Public Act 90-0166 of the 90th General Assembly
Public Act 90-0166
HB2201 Enrolled LRB9000111KRpk
AN ACT to amend the Service Use Tax Act by changing
Section 3-70.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 5. The Service Use Tax Act is amended by
changing Section 3-70 as follows:
(35 ILCS 110/3-70)
Sec. 3-70. Manufacturer's Purchase Credit. For purchases
of machinery and equipment made on and after January 1, 1995,
a purchaser of manufacturing machinery and equipment that
qualifies for the exemption provided by Section 2 of this Act
earns a credit in an amount equal to a fixed percentage of
the tax which would have been incurred under this Act on
those purchases. For purchases of graphic arts machinery and
equipment made on or after July 1, 1996, a purchase of
graphic arts machinery and equipment that qualifies for the
exemption provided by paragraph (5) of Section 3-5 of this
Act earns a credit in an amount equal to a fixed percentage
of the tax that would have been incurred under this Act on
those purchases. The credit earned for the purchase of
manufacturing machinery and equipment and graphic arts
machinery and equipment shall be referred to as the
Manufacturer's Purchase Credit. A graphic arts producer is a
person engaged in graphic arts production as defined in
Section 3-30 of the Service Occupation Tax Act. Beginning
July 1, 1996, all references in this Section to manufacturers
or manufacturing shall also refer to graphic arts producers
or graphic arts production.
The amount of credit shall be a percentage of the tax
that would have been incurred on the purchase of the
manufacturing machinery and equipment or graphic arts
machinery and equipment if the exemptions provided by Section
2 or paragraph (5) of Section 3-5 of this Act had not been
applicable.
All purchases of manufacturing machinery and equipment
and graphic arts machinery and equipment that qualify for the
exemptions provided by paragraph (5) of Section 2 or
paragraph (5) of Section 3-5 of this Act qualify for the
credit without regard to whether the serviceman elected, or
could have elected, under paragraph (7) of Section 2 of this
Act to exclude the transaction from this Act. If the
serviceman's billing to the service customer separately
states a selling price for the exempt manufacturing machinery
or equipment or the exempt graphic arts machinery and
equipment, the credit shall be calculated, as otherwise
provided herein, based on that selling price. If the
serviceman's billing does not separately state a selling
price for the exempt manufacturing machinery and equipment or
the exempt graphic arts machinery and equipment, the credit
shall be calculated, as otherwise provided herein, based on
50% of the entire billing. If the serviceman contracts to
design, develop, and produce special order manufacturing
machinery and equipment or special order graphic arts
machinery and equipment, and the billing does not separately
state a selling price for such special order machinery and
equipment, the credit shall be calculated, as otherwise
provided herein, based on 50% of the entire billing. The
provisions of this paragraph are effective for purchases made
on or after January 1, 1995.
The percentage shall be as follows:
(1) 15% for purchases made on or before June 30,
1995.
(2) 25% for purchases made after June 30, 1995, and
on or before June 30, 1996.
(3) 40% for purchases made after June 30, 1996, and
on or before June 30, 1997.
(4) 50% for purchases made on or after July 1,
1997.
A purchaser of production related tangible personal
property desiring to use the Manufacturer's Purchase Credit
shall certify to the seller that the purchaser is satisfying
all or part of the liability under the Use Tax Act or the
Service Use Tax Act that is due on the purchase of the
production related tangible personal property by use of a
Manufacturer's Purchase Credit. The Manufacturer's Purchase
Credit certification must be dated and shall include the name
and address of the purchaser, the purchaser's registration
number, if registered, the credit being applied, and a
statement that the State Use Tax or Service Use Tax liability
is being satisfied with the manufacturer's or graphic arts
producer's accumulated purchase credit. Certification may be
incorporated into the manufacturer's or graphic arts
producer's purchase order. Manufacturer's Purchase Credit
certification by the manufacturer or graphic arts producer
may be used to satisfy the retailer's or serviceman's
liability under the Retailers' Occupation Tax Act or Service
Occupation Tax Act for the credit claimed, not to exceed
6.25% of the receipts subject to tax from a qualifying
purchase, but only if the retailer or serviceman reports the
Manufacturer's Purchase Credit claimed as required by the
Department. The Manufacturer's Purchase Credit earned by
purchase of exempt manufacturing machinery and equipment or
graphic arts machinery and equipment is a non-transferable
credit. A manufacturer or graphic arts producer that enters
into a contract involving the installation of tangible
personal property into real estate within a manufacturing or
graphic arts production facility may authorize a construction
contractor to utilize credit accumulated by the manufacturer
or graphic arts producer to purchase the tangible personal
property. A manufacturer or graphic arts producer intending
to use accumulated credit to purchase such tangible personal
property shall execute a written contract authorizing the
contractor to utilize a specified dollar amount of credit.
