What records did an Illinois retailer need to support the enterprise-zone building-materials exemption?

Plain-English summary

IDOR explained the records a retailer needed to claim the enterprise-zone building-materials deduction. The exemption covered qualifying building materials that would be physically incorporated into real estate through remodeling, rehabilitation, or new construction in an Illinois enterprise zone.

The retailer had to keep both of these documents:

1. A Certificate of Eligibility for Sales Tax Exemption issued by the administrator of the enterprise zone. It had to identify the project and location, state that the project met the zone ordinance, and carry the administrator's signature.
2. A purchaser certification stating that the materials were for incorporation into enterprise-zone real estate and listing the address, enterprise-zone name, materials, purchase date, and purchaser's signature.

With proper documentation and absent fraud or collusion, IDOR said it would look to the purchaser for tax if the purchaser had improperly claimed the exemption.

The item also had to be a true building material. Tile, linoleum, and carpeting permanently affixed with glue, tacks, staples, or tack strips could qualify. Area rugs and floor coverings attached only with two-sided tape did not because they were not physically incorporated into the real estate. The deduction applied to state and local sales taxes on qualifying materials.

Common questions

Was a letter from the village enough by itself? No. The retailer needed the enterprise-zone administrator's eligibility certificate and the purchaser's separate certification.

Could all flooring qualify? No. Permanently affixed flooring could qualify; area rugs and flooring held only with two-sided tape did not.

Who bore the tax if a documented purchaser claimed the exemption improperly? Absent fraud or collusion, IDOR said it would look to the purchaser.

Citations and references

• 35 ILCS 120/5k
• 86 Ill. Adm. Code 130.1951(d), (e)(8), and (f)(3)

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2013.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2013/st-13-0007.pdf

Original ruling text

ST 13-0007-GIL 02/05/2013 ENTERPRISE ZONES
This letter describes the documentation required to document the Enterprise Zone
building materials exemption. 35 ILCS 120/5k and 86 Ill. Adm. Code 130.1951(e).
(This is a GIL.)
February 5, 2013
Dear:
This letter is in response to your letter dated December 11, 2012, 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:
We would like to verify if our customer COMPANY1 could use the letter from VILLAGE
to be exempt from Illinois sales tax. We billed COMPANY1 but the end user is
COMPANY2.
Attached are copies [sic] our invoice and letter COMPANY1 had provided to us.
We appreciate your written advise [sic] in this regard.
DEPARTMENT’S RESPONSE:
A deduction from Illinois Retailers’ Occupation Tax liability is allowed for gross receipts from retail
sales of building materials that will be incorporated, by remodeling, rehabilitation or new construction,
into real estate located in an enterprise zone established by a county or municipality under the Illinois
Enterprise Zone Act. 35 ILCS 120/5k.
The Department’s regulation governing various enterprise zone exemptions is found at 86 Ill. Adm.
Code 130.1951. Subsection (d) of this regulation explains the current requirements for persons
claiming the enterprise zone building materials exemption. This exemption applies to qualified sales
of building materials to be incorporated into real estate in an enterprise zone established by a county
or municipality under the Illinois Enterprise Zone Act by remodeling, rehabilitation or new
construction. A “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 has
been issued by the administrator of the enterprise zone in which the building project is located.
Retailers claiming the deduction must obtain two specific documents from the purchaser in order to
properly claim the exemption:

ST 13-0007-GIL
February 5, 2013
Page 2

1.

Prior to making a purchase of qualifying building materials, a purchaser must obtain a
Certificate of Eligibility for Sales Tax Exemption from the administrator of the enterprise
zone into which the materials will be incorporated. The Certificate of Eligibility for Sales
Tax Exemption must contain 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; the location or street address of the
building project that is the subject of the Certificate; and the signature of the
administrator of the enterprise zone in which the building project is located.

2.

In addition to the Certificate of Eligibility for Sales Tax Exemption, a purchaser must
prepare a certification that contains the following items:
a.
b.
c.
d.
e.
f.

a statement that the building materials being purchased are being purchased for
incorporation into real estate located in an Illinois enterprise zone;
the location or address of that real estate;
the name of the enterprise zone in which that real estate is located;
a description of the building materials being purchased for incorporation into that
real estate;
the date of the purchase; and
the purchaser's signature.

A retailer claiming the deduction must have both the Certificate of Eligibility for Sales Tax Exemption
and the purchaser’s certificate among its books and records in order to document the exemption.
Provided that the retailer has properly documented the exemption (and absent any fraud or collusion),
if the Department should discover that the purchaser has improperly claimed the exemption, it will
look to the purchaser for payment of tax.
The enterprise zone building materials exemption from sales tax applies to both state and local sales
taxes on qualifying building materials. In order to qualify for the deduction, 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 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 deduction. Section 130.1951(e)(8). Items that are not
physically incorporated into the real estate cannot qualify for the deduction. For example, gross
receipts from sales of floor coverings that are area rugs or that are attached to the structure using
only two-sided tape do not qualify for the deduction. Section 130.1951(f)(3).
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