meets the
26    criteria of either (A) or (B) for the preceding 12-month

 

 

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1    period.
2    "Bulk vending machine" means a vending machine, containing
3unsorted confections, nuts, toys, or other items designed
4primarily to be used or played with by children which, when a
5coin or coins of a denomination not larger than $0.50 are
6inserted, are dispensed in equal portions, at random and
7without selection by the customer.
8(Source: P.A. 98-628, eff. 1-1-15; 98-1080, eff. 8-26-14;
998-1089, eff. 1-1-15; 99-78, eff. 7-20-15.)
 
10    Section 10. The Service Use Tax Act is amended by changing
11Section 2 as follows:
 
12    (35 ILCS 110/2)  (from Ch. 120, par. 439.32)
13    Sec. 2. Definitions. In this Act:
14    "Use" means the exercise by any person of any right or
15power over tangible personal property incident to the ownership
16of that property, but does not include the sale or use for
17demonstration by him of that property in any form as tangible
18personal property in the regular course of business. "Use" does
19not mean the interim use of tangible personal property nor the
20physical incorporation of tangible personal property, as an
21ingredient or constituent, into other tangible personal
22property, (a) which is sold in the regular course of business
23or (b) which the person incorporating such ingredient or
24constituent therein has undertaken at the time of such purchase

 

 

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1to cause to be transported in interstate commerce to
2destinations outside the State of Illinois.
3    "Purchased from a serviceman" means the acquisition of the
4ownership of, or title to, tangible personal property through a
5sale of service.
6    "Purchaser" means any person who, through a sale of
7service, acquires the ownership of, or title to, any tangible
8personal property.
9    "Cost price" means the consideration paid by the serviceman
10for a purchase valued in money, whether paid in money or
11otherwise, including cash, credits and services, and shall be
12determined without any deduction on account of the supplier's
13cost of the property sold or on account of any other expense
14incurred by the supplier. When a serviceman contracts out part
15or all of the services required in his sale of service, it
16shall be presumed that the cost price to the serviceman of the
17property transferred to him or her by his or her subcontractor
18is equal to 50% of the subcontractor's charges to the
19serviceman in the absence of proof of the consideration paid by
20the subcontractor for the purchase of such property.
21    "Selling price" means the consideration for a sale valued
22in money whether received in money or otherwise, including
23cash, credits and service, and shall be determined without any
24deduction on account of the serviceman's cost of the property
25sold, the cost of materials used, labor or service cost or any
26other expense whatsoever, but does not include interest or

 

 

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1finance charges which appear as separate items on the bill of
2sale or sales contract nor charges that are added to prices by
3sellers on account of the seller's duty to collect, from the
4purchaser, the tax that is imposed by this Act.
5    "Department" means the Department of Revenue.
6    "Person" means any natural individual, firm, partnership,
7association, joint stock company, joint venture, public or
8private corporation, limited liability company, and any
9receiver, executor, trustee, guardian or other representative
10appointed by order of any court.
11    "Sale of service" means any transaction except:
12        (1) a retail sale of tangible personal property taxable
13    under the Retailers' Occupation Tax Act or under the Use
14    Tax Act.
15        (2) a sale of tangible personal property for the
16    purpose of resale made in compliance with Section 2c of the
17    Retailers' Occupation Tax Act.
18        (3) except as hereinafter provided, a sale or transfer
19    of tangible personal property as an incident to the
20    rendering of service for or by any governmental body, or
21    for or by any corporation, society, association,
22    foundation or institution organized and operated
23    exclusively for charitable, religious or educational
24    purposes or any not-for-profit corporation, society,
25    association, foundation, institution or organization which
26    has no compensated officers or employees and which is

 

 