The contractor shall furnish the supplier with the
manufacturer's or graphic arts producer's name, registration
or resale number, and a statement that a specific amount of
the Use Tax or Service Use Tax liability, not to exceed 6.25%
of the selling price, is being satisfied with the credit. The
manufacturer or graphic arts producer shall remain liable to
timely report all information required by the annual Report
of Manufacturer's Purchase Credit Used for credit utilized by
a construction contractor.
The Manufacturer's Purchase Credit may be used to satisfy
liability under the Use Tax Act or the Service Use Tax Act
due on the purchase of production related tangible personal
property (including purchases by a manufacturer, by a graphic
arts producer, or a lessor who rents or leases the use of the
property to a manufacturer or graphic arts producer) that
does not otherwise qualify for the manufacturing machinery
and equipment exemption or the graphic arts machinery and
equipment exemption. "Production related tangible personal
property" means (i) all tangible personal property used or
consumed by the purchaser in a manufacturing facility in
which a manufacturing process described in Section 2-45 of
the Retailers' Occupation Tax Act takes place, including
tangible personal property purchased for incorporation into
real estate within a manufacturing facility and including,
but not limited to, tangible personal property used or
consumed in activities such as pre-production material
handling, receiving, quality control, inventory control,
storage, staging, and packaging for shipping and
transportation purposes; (ii) all tangible personal property
used or consumed by the purchaser in a graphic arts facility
in which graphic arts production as described in Section 2-30
of the Retailers' Occupation Tax Act takes place, including
tangible personal property purchased for incorporation into
real estate within a graphic arts facility and including, but
not limited to, all tangible personal property used or
consumed in activities such as graphic arts preliminary or
pre-press production, pre-production material handling,
receiving, quality control, inventory control, storage,
staging, sorting, labeling, mailing, tying, wrapping, and
packaging; and (iii) all tangible personal property used or
consumed by the purchaser for research and development.
"Production related tangible personal property" does not
include (i) tangible personal property used, within or
without a manufacturing or graphic arts facility, in sales,
purchasing, accounting, fiscal management, marketing,
personnel recruitment or selection, or landscaping or (ii)
tangible personal property required to be titled or
registered with a department, agency, or unit of federal,
state, or local government. The Manufacturer's Purchase
Credit may be used to satisfy the tax arising either from the
purchase of machinery and equipment on or after January 1,
1995 for which the manufacturing machinery and equipment
exemption provided by Section 2 of this Act was erroneously
claimed, or the purchase of machinery and equipment on or
after July 1, 1996 for which the exemption provided by
paragraph (5) of Section 3-5 of this Act was erroneously
claimed, but not in satisfaction of penalty, if any, and
interest for failure to pay the tax when due. A purchaser of
production related tangible personal property who is required
to pay Illinois Use Tax or Service Use Tax on the purchase
directly to the Department may utilize the Manufacturer's
Purchase Credit in satisfaction of the tax arising from that
purchase, but not in satisfaction of penalty and interest. A
purchaser who uses the Manufacturer's Purchase Credit to
purchase property which is later determined not to be
production related tangible personal property may be liable
for tax, penalty, and interest on the purchase of that
property as of the date of purchase but shall be entitled to
use the disallowed Manufacturer's Purchase Credit, so long as
it has not expired, on qualifying purchases of production
related tangible personal property not previously subject to
credit usage. The Manufacturer's Purchase Credit earned by a
manufacturer or graphic arts producer expires the last day of
the second calendar year following the calendar year in which
the credit arose.
