New Illinois Tax Developments

New Illinois Sales Tax Exemption for Production-Related Purchases

By Joseph P. (Joe) Roznai, CPA, CGMA - Partner
July 2019

Included in a flurry of late legislative session activity, Illinois just enacted a new sales tax law to expand the manufacturing machinery and equipment exemption to include production-related, tangible personal property purchased on or after
July 1, 2019.

Effective July 1, 2019, manufacturers will no longer have to pay sales tax on most of the tangible personal property, supplies, and consumable goods purchased for direct or indirect use in the manufacturing process. These include the following:

  • Tangible personal property purchased for incorporation into real estate within a manufacturing facility for use in a production related process – This includes such production related property purchased by a construction contractor that is building or modifying such a facility.
  • Tangible personal property primarily used or consumed in activities such as research and development, preproduction material handling, receiving, quality control, inventory control, storage, staging, and packaging for shipping and transportation purposes.
  • Supplies and consumables such as fuels, coolants, solvents, oils, lubricants, adhesives, hand tools, protective apparel, and fire and safety equipment primarily used or consumed within a manufacturing facility in a manufacturing process.

Manufacturers must provide IDOR Form ST-587, Exemption Certificate for Manufacturing, etc., to their vendors in order to claim the sales tax exemption. Since Illinois has not modified this form to permit a “blanket” exemption for all future purchases, you must provide the form for each and every purchase order for exemption eligible property. If you have already purchased any of the newly exempted tangible personal property, supplies, or consumable goods after June 30, 2019, contact your vendor and ask for a refund of the Illinois sales tax paid by providing a Form ST-587.

Sellers must retain these and all other exemption certificates in their records and must make them available for inspection or audit by the Illinois Department of Revenue if and as requested.

We are happy to answer any questions that you have regarding the above, including which of your purchases qualify for sales tax exemption. Sales tax issue, for purchasers and resellers, can be complicated. We are here to discuss any of your sales tax related issues or concerns.

Illinois Tax Amnesty

Illinois also enacted two tax amnesty programs that will be available from October 1 through November 15, 2019. This is the first tax amnesty Illinois has offered since 2010. Under both programs, the Illinois Department of Revenue waives applicable interest and penalties.

  • The general tax amnesty applies to all taxes due to the State of Illinois for any tax period ending after June 30, 2011 and before July 1, 2018.
  • The other tax amnesty applies to franchise tax and license fees taxes due for any tax period ending after March 15, 2008 and on or before June 30, 2019.

Regulations have not yet been issued regarding how amnesty is to be claimed, which forms to use, how payment is to be made, etc. For prior amnesty programs, taxpayers were required to file delinquent and/or amended tax returns, including making applicable payment, within the short amnesty period.

If you think you may have any taxes owed to Illinois, or you are not sure if you may have such exposure, we are happy to help you review your situation to determine if you are able to take advantage of the Illinois amnesty benefits. Please call us at 847.982.0333.

Joe Roznai, CPA, CGMA, Partner, is the leader of our state and local tax practice, as well as our international tax team. He has more than 30 years of federal, state and local tax planning, consulting and compliance experience, working with entrepreneurial businesses across a wide range of industries, including manufacturers, distributors, real estate, leasing companies, retailers, service providers, and auto dealers. He has expertise in corporate reorganizations, multi‐state income, franchise, personal property and sales and use taxes, international reporting, and related appeals.