Ill. Admin. Code tit. 86, § 130.1951 - Sales of Building Materials Incorporated into Real Estate within Enterprise Zones
a) An exemption
from Illinois Retailers' Occupation Tax liability exists for gross receipts
from qualified sales of building materials that will be
incorporated intoreal estate located
in an enterprise zone established by a county or municipality under the
Illinois Enterprise Zone Act by remodeling, rehabilitation or new
construction. [35 ILCS
120/5k ]
b) Documentation for Sales Made on and after
August 6, 2002 through June 30, 2013
1)
"Qualified sale" means a sale of building materials that will be
incorporated into real estate as part of a building project for which a
Certificate of Eligibility for Sales Tax Exemption (Exemption
Certificate) has been issued by the administrator of the enterprise
zone in which the building project is located. [35 ILCS 120/5k] During
this period, there is no requirement that the retailer from whom the materials
are purchased be located in a jurisdiction that created the enterprise zone
into which the materials will be incorporated; likewise, restrictions in the
enterprise zone ordinance in effect at the retailer's location do not apply to
purchases of building materials for incorporation into another enterprise zone.
The municipality or county that created the enterprise zone into which the
materials will be incorporated can limit the exemption by ordinance, except
that the ordinance may not require that the materials be purchased from any
class of retailers, and it may not prohibit the purchase being made from any
class of retailers. All "qualified sales" of building materials sold for
incorporation into any Illinois enterprise zone are eligible for the
exemption.
2) The Certificate of
Eligibility for Sales Tax Exemption must contain:
A) a statement that the building project
identified in the Certificate meets all of the requirements of the enterprise
zone ordinance of the jurisdiction in which the building project is
located;
B) the location or street
address of the building project that is the subject of the
Certificate;
C) the signature of
the administrator of the enterprise zone in which the building project is
located.
3)
Certification. A retailer claiming the exemption on and after August 6, 2002
through June 30, 2013, must have among its books and records:
A) a copy of the Certificate of Eligibility
for Sales Tax Exemption from the administrator of the enterprise zone into
which the materials will be incorporated; and
B) a certification from the purchaser of the
building materials containing the following:
i) a statement that the building materials
being purchased are being purchased for incorporation into real estate located
in an Illinois enterprise zone,
ii)
the location or address of that real estate,
iii) the name of the enterprise zone in which
that real estate is located,
iv) a
description of the building materials being purchased for incorporation into
that real estate,
v) the date of
the purchase, and
vi) the
purchaser's signature.
c) Issuance of Exemption Certificates for
Purchases Made on and after July 1, 2013
1)
On and after July 1, 2013, "qualified sale" means a sale of building
materials that will be incorporated into real estate as part of a building
project for which an Enterprise Zone Building Materials Exemption
Certificate (Exemption Certificate) has been issued to the
purchaser by the Department. A construction contractor or other entity shall
not make tax-free purchases unless it has an active Exemption Certificate
issued by the Department at the time of the purchase. [35 ILCS
120/5k(a) ] The exemption
allowed by this Section for the sale of building materials may be limited to
the extent authorized by ordinance by the municipality or county that created
the enterprise zone into which the building materials will be incorporated. The
ordinance, however, may neither require nor prohibit the purchase of building
materials from any retailer or class of retailers in order to qualify for the
exemption allowed under Section 5k of the Retailers' Occupation Tax
Act. [35 ILCS
120/5k(d) ]
2)
Upon request from an enterprise
zone administrator, the Department shall issue an Exemption Certificate for
each construction contractor or other entity identified by the enterprise zone
administrator. The Department shall make the Exemption Certificates available
directly to each enterprise zone administrator, construction contractor or
other entity.
A)
The request
for an Exemption Certificate from the enterprise zone administrator to the
Department must include the following information:
i)
the name, address,
telephone number and e-mail address of the construction contractor or
other entity;
ii)
the name and number of the enterprise zone;
iii)
the name and location or address
of the building project in the enterprise zone;
iv)
the estimated amount of the
exemption for each construction contractor or other entity for which a request
for Exemption Certificate is made, based on a stated estimated average tax rate
and the percentage of the contract that consists of materials;
v)
the period of time over
which supplies for the project are expected to be purchased;
and
vi)
theFEIN of the applicant.
B)
The Department shall issue an
Exemption Certificate within 3 business days after receipt of a request from
the zone administrator, unless the Department, for reasonable cause, is unable
to issue an Exemption Certificate within 3 business days. Examples of
"reasonable cause" include, but are not limited to, receipt of a request
lacking all the information required by subsection (c)(2)(A), the receipt of a
large number of requests for Exemption Certificates from a zone administrator,
or lack of sufficient staff to process the number of existing
requests.