A purchaser earning Manufacturer's Purchase Credit shall
sign and file an annual Report of Manufacturer's Purchase
Credit Earned for each calendar year no later than the last
day of the sixth month following the calendar year in which a
Manufacturer's Purchase Credit is earned. A Report of
Manufacturer's Purchase Credit Earned shall be filed on forms
as prescribed or approved by the Department and shall state,
for each month of the calendar year: (i) the total purchase
price of all purchases of exempt manufacturing or graphic
arts machinery on which the credit was earned; (ii) the total
State Use Tax or Service Use Tax which would have been due on
those items; (iii) the percentage used to calculate the
amount of credit earned; (iv) the amount of credit earned;
and (v) such other information as the Department may
reasonably require. A purchaser earning Manufacturer's
Purchase Credit shall maintain records which identify, as to
each purchase of manufacturing or graphic arts machinery and
equipment on which the purchaser earned Manufacturer's
Purchase Credit, the vendor (including, if applicable, either
the vendor's registration number or Federal Employer
Identification Number), the purchase price, and the amount of
Manufacturer's Purchase Credit earned on each purchase.
A purchaser using Manufacturer's Purchase Credit shall
sign and file an annual Report of Manufacturer's Purchase
Credit Used for each calendar year no later than the last day
of the sixth month following the calendar year in which a
Manufacturer's Purchase Credit is used. A Report of
Manufacturer's Purchase Credit Used shall be filed on forms
as prescribed or approved by the Department and shall state,
for each month of the calendar year: (i) the total purchase
price of production related tangible personal property
purchased from Illinois suppliers; (ii) the total purchase
price of production related tangible personal property
purchased from out-of-state suppliers; (iii) the total amount
of credit used during such month; and (iv) such other
information as the Department may reasonably require. A
purchaser using Manufacturer's Purchase Credit shall maintain
records that identify, as to each purchase of production
related tangible personal property on which the purchaser
used Manufacturer's Purchase Credit, the vendor (including,
if applicable, either the vendor's registration number or
Federal Employer Identification Number), the purchase price,
and the amount of Manufacturer's Purchase Credit used on each
purchase.
No annual report shall be filed before May 1, 1996. A
purchaser that fails to file an annual Report of
Manufacturer's Purchase Credit Earned or an annual Report of
Manufacturer's Purchase Credit Used by the last day of the
sixth month following the end of the calendar year shall
forfeit all Manufacturer's Purchase Credit for that calendar
year unless it establishes that its failure to file was due
to reasonable cause. Manufacturer's Purchase Credit reports
may be amended to report and claim credit on qualifying
purchases not previously reported at any time before the
credit would have expired, unless both the Department and the
purchaser have agreed to an extension of the statute of
limitations for the issuance of a notice of tax liability as
provided in Section 4 of the Retailers' Occupation Tax Act.
If the time for assessment or refund has been extended, then
amended reports for a calendar year may be filed at any time
prior to the date to which the statute of limitations for the
calendar year or portion thereof has been extended. No
Manufacturer's Purchase Credit report filed with the
Department for periods prior to January 1, 1995 shall be
approved. Manufacturer's Purchase Credit claimed on an
amended report may be used to satisfy tax liability under the
Use Tax Act or the Service Use Tax Act (i) on qualifying
purchases of production related tangible personal property
made after the date the amended report is filed or (ii)
assessed by the Department on qualifying purchases of
production related tangible personal property made in the
case of manufacturers on or after January 1, 1995, or in the
case of graphic arts producers on or after July 1, 1996.
If the purchaser is not the manufacturer or a graphic
arts producer, but rents or leases the use of the property to
a manufacturer or a graphic arts producer, the purchaser may
earn, report, and use Manufacturer's Purchase Credit in the
same manner as a manufacturer or graphic arts producer.
A purchaser shall not be entitled to any Manufacturer's
Purchase Credit for a purchase that is required to be
reported and is not timely reported as provided in this
Section. A purchaser remains liable for (i) any tax that was
satisfied by use of a Manufacturer's Purchase Credit, as of
the date of purchase, if that use is not timely reported as
required in this Section and (ii) for any applicable
penalties and interest for failing to pay the tax when due.
(Source: P.A. 88-547, eff. 6-30-94; 89-89, eff. 6-30-95;
89-235, eff. 8-4-95; 89-531, eff. 7-19-96.)
Section 99. Effective date. This Act takes effect upon
becoming law.