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1    organized and operated primarily for the recreation of
2    persons 55 years of age or older. A limited liability
3    company may qualify for the exemption under this paragraph
4    only if the limited liability company is organized and
5    operated exclusively for educational purposes.
6        (4) (blank).
7        (4a) a sale or transfer of tangible personal property
8    as an incident to the rendering of service for owners,
9    lessors, or shippers of tangible personal property which is
10    utilized by interstate carriers for hire for use as rolling
11    stock moving in interstate commerce so long as so used by
12    interstate carriers for hire, and equipment operated by a
13    telecommunications provider, licensed as a common carrier
14    by the Federal Communications Commission, which is
15    permanently installed in or affixed to aircraft moving in
16    interstate commerce.
17        (4a-5) on and after July 1, 2003 and through June 30,
18    2004, a sale or transfer of a motor vehicle of the second
19    division with a gross vehicle weight in excess of 8,000
20    pounds as an incident to the rendering of service if that
21    motor vehicle is subject to the commercial distribution fee
22    imposed under Section 3-815.1 of the Illinois Vehicle Code.
23    Beginning on July 1, 2004 and through June 30, 2005, the
24    use in this State of motor vehicles of the second division:
25    (i) with a gross vehicle weight rating in excess of 8,000
26    pounds; (ii) that are subject to the commercial

 

 

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1    distribution fee imposed under Section 3-815.1 of the
2    Illinois Vehicle Code; and (iii) that are primarily used
3    for commercial purposes. Through June 30, 2005, this
4    exemption applies to repair and replacement parts added
5    after the initial purchase of such a motor vehicle if that
6    motor vehicle is used in a manner that would qualify for
7    the rolling stock exemption otherwise provided for in this
8    Act. For purposes of this paragraph, "used for commercial
9    purposes" means the transportation of persons or property
10    in furtherance of any commercial or industrial enterprise
11    whether for-hire or not.
12        (5) a sale or transfer of machinery and equipment used
13    primarily in the process of the manufacturing or
14    assembling, either in an existing, an expanded or a new
15    manufacturing facility, of tangible personal property for
16    wholesale or retail sale or lease, whether such sale or
17    lease is made directly by the manufacturer or by some other
18    person, whether the materials used in the process are owned
19    by the manufacturer or some other person, or whether such
20    sale or lease is made apart from or as an incident to the
21    seller's engaging in a service occupation and the
22    applicable tax is a Service Use Tax or Service Occupation
23    Tax, rather than Use Tax or Retailers' Occupation Tax. The
24    exemption provided by this paragraph (5) does not include
25    machinery and equipment used in (i) the generation of
26    electricity for wholesale or retail sale; (ii) the

 

 

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1    generation or treatment of natural or artificial gas for
2    wholesale or retail sale that is delivered to customers
3    through pipes, pipelines, or mains; or (iii) the treatment
4    of water for wholesale or retail sale that is delivered to
5    customers through pipes, pipelines, or mains. The
6    provisions of Public Act 98-583 this amendatory Act of the
7    98th General Assembly are declaratory of existing law as to
8    the meaning and scope of this exemption. The exemption
9    under this paragraph (5) is exempt from the provisions of
10    Section 3-75.
11        (5a) the repairing, reconditioning or remodeling, for
12    a common carrier by rail, of tangible personal property
13    which belongs to such carrier for hire, and as to which
14    such carrier receives the physical possession of the
15    repaired, reconditioned or remodeled item of tangible
16    personal property in Illinois, and which such carrier
17    transports, or shares with another common carrier in the
18    transportation of such property, out of Illinois on a
19    standard uniform bill of lading showing the person who
20    repaired, reconditioned or remodeled the property to a
21    destination outside Illinois, for use outside Illinois.
22        (5b) a sale or transfer of tangible personal property
23    which is produced by the seller thereof on special order in
24    such a way as to have made the applicable tax the Service
25    Occupation Tax or the Service Use Tax, rather than the
26    Retailers' Occupation Tax or the Use Tax, for an interstate

 

 

