Did a business qualify for Illinois's enterprise-zone Gas Use Tax exemption merely by being located in a certified zone, without separate job-creation certification?

Plain-English summary

A business only had to be located in an enterprise zone certified by the Illinois Department of Commerce and Economic Opportunity to claim the Gas Use Tax exemption described in this letter. The business itself did not need separate certification or the job-creation and retention certification the requester had found in other enterprise-zone utility guidance.

The company bought natural gas from out-of-state suppliers. Most gas was used in exempt production processes, while a smaller amount heated administrative and other nonproduction buildings. The Department explained that the enterprise-zone exemption applied to gas used by businesses located in a certified enterprise zone and excluded gas used for a residential purpose.

The exemption was limited to Gas Use Tax Law liability. It did not apply to liability under the Gas Revenue Tax Act.

What this means for you

For the 2011 rule, confirm that the business location was inside a certified enterprise zone and that the gas was not used residentially. Do not assume the same location-only standard applies to a different utility incentive or to Gas Revenue Tax.

Common questions

Q: Did the business itself need DCEO certification?
A: No. The letter says the business needed only to be located in a DCEO-certified enterprise zone.

Q: Did the exemption require the business to meet job-creation or retention criteria?
A: Not for the Gas Use Tax exemption described in this GIL.

Q: Did the exemption cover residential gas use or Gas Revenue Tax?
A: No. Residential use was excluded, and the exemption did not apply to the Gas Revenue Tax Act.

Subject

Gas Use Tax

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2011.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2011/st-11-0027.pdf

Original ruling text

ST 11-0027-GIL 04/06/2011 GAS USE TAX
This letter discusses the exemption under the Gas Use Tax Law for business enterprises
located in enterprise zones certified by the Department of Commerce and Economic
Opportunity. See 35 ILCS 173/5-50. (This is a GIL.)

April 6, 2011

Dear Xxxxx:
This letter is in response to your letter dated February 22, 2011, in which you request
information. The Department issues two types of letter rulings. Private Letter Rulings (“PLRs”) are
issued by the Department in response to specific taxpayer inquiries concerning the application of a
tax statute or rule to a particular fact situation. A PLR is binding on the Department, but only as to the
taxpayer who is the subject of the request for ruling and only to the extent the facts recited in the PLR
are correct and complete. Persons seeking PLRs must comply with the procedures for PLRs found in
the Department’s regulations at 2 Ill. Adm. Code 1200.110. The purpose of a General Information
Letter (“GIL”) is to direct taxpayers to Department regulations or other sources of information
regarding the topic about which they have inquired. A GIL is not a statement of Department policy
and is not binding on the Department. See 2 Ill. Adm. Code 1200.120. You may access our website
at www.tax.illinois.gov to review regulations, letter rulings and other types of information relevant to
your inquiry.
The nature of your inquiry and the information you have provided require that we respond with
a GIL. In your letter you have stated and made inquiry as follows:
The purpose of this letter is to obtain clarification of the allowable exemption available to
Illinois businesses located within an enterprise zone that purchase natural gas from out
of state [sic] suppliers. The exemption I am referring to is listed in the Allowable
Exemptions
found
at
the
IL
Dept
of
Revenue
website
http://tax.illinois.gov/Businesses/TaxInformation/Excise/gasuse.htm.
The Dept of
Revenue website lists the six allowable exemptions for Gas Use Tax as:
1.

2.

3.
4.
5.
6.

used by governmental bodies or entities operated and organized
exclusively for charitable, religious, or educational purposes who have
been issued a tax exemption identification number by IDOR
used in the production of electric energy. This does not include gas used
in the general maintenance or heating of an electric energy production
facility or other structures.
used in petroleum refinery operations.
used in liquefaction and fractionation processes that produce value-added
natural gas by-products for resale.
used in the production of anhydrous ammonia and downstream nitrogen
fertilizer products for resale.
used by a business located in an enterprise zone.

COMPANY purchases all of our natural gas from out of state [sic] suppliers. This
natural gas is almost entirely used in either the production of anhydrous ammonia or in
the liquefaction and fractionation processes that produce natural gas by-products for
resale and therefore exempt under #4 and #5 above. COMPANY does use a small
amount of natural gas for heating purposes in administrative and other buildings that are
not used for production purposes. We are questioning if we are required to pay gas use
tax on this natural gas used for heating purposes.
COMPANY is located within an enterprise zone, and therefore the natural gas used for
heating purposes appears to be exempt under #6 above (as would all the natural gas
we purchase). However when reviewing enterprise zone guidelines, they appear to
state that a business in an enterprise zone is only exempt from utility taxes if certain job
creation/retention criteria are met. COMPANY does not meet the job creation/retention
criteria.
We would appreciate clarification regarding whether the natural gas we purchase from
out of state [sic] vendors is exempt solely due to COMPANY being located in an
enterprise zone, or if additional job creation/retention criteria apply.

DEPARTMENT’S RESPONSE:
The Gas Use Tax Law imposes a tax on the privilege of using in this State gas obtained in a
purchase of out-of-state gas at the rate of 2.4 cents per therm or 5% of the purchase price for the
billing period, whichever is the lower rate. See 35 ILCS 173/5-10 and 86 Ill. Adm. Code 471.105.
Section 5-10 of the Gas Use Tax Law provides that the tax does not apply to gas used by business
enterprises certified under Section 9-222.1 of the Public Utilities Act to the extent of such exemption
and during the period of time specified by the Department of Commerce and Economic Opportunity.
One of the exemptions from Gas Use Tax provided in Section 5-50 of the Gas Use Tax Law is
for gas used by business enterprises located in an enterprise zone certified by the Department of
Commerce and Economic Opportunity pursuant to the Illinois Enterprise Zone Act. 35 ILCS 173/550. As the statutory language provides, the business enterprise need only be located in an enterprise
zone certified by the Department of Commerce and Economic Opportunity to claim the exemption.
The business itself does not need to be certified by the Department of Commerce and Economic
Opportunity. However, the use of gas by business enterprises under that exemption does not include
gas that is used for any residential purpose. See 86 Ill. Adm. Code 1471.125(a)(1). Please note that
this exemption is limited to the Gas Use Tax Law and does not apply to liabilities incurred under the
Gas Revenue Tax Act.
I hope this information is helpful. If you require additional information, please visit our website
at www.tax.illinois.gov or contact the Department’s Taxpayer Information Division at (217) 782-3336.
Very truly yours,

Richard S. Wolters
Associate Counsel
RSW:msk