State of Illinois
90th General Assembly
Legislation

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[ Introduced ][ Enrolled ][ House Amendment 001 ]

90_HB2201eng

      35 ILCS 115/2c            from Ch. 120, par. 439.102c
          Amends the Service Occupation Tax Act.   Makes  technical
      changes  in  the  Section  concerning  corporations,  limited
      liability companies, societies, associations, foundations, or
      institutions   organized   and   operated   exclusively   for
      educational purposes.
                                                     LRB9000111KRpk
HB2201 Engrossed                               LRB9000111KRpk
 1        AN  ACT  to  amend  the  Service  Use Tax Act by changing
 2    Section 3-70.
 3        Be it enacted by the People of  the  State  of  Illinois,
 4    represented in the General Assembly:
 5        Section  5.  The  Service  Use  Tax  Act  is  amended  by
 6    changing Section 3-70 as follows:
 7        (35 ILCS 110/3-70)
 8        Sec.  3-70. Manufacturer's Purchase Credit. For purchases
 9    of machinery and equipment made on and after January 1, 1995,
10    a purchaser of manufacturing  machinery  and  equipment  that
11    qualifies for the exemption provided by Section 2 of this Act
12    earns  a  credit  in an amount equal to a fixed percentage of
13    the tax which would have been  incurred  under  this  Act  on
14    those  purchases. For purchases of graphic arts machinery and
15    equipment made on or  after  July  1,  1996,  a  purchase  of
16    graphic  arts  machinery and equipment that qualifies for the
17    exemption provided by paragraph (5) of Section  3-5  of  this
18    Act  earns  a credit in an amount equal to a fixed percentage
19    of the tax that would have been incurred under  this  Act  on
20    those  purchases.  The  credit  earned  for  the  purchase of
21    manufacturing  machinery  and  equipment  and  graphic   arts
22    machinery   and   equipment  shall  be  referred  to  as  the
23    Manufacturer's Purchase Credit. A graphic arts producer is  a
24    person  engaged  in  graphic  arts  production  as defined in
25    Section 3-30 of the Service Occupation  Tax  Act.   Beginning
26    July 1, 1996, all references in this Section to manufacturers
27    or  manufacturing  shall also refer to graphic arts producers
28    or graphic arts production.
29        The amount of credit shall be a  percentage  of  the  tax
30    that  would  have  been  incurred  on  the  purchase  of  the
31    manufacturing   machinery   and  equipment  or  graphic  arts
HB2201 Engrossed            -2-                LRB9000111KRpk
 1    machinery and equipment if the exemptions provided by Section
 2    2 or paragraph (5) of Section 3-5 of this Act  had  not  been
 3    applicable.
 4        All  purchases  of  manufacturing machinery and equipment
 5    and graphic arts machinery and equipment that qualify for the
 6    exemptions  provided  by  paragraph  (5)  of  Section  2   or
 7    paragraph  (5)  of  Section  3-5  of this Act qualify for the
 8    credit without regard to whether the serviceman  elected,  or
 9    could  have elected, under paragraph (7) of Section 2 of this
10    Act to  exclude  the  transaction  from  this  Act.   If  the
11    serviceman's  billing  to  the  service  customer  separately
12    states a selling price for the exempt manufacturing machinery
13    or  equipment  or  the  exempt  graphic  arts  machinery  and
14    equipment,  the  credit  shall  be  calculated,  as otherwise
15    provided  herein,  based  on  that  selling  price.   If  the
16    serviceman's billing does  not  separately  state  a  selling
17    price for the exempt manufacturing machinery and equipment or
18    the  exempt  graphic arts machinery and equipment, the credit
19    shall be calculated, as otherwise provided herein,  based  on
20    50%  of  the  entire billing.  If the serviceman contracts to
21    design, develop,  and  produce  special  order  manufacturing
22    machinery   and  equipment  or  special  order  graphic  arts
23    machinery and equipment, and the billing does not  separately
24    state  a  selling  price for such special order machinery and
25    equipment, the  credit  shall  be  calculated,  as  otherwise
26    provided  herein,  based  on  50% of the entire billing.  The
27    provisions of this paragraph are effective for purchases made
28    on or after January 1, 1995.
29        The percentage shall be as follows:
30             (1)  15% for purchases made on or  before  June  30,
31        1995.