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1    carrier by rail which receives the physical possession of
2    such property in Illinois, and which transports such
3    property, or shares with another common carrier in the
4    transportation of such property, out of Illinois on a
5    standard uniform bill of lading showing the seller of the
6    property as the shipper or consignor of such property to a
7    destination outside Illinois, for use outside Illinois.
8        (6) until July 1, 2003, a sale or transfer of
9    distillation machinery and equipment, sold as a unit or kit
10    and assembled or installed by the retailer, which machinery
11    and equipment is certified by the user to be used only for
12    the production of ethyl alcohol that will be used for
13    consumption as motor fuel or as a component of motor fuel
14    for the personal use of such user and not subject to sale
15    or resale.
16        (7) at the election of any serviceman not required to
17    be otherwise registered as a retailer under Section 2a of
18    the Retailers' Occupation Tax Act, made for each fiscal
19    year sales of service in which the aggregate annual cost
20    price of tangible personal property transferred as an
21    incident to the sales of service is less than 35%, or 75%
22    in the case of servicemen transferring prescription drugs
23    or servicemen engaged in graphic arts production, of the
24    aggregate annual total gross receipts from all sales of
25    service. The purchase of such tangible personal property by
26    the serviceman shall be subject to tax under the Retailers'

 

 

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1    Occupation Tax Act and the Use Tax Act. However, if a
2    primary serviceman who has made the election described in
3    this paragraph subcontracts service work to a secondary
4    serviceman who has also made the election described in this
5    paragraph, the primary serviceman does not incur a Use Tax
6    liability if the secondary serviceman (i) has paid or will
7    pay Use Tax on his or her cost price of any tangible
8    personal property transferred to the primary serviceman
9    and (ii) certifies that fact in writing to the primary
10    serviceman.
11    Tangible personal property transferred incident to the
12completion of a maintenance agreement is exempt from the tax
13imposed pursuant to this Act.
14    Exemption (5) also includes machinery and equipment used in
15the general maintenance or repair of such exempt machinery and
16equipment or for in-house manufacture of exempt machinery and
17equipment. On and after July 1, 2017, exemption (5) also
18includes graphic arts machinery and equipment, as defined in
19paragraph (5) of Section 3-5. The machinery and equipment
20exemption does not include machinery and equipment used in (i)
21the generation of electricity for wholesale or retail sale;
22(ii) the generation or treatment of natural or artificial gas
23for wholesale or retail sale that is delivered to customers
24through pipes, pipelines, or mains; or (iii) the treatment of
25water for wholesale or retail sale that is delivered to
26customers through pipes, pipelines, or mains. The provisions of

 

 

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1Public Act 98-583 this amendatory Act of the 98th General
2Assembly are declaratory of existing law as to the meaning and
3scope of this exemption. For the purposes of exemption (5),
4each of these terms shall have the following meanings: (1)
5"manufacturing process" shall mean the production of any
6article of tangible personal property, whether such article is
7a finished product or an article for use in the process of
8manufacturing or assembling a different article of tangible
9personal property, by procedures commonly regarded as
10manufacturing, processing, fabricating, or refining which
11changes some existing material or materials into a material
12with a different form, use or name. In relation to a recognized
13integrated business composed of a series of operations which
14collectively constitute manufacturing, or individually
15constitute manufacturing operations, the manufacturing process
16shall be deemed to commence with the first operation or stage
17of production in the series, and shall not be deemed to end
18until the completion of the final product in the last operation
19or stage of production in the series; and further, for purposes
20of exemption (5), photoprocessing is deemed to be a
21manufacturing process of tangible personal property for
22wholesale or retail sale; (2) "assembling process" shall mean
23the production of any article of tangible personal property,
24whether such article is a finished product or an article for
25use in the process of manufacturing or assembling a different
26article of tangible personal property, by the combination of

 

 

