§ 3-85 — Manufacturer's Purchase Credit

Illinois § 3-85

• Jurisdiction: Illinois
• Topic: GOVERNMENT
• Ch. 35: REVENUE
• Act 35 ILCS 105/: Use Tax Act.

Text

For purchases of machinery and equipment made on and after January 1, 1995 through June 30, 2003, and on and after September 1, 2004 through August 30, 2014, a purchaser of manufacturing machinery and equipment that qualifies for the exemption provided by paragraph (18) of Section 3-5 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 and through June 30, 2003, and on and after September 1, 2004 through August 30, 2014, a purchaser of graphic arts machinery and equipment that qualifies for the exemption provided by paragraph (6) 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 purchases of manufacturing machinery and equipment or 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 2-30 of the Retailers' Occupation Tax Act. Beginning July 1, 1996, all references in this Section to manufacturers or manufacturing shall also be deemed to 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 manufacturing machinery and equipment or graphic arts machinery and equipment if the exemptions provided by paragraph (6) or paragraph (18) of Section 3-5 of this Act had not been applicable. 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) Manufacturer's Purchase Credit earned prior to July 1, 2003. This subsection (a) applies to Manufacturer's Purchase Credit earned prior to July 1, 2003. A purchaser of production related tangible personal property desiring to use the Manufacturer's Purchase Credit shall certify to the seller prior to October 1, 2003 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 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 provided by the manufacturer or graphic arts producer prior to October 1, 2003 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. A Manufacturer's Purchase Credit reported on any original or amended return filed under this Act after October 20, 2003 shall be disallowed. 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, prior to October 1, 2003, 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, prior to October 1, 2003, 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 all credit utilized by a construction contractor. No Manufacturer's Purchase Credit earned prior to July 1, 2003 may be used after October 1, 2003. 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 by 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 preproduction 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 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, prior to October 1, 2003, to satisfy the tax arising either from the purchase of machinery and equipment on or after January 1, 1995 for which the exemption provided by paragraph (18) of Section 3-5 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 (6) 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, prior to October 1, 2003, 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 and is used prior to October 1, 2003, 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. No Manufacturer's Purchase Credit may be used after September 30, 2003 regardless of when that credit was earned. 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 or after June 30, 2004. 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, until October 1, 2003, 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 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. No Manufacturer's Purchase Credit may be used after September 30, 2003 to satisfy any tax liability imposed under this Act, including any audit liability. (b) Manufacturer's Purchase Credit earned on and after September 1, 2004. This subsection (b) applies to Manufacturer's Purchase Credit earned on and after September 1, 2004. Manufacturer's Purchase Credit earned on or after September 1, 2004 may only be used to satisfy the Use Tax or Service Use Tax liability incurred on production related tangible personal property purchased on or after September 1, 2004. 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 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 provided 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, on or after September 1, 2004, 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 all 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, made on or after September 1, 2004, of production related tangible personal property (including purchases by a manufacturer, by a graphic arts producer, or by 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 preproduction 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 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 September 1, 2004 for which the exemption provided by paragraph (18) of Section 3-5 of this Act was erroneously claimed, or the purchase of machinery and equipment on or after September 1, 2004 for which the exemption provided by paragraph (6) 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 that is purchased on or after September 1, 2004 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 on and after September 1, 2004 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 and is used 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. 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. 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 production related tangible personal property purchased on or after September 1, 2004. 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 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.

Legislative History

(Source: P.A. 96-116, eff. 7-31-09.)