C)
The Department
may refuse to issue an Exemption Certificate if the owner, any partner, or a
corporate officer, and in the case of a limited liability company, any manager
or member, of the construction contractor or other entity is or has been the
owner, a partner, a corporate officer, and in the case of a limited liability
company, a manager or member, of a person that is in default for moneys due to
the Department under this Act or any other tax or fee Act administered by the
Department.
D) The request
for an Exemption Certificate must be submitted electronically.
E)
An Exemption Certificate shall be
effective for no more than 2 years after the date of issuance. At the request
of a zone administrator, the Department may renew an Exemption
Certificate.
F)
After the Department issues an Exemption Certificate for a given
enterprise zone building project, an enterprise zone administrator may notify
the Department of additional construction contractors or other entities
eligible for Exemption Certificates. Upon notification by an enterprise zone
administrator, and subject to the other provisions of this subsection (c), the
Department shall issue an Exemption Certificate to each additional construction
contractor or other entity identified by the enterprise zone
administrator.
G)
An enterprise zone administrator may notify the Department to rescind
an Exemption Certificate previously issued by the Department but that has not
yet expired. Upon notification by the enterprise zone administrator, and
subject to the other provisions of this subsection (c), the
Department shall issue the rescission of the Exemption Certificate to the
construction contractor or other entity identified by the enterprise zone
administrator and provide a copy to the enterprise zone administrator.
[35 ILCS 120/5k]
3)
Notwithstanding anything to the contrary in this subsection
(c), for Enterprise Zone building projects already in existence and for
which construction contracts are already in place on July 1, 2013, the request
for Exemption Certificates from an enterprise zone administrator to the
Department for pre-existing construction contractors and other entities must
include the information required under subsection (c)(2)(A),
but need not include the information listed in subsections
(c)(2)(A)(iv) and (v). For any new construction contract entered into
on or after July 1, 2013, however, all of the information in
subsection (c) of this Section must be provided.
[35 ILCS
120/5k(a) ]
d) Documentation of the Exemption for
Purchases made on or after July 1, 2013
1)
On and after July 1, 2013, to document the exemption allowed under this
Section, the retailer must obtain from the purchaser the purchaser's Exemption
Certificate number issued by the Department, along with a copy of the
certification required by subsection (d)(2). [35 ILCS
120/5k(b) ] A construction
contractor or other entity shall not make tax-free purchases unless it has an
active Exemption Certificate issued by the Department at the time of
purchase. [35 ILCS
120/5k(a) ]
2)
The retailer must obtain a
certification from the purchaser that contains:
A)
a statement that the building
materials are being purchased for incorporation into real estate located in an
Illinois enterprise zone;
B)
the location or address of the
real estate into which the building materials will be
incorporated;
C)
the name of the enterprise zone in which that real estate is
located;
D)
a
description of the building materials being purchased;
E)
the purchaser's Exemption
Certificate number issued by the Department; and
F)
the purchaser's signature and date
of purchase [35 ILCS
120/5k(c)
].
3)
The retailer may comply with this subsection (d) certification requirement by
securing from the purchaser a completed and signed Form EZ-1.
e) Qualified Sales of Tangible
Personal Property. In order to qualify for the building materials exemption
under this Section, the materials being purchased must be building materials.
That is, they must be purchased for physical incorporation into real estate.
For example, gross receipts from sales of:
1)
common building materials such as lumber, bricks, cement, windows, doors,
insulation, roofing materials and sheet metal can qualify for the
exemption;
2) plumbing systems and
components thereof such as bathtubs, lavatories, sinks, faucets, garbage
disposals, water pumps, water heaters, water softeners and water pipes can
qualify for the exemption;
3)
heating systems and components thereof such as furnaces, ductwork, vents,
stokers, boilers, heating pipes and radiators can qualify for the
exemption;
4) electrical systems
and components thereof such as wiring, outlets and light fixtures that are
physically incorporated into the real estate can qualify for the
exemption;
5) central air
conditioning systems, ventilation systems and components thereof that are
physically incorporated into the real estate can qualify for the
exemption;
6) built-in cabinets and
other woodwork that are physically incorporated into the real estate can
qualify for the exemption;
7)
built-in appliances such as refrigerators, stoves, ovens and trash compactors
that are physically incorporated into the real estate can qualify for the
exemption;
8) floor coverings such
as tile, linoleum and carpeting that are glued or otherwise permanently affixed
to the real estate by use of tacks, staples, or wood stripping filled with
nails that protrude upward (sometimes referred to as "tacking strips" or
"tack-down strips") can qualify for the exemption.