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1existing materials in a manner commonly regarded as assembling
2which results in a material of a different form, use or name;
3(3) "machinery" shall mean major mechanical machines or major
4components of such machines contributing to a manufacturing or
5assembling process; and (4) "equipment" shall include any
6independent device or tool separate from any machinery but
7essential to an integrated manufacturing or assembly process;
8including computers used primarily in a manufacturer's
9computer assisted design, computer assisted manufacturing
10(CAD/CAM) system; or any subunit or assembly comprising a
11component of any machinery or auxiliary, adjunct or attachment
12parts of machinery, such as tools, dies, jigs, fixtures,
13patterns and molds; or any parts which require periodic
14replacement in the course of normal operation; but shall not
15include hand tools. Equipment includes chemicals or chemicals
16acting as catalysts but only if the chemicals or chemicals
17acting as catalysts effect a direct and immediate change upon a
18product being manufactured or assembled for wholesale or retail
19sale or lease. The purchaser of such machinery and equipment
20who has an active resale registration number shall furnish such
21number to the seller at the time of purchase. The user of such
22machinery and equipment and tools without an active resale
23registration number shall prepare a certificate of exemption
24for each transaction stating facts establishing the exemption
25for that transaction, which certificate shall be available to
26the Department for inspection or audit. The Department shall

 

 

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1prescribe the form of the certificate.
2    Any informal rulings, opinions or letters issued by the
3Department in response to an inquiry or request for any opinion
4from any person regarding the coverage and applicability of
5exemption (5) to specific devices shall be published,
6maintained as a public record, and made available for public
7inspection and copying. If the informal ruling, opinion or
8letter contains trade secrets or other confidential
9information, where possible the Department shall delete such
10information prior to publication. Whenever such informal
11rulings, opinions, or letters contain any policy of general
12applicability, the Department shall formulate and adopt such
13policy as a rule in accordance with the provisions of the
14Illinois Administrative Procedure Act.
15    On and after July 1, 1987, no entity otherwise eligible
16under exemption (3) of this Section shall make tax-free tax
17free purchases unless it has an active exemption identification
18number issued by the Department.
19    The purchase, employment and transfer of such tangible
20personal property as newsprint and ink for the primary purpose
21of conveying news (with or without other information) is not a
22purchase, use or sale of service or of tangible personal
23property within the meaning of this Act.
24    "Serviceman" means any person who is engaged in the
25occupation of making sales of service.
26    "Sale at retail" means "sale at retail" as defined in the

 

 

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1Retailers' Occupation Tax Act.
2    "Supplier" means any person who makes sales of tangible
3personal property to servicemen for the purpose of resale as an
4incident to a sale of service.
5    "Serviceman maintaining a place of business in this State",
6or any like term, means and includes any serviceman:
7        (1) 1. having or maintaining within this State,
8    directly or by a subsidiary, an office, distribution house,
9    sales house, warehouse or other place of business, or any
10    agent or other representative operating within this State
11    under the authority of the serviceman or its subsidiary,
12    irrespective of whether such place of business or agent or
13    other representative is located here permanently or
14    temporarily, or whether such serviceman or subsidiary is
15    licensed to do business in this State;
16        (1.1) 1.1. having a contract with a person located in
17    this State under which the person, for a commission or
18    other consideration based on the sale of service by the
19    serviceman, directly or indirectly refers potential
20    customers to the serviceman by providing to the potential
21    customers a promotional code or other mechanism that allows
22    the serviceman to track purchases referred by such persons.
23    Examples of mechanisms that allow the serviceman to track
24    purchases referred by such persons include but are not
25    limited to the use of a link on the person's Internet
26    website, promotional codes distributed through the

 

 

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1    person's hand-delivered or mailed material, and
2    promotional codes distributed by the person through radio
3    or other broadcast media. The provisions of this paragraph
4    (1.1) 1.1 shall apply only if the cumulative gross receipts
5    from sales of service by the serviceman to customers who
6    are referred to the serviceman by all persons in this State
7    under such contracts exceed $10,000 during the preceding 4
8    quarterly periods ending on the last day of March, June,
9    September, and December; a serviceman meeting the
10    requirements of this paragraph (1.1) 1.1 shall be presumed
11    to be maintaining a place of business in this State but may
12    rebut this presumption by submitting proof that the
13    referrals or other activities pursued within this State by
14    such persons were not sufficient to meet the nexus
15    standards of the United States Constitution during the
16    preceding 4 quarterly periods;
17        (1.2) 1.2. beginning July 1, 2011, having a contract
18    with a person located in this State under which:
19            (A) A. the serviceman sells the same or
20        substantially similar line of services as the person
21        located in this State and does so using an identical or
22        substantially similar name, trade name, or trademark
23        as the person located in this State; and
24            (B) B. the serviceman provides a commission or
25        other consideration to the person located in this State
26        based upon the sale of services by the serviceman.