32             (2)  25% for purchases made after June 30, 1995, and
33        on or before June 30, 1996.
34             (3)  40% for purchases made after June 30, 1996, and
HB2201 Engrossed            -3-                LRB9000111KRpk
 1        on or before June 30, 1997.
 2             (4)  50%  for  purchases  made  on  or after July 1,
 3        1997.
 4        A  purchaser  of  production  related  tangible  personal
 5    property desiring to use the Manufacturer's  Purchase  Credit
 6    shall  certify to the seller that the purchaser is satisfying
 7    all or part of the liability under the Use  Tax  Act  or  the
 8    Service  Use  Tax  Act  that  is  due  on the purchase of the
 9    production related tangible personal property  by  use  of  a
10    Manufacturer's  Purchase  Credit. The Manufacturer's Purchase
11    Credit certification must be dated and shall include the name
12    and address of the purchaser,  the  purchaser's  registration
13    number,  if  registered,  the  credit  being  applied,  and a
14    statement that the State Use Tax or Service Use Tax liability
15    is being satisfied with the manufacturer's  or  graphic  arts
16    producer's  accumulated purchase credit. Certification may be
17    incorporated  into  the  manufacturer's   or   graphic   arts
18    producer's  purchase  order.  Manufacturer's  Purchase Credit
19    certification by the manufacturer or  graphic  arts  producer
20    may  be  used  to  satisfy  the  retailer's  or  serviceman's
21    liability  under the Retailers' Occupation Tax Act or Service
22    Occupation Tax Act for the  credit  claimed,  not  to  exceed
23    6.25%  of  the  receipts  subject  to  tax  from a qualifying
24    purchase, but only if the retailer or serviceman reports  the
25    Manufacturer's  Purchase  Credit  claimed  as required by the
26    Department. The  Manufacturer's  Purchase  Credit  earned  by
27    purchase  of  exempt manufacturing machinery and equipment or
28    graphic arts machinery and equipment  is  a  non-transferable
29    credit.   A manufacturer or graphic arts producer that enters
30    into  a  contract  involving  the  installation  of  tangible
31    personal property into real estate within a manufacturing  or
32    graphic arts production facility may authorize a construction
33    contractor  to utilize credit accumulated by the manufacturer
34    or graphic arts producer to purchase  the  tangible  personal
HB2201 Engrossed            -4-                LRB9000111KRpk
 1    property.   A manufacturer or graphic arts producer intending
 2    to use accumulated credit to purchase such tangible  personal
 3    property  shall  execute  a  written contract authorizing the
 4    contractor to utilize a specified dollar  amount  of  credit.
 5    The   contractor   shall   furnish   the  supplier  with  the
 6    manufacturer's or graphic arts producer's name,  registration
 7    or  resale  number, and a statement that a specific amount of
 8    the Use Tax or Service Use Tax liability, not to exceed 6.25%
 9    of the selling price, is being satisfied with the credit. The
10    manufacturer or graphic arts producer shall remain liable  to
11    timely  report  all information required by the annual Report
12    of Manufacturer's Purchase Credit Used for credit utilized by
13    a construction contractor.
14        The Manufacturer's Purchase Credit may be used to satisfy
15    liability under the Use Tax Act or the Service  Use  Tax  Act
16    due  on  the purchase of production related tangible personal
17    property (including purchases by a manufacturer, by a graphic
18    arts producer, or a lessor who rents or leases the use of the
19    property to a manufacturer or  graphic  arts  producer)  that
20    does  not  otherwise  qualify for the manufacturing machinery
21    and equipment exemption or the  graphic  arts  machinery  and
22    equipment  exemption.   "Production related tangible personal
23    property" means (i) all tangible personal  property  used  or
24    consumed  by  the  purchaser  in  a manufacturing facility in
25    which a manufacturing process described in  Section  2-45  of
26    the  Retailers'  Occupation  Tax  Act  takes place, including
27    tangible personal property purchased for  incorporation  into
28    real  estate  within  a manufacturing facility and including,
29    but not  limited  to,  tangible  personal  property  used  or
30    consumed   in  activities  such  as  pre-production  material
31    handling,  receiving,  quality  control,  inventory  control,
32    storage,   staging,   and   packaging   for   shipping    and
33    transportation  purposes; (ii) all tangible personal property
34    used or consumed by the purchaser in a graphic arts  facility
HB2201 Engrossed            -5-                LRB9000111KRpk
 1    in which graphic arts production as described in Section 2-30
 2    of  the  Retailers' Occupation Tax Act takes place, including
 3    tangible personal property purchased for  incorporation  into
 4    real estate within a graphic arts facility and including, but
 5    not  limited  to,  all  tangible  personal  property  used or
 6    consumed in activities such as graphic  arts  preliminary  or
 7    pre-press   production,   pre-production  material  handling,
 8    receiving,  quality  control,  inventory  control,   storage,
 9    staging,  sorting,  labeling,  mailing,  tying, wrapping, and
10    packaging; and (iii) all tangible personal property  used  or
11    consumed  by  the  purchaser  for  research  and development.