f) Sales of Tangible Personal Property that
Do Not Qualify for the Exemption. Items that are not physically incorporated
into the real estate cannot qualify for the exemption. For example, gross
receipts from sales of:
1) tools, machinery,
equipment, fuel, forms and other items that may be used by a construction
contractor at an enterprise zone building site, but that are not physically
incorporated into the real estate, do not qualify for the exemption;
2) free-standing appliances such as stoves,
ovens, refrigerators, washing machines, portable ventilation units, window air
conditioning units, lamps, clothes washers, clothes dryers, trash compactors
and dishwashers that may be connected to and operate from a building's
electrical or plumbing system but which do not become a component of those
systems do not qualify for the exemption;
3) floor coverings that are area rugs or that
are attached to the structure using only two-sided tape do not qualify for the
exemption.
g) Penalties
- Revocation - Protest Procedures
1)
If the Department determines that a construction contractor or other
entity that was issued an Exemption Certificate under subsection (c) made a
tax-exempt purchase, as described in this Section, that was not eligible for
exemption under this Section, or allowed another person to make a tax-exempt
purchase, as described in this Section, that was not eligible for exemption
under this Section, then, in addition to any tax or other penalty imposed, the
construction contractor or other entity is subject to a penalty equal to the
tax that would have been paid by the retailer under the Act, including any
applicable local retailers' occupation tax on the purchase that was not
eligible for the exemption.
2)
Each contractor or other entity
that has been issued an Exemption Certificate under Section 5k of the
Retailers' Occupation Tax Act shall annually report to the Department the total
tax benefits for taxes imposed by the State that are received under Enterprise
Zone building materials exemption broken down by Enterprise Zone. Reports are
due no later than May 31 of each year and shall cover the previous calendar
year. Failure to report data may result in revocation of the Exemption
Certificate issued to the contractor or other entity. [20
ILCS 655/8.1 (a-5)].
3) Suspension of Exemption Certificate for
Failure to Report Data. A contractor or other entity that fails to comply with
the reporting requirements or deadlines provided in subsection (g)(2) shall
have the Exemption Certificate for which it failed to report suspended.
A) First Offense: A contractor or other
entity that fails to comply with the reporting requirements or deadlines
provided in subsection (g)(2) shall have the Exemption Certificate suspended
until the contractor or other entity complies with the reporting requirements
of subsection (g)(2).
B) Second
Offense: A contractor or other entity that fails to comply with the reporting
requirements or deadlines provided in subsection (g)(2) for two reporting
periods within a five-year period shall have all Exemption Certificates issued
to it suspended until 30 days after the contractor or other entity complies
with the reporting requirements of subsection (g)(2).
C) Subsequent Offenses: A contractor or other
entity that fails to comply with the reporting requirements or deadlines of
subsection (g)(2) for more than two reporting periods within a five-year period
shall have all Exemption Certificates issued to it suspended until 180 days
after the contractor or other entity complies with the reporting requirements
of subsection (g)(2).
4)
Suspension or Revocation of Exemption Certificate for Both Failure to Report
Data and Unlawful Use of Exemption Certificate. The Department shall suspend or
revoke the Exemption Certificate of a contractor or other entity found to have
both failed to comply with the reporting requirements of subsection (g)(2) and
to have used an Exemption Certificate in violation of subsection (g)(1), as
follows:
A) First Offense: In addition to all
other penalties provided by law, a first offense shall result in the suspension
of all Exemption Certificates issued to a contractor or other entity for 1
year.
B) Second Offense: In
addition to all other penalties provided by law, a second offense shall result
in permanent revocation of all Exemption Certificates issued to the contractor
or other entity.
5)
Ineligibility. A contractor or other entity is not eligible to receive
additional Exemption Certificates during the period that one or more Exemption
Certificates issued to it are subject to suspension or revocation.
6) Protest Procedures. Any person aggrieved
by any decision of the Department under subsections (g)(3) through (g)(4) may,
within 20 days after notice of the decision, protest and request a hearing,
whereupon the Department shall give notice to that person of the time and place
fixed for a hearing and shall hold a hearing and then issue its final
administrative decision in the matter to that person. In the absence of a
protest within 20 days, the Department's decision shall become final without
any further determination being made or notice given.
Notes
Amended at 27 Ill. Reg. 17216, effective November 3, 2003
AGENCY NOTE: Each of these transactions must exist independent of the other, and the exemption applicable to each transaction must be properly documented. These transactions must be reflected in the books and records of the qualified retailer.
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