 

 

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1    The provisions of this paragraph (1.2) 1.2 shall apply only
2    if the cumulative gross receipts from sales of service by
3    the serviceman to customers in this State under all such
4    contracts exceed $10,000 during the preceding 4 quarterly
5    periods ending on the last day of March, June, September,
6    and December;
7        (2) 2. soliciting orders for tangible personal
8    property by means of a telecommunication or television
9    shopping system (which utilizes toll free numbers) which is
10    intended by the retailer to be broadcast by cable
11    television or other means of broadcasting, to consumers
12    located in this State;
13        (3) 3. pursuant to a contract with a broadcaster or
14    publisher located in this State, soliciting orders for
15    tangible personal property by means of advertising which is
16    disseminated primarily to consumers located in this State
17    and only secondarily to bordering jurisdictions;
18        (4) 4. soliciting orders for tangible personal
19    property by mail if the solicitations are substantial and
20    recurring and if the retailer benefits from any banking,
21    financing, debt collection, telecommunication, or
22    marketing activities occurring in this State or benefits
23    from the location in this State of authorized installation,
24    servicing, or repair facilities;
25        (5) 5. being owned or controlled by the same interests
26    which own or control any retailer engaging in business in

 

 

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1    the same or similar line of business in this State;
2        (6) 6. having a franchisee or licensee operating under
3    its trade name if the franchisee or licensee is required to
4    collect the tax under this Section;
5        (7) 7. pursuant to a contract with a cable television
6    operator located in this State, soliciting orders for
7    tangible personal property by means of advertising which is
8    transmitted or distributed over a cable television system
9    in this State; or
10        (8) 8. engaging in activities in Illinois, which
11    activities in the state in which the supply business
12    engaging in such activities is located would constitute
13    maintaining a place of business in that state; or .
14        (9) beginning January 1, 2019, making sales of service
15    to purchasers in Illinois from outside of Illinois if:
16            (A) the cumulative gross receipts from sales of
17        service to purchasers in Illinois are $100,000 or more;
18        or
19            (B) the serviceman enters into 200 or more separate
20        transactions for sales of service to purchasers in
21        Illinois.
22        The serviceman shall determine on a quarterly basis,
23    ending on the last day of March, June, September, and
24    December, whether he or she meets the criteria of either
25    (A) or (B) of this paragraph (9) for the preceding 12-month
26    period. If the serviceman meets the criteria of either (A)

 

 

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1    or (B) for a 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 one year. At the end of that
5    one-year period, the serviceman shall determine whether
6    the serviceman met the criteria of either (A) or (B) during
7    the preceding 12-month period. If the serviceman met the
8    criteria in either (A) or (B) for the preceding 12-month
9    period, he or she is considered a serviceman maintaining a
10    place of business in this State and is required to collect
11    and remit the tax imposed under this Act and file returns
12    for the subsequent year. If at the end of a one-year period
13    a serviceman that was required to collect and remit the tax
14    imposed under this Act determines that he or she did not
15    meet the criteria in either (A) or (B) during the preceding
16    12-month period, the serviceman subsequently shall
17    determine on a quarterly basis, ending on the last day of
18    March, June, September, and December, whether he or she
19    meets the criteria of either (A) or (B) for the preceding
20    12-month period.
21(Source: P.A. 100-22, eff. 7-6-17; 100-321, eff. 8-24-17;
22revised 9-27-17.)
 
23    Section 99. Effective date. This Act takes effect upon
24becoming law.