12    "Production related  tangible  personal  property"  does  not
13    include  (i)  tangible  personal  property  used,  within  or
14    without  a  manufacturing or graphic arts facility, in sales,
15    purchasing,   accounting,   fiscal   management,   marketing,
16    personnel recruitment or selection, or  landscaping  or  (ii)
17    tangible   personal   property   required  to  be  titled  or
18    registered with a department, agency,  or  unit  of  federal,
19    state,  or  local  government.   The  Manufacturer's Purchase
20    Credit may be used to satisfy the tax arising either from the
21    purchase of machinery and equipment on or  after  January  1,
22    1995  for  which  the  manufacturing  machinery and equipment
23    exemption provided by Section 2  of this Act was  erroneously
24    claimed,  or  the  purchase  of machinery and equipment on or
25    after July 1,  1996  for  which  the  exemption  provided  by
26    paragraph  (5)  of  Section  3-5  of this Act was erroneously
27    claimed, but not in satisfaction  of  penalty,  if  any,  and
28    interest for failure to pay the tax when due.  A purchaser of
29    production related tangible personal property who is required
30    to  pay  Illinois  Use Tax or Service Use Tax on the purchase
31    directly to the Department  may  utilize  the  Manufacturer's
32    Purchase  Credit in satisfaction of the tax arising from that
33    purchase, but not in satisfaction of penalty and interest.  A
34    purchaser  who  uses  the  Manufacturer's  Purchase Credit to
HB2201 Engrossed            -6-                LRB9000111KRpk
 1    purchase  property  which  is  later  determined  not  to  be
 2    production related tangible personal property may  be  liable
 3    for  tax,  penalty,  and  interest  on  the  purchase of that
 4    property as of the date of purchase but shall be entitled  to
 5    use the disallowed Manufacturer's Purchase Credit, so long as
 6    it  has  not  expired,  on qualifying purchases of production
 7    related tangible personal property not previously subject  to
 8    credit  usage. The Manufacturer's Purchase Credit earned by a
 9    manufacturer or graphic arts producer expires the last day of
10    the second calendar year following the calendar year in which
11    the credit arose.
12        A purchaser earning Manufacturer's Purchase Credit  shall
13    sign  and  file  an  annual Report of Manufacturer's Purchase
14    Credit Earned for each calendar year no later than  the  last
15    day of the sixth month following the calendar year in which a
16    Manufacturer's  Purchase  Credit  is  earned.   A  Report  of
17    Manufacturer's Purchase Credit Earned shall be filed on forms
18    as  prescribed or approved by the Department and shall state,
19    for each month of the calendar year: (i) the  total  purchase
20    price  of  all  purchases  of exempt manufacturing or graphic
21    arts machinery on which the credit was earned; (ii) the total
22    State Use Tax or Service Use Tax which would have been due on
23    those items; (iii)  the  percentage  used  to  calculate  the
24    amount  of  credit  earned; (iv) the amount of credit earned;
25    and  (v)  such  other  information  as  the  Department   may
26    reasonably   require.   A  purchaser  earning  Manufacturer's
27    Purchase Credit shall maintain records which identify, as  to
28    each  purchase of manufacturing or graphic arts machinery and
29    equipment  on  which  the  purchaser  earned   Manufacturer's
30    Purchase Credit, the vendor (including, if applicable, either
31    the   vendor's   registration   number  or  Federal  Employer
32    Identification Number), the purchase price, and the amount of
33    Manufacturer's Purchase Credit earned on each purchase.
34        A purchaser using Manufacturer's  Purchase  Credit  shall
HB2201 Engrossed            -7-                LRB9000111KRpk
 1    sign  and  file  an  annual Report of Manufacturer's Purchase
 2    Credit Used for each calendar year no later than the last day
 3    of the sixth month following the calendar  year  in  which  a
 4    Manufacturer's   Purchase   Credit   is  used.  A  Report  of
 5    Manufacturer's Purchase Credit Used shall be filed  on  forms
 6    as  prescribed or approved by the Department and shall state,
 7    for each month of the calendar year:  (i) the total  purchase
 8    price   of  production  related  tangible  personal  property
 9    purchased from Illinois suppliers; (ii)  the  total  purchase
10    price   of  production  related  tangible  personal  property
11    purchased from out-of-state suppliers; (iii) the total amount
12    of credit  used  during  such  month;  and  (iv)  such  other
13    information  as  the  Department  may  reasonably require.  A
14    purchaser using Manufacturer's Purchase Credit shall maintain
15    records that identify, as  to  each  purchase  of  production
16    related  tangible  personal  property  on which the purchaser
17    used Manufacturer's Purchase Credit, the  vendor  (including,
18    if  applicable,  either  the  vendor's registration number or
19    Federal Employer Identification Number), the purchase  price,
20    and the amount of Manufacturer's Purchase Credit used on each
21    purchase.
22        No  annual  report  shall  be filed before May 1, 1996. A
23    purchaser  that  fails  to   file   an   annual   Report   of
24    Manufacturer's  Purchase Credit Earned or an annual Report of
25    Manufacturer's Purchase Credit Used by the last  day  of  the
26    sixth  month  following  the  end  of the calendar year shall
27    forfeit all Manufacturer's Purchase Credit for that  calendar
28    year  unless  it establishes that its failure to file was due
29    to reasonable cause. Manufacturer's Purchase  Credit  reports
30    may  be  amended  to  report  and  claim credit on qualifying
31    purchases not previously reported  at  any  time  before  the
32    credit would have expired, unless both the Department and the
33    purchaser  have  agreed  to  an  extension  of the statute of
34    limitations for the issuance of a notice of tax liability  as
HB2201 Engrossed            -8-                LRB9000111KRpk
 1    provided  in  Section 4 of the Retailers' Occupation Tax Act.
 2    If the time for assessment or refund has been extended,  then
 3    amended  reports for a calendar year may be filed at any time
 4    prior to the date to which the statute of limitations for the
 5    calendar year  or  portion  thereof  has  been  extended.  No
 6    Manufacturer's   Purchase   Credit   report  filed  with  the
 7    Department for periods prior to  January  1,  1995  shall  be
 8    approved.   Manufacturer's  Purchase  Credit  claimed  on  an
 9    amended report may be used to satisfy tax liability under the
10    Use Tax Act or the Service Use  Tax  Act  (i)  on  qualifying
11    purchases  of  production  related tangible personal property
12    made after the date the  amended  report  is  filed  or  (ii)
13    assessed   by  the  Department  on  qualifying  purchases  of
14    production related tangible personal  property  made  in  the
15    case  of manufacturers on or after January 1, 1995, or in the
16    case of graphic arts producers on or after July 1, 1996.
17        If the purchaser is not the  manufacturer  or  a  graphic
18    arts producer, but rents or leases the use of the property to
19    a  manufacturer or a graphic arts producer, the purchaser may
20    earn, report, and use Manufacturer's Purchase Credit  in  the
21    same manner as a manufacturer or graphic arts producer.
22        A  purchaser  shall not be entitled to any Manufacturer's
23    Purchase Credit  for  a  purchase  that  is  required  to  be
24    reported  and  is  not  timely  reported  as provided in this
25    Section.  A purchaser remains liable for (i) any tax that was
26    satisfied by use of a Manufacturer's Purchase Credit,  as  of
27    the  date  of purchase, if that use is not timely reported as
28    required  in  this  Section  and  (ii)  for  any   applicable
29    penalties and interest for failing to pay the tax when due.
30    (Source:  P.A.  88-547,  eff.  6-30-94;  89-89, eff. 6-30-95;
31    89-235, eff. 8-4-95; 89-531, eff. 7-19-96.)
32        Section 99.  Effective date.  This Act takes effect  upon
33    becoming law.

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