Did grass seed, sod, trees, hydromulch, and fertilizer qualify for Illinois's enterprise-zone building-materials exemption?

Plain-English summary

A landscape, outdoor-lighting, irrigation, and nursery-products retailer received enterprise-zone exemption documents for grass seed, hydromulch, fertilizer, and other landscaping materials. A prior audit had allowed an irrigation system but disallowed similar landscape products.

IDOR said the building-materials exemption covered qualifying sales of materials incorporated into real estate through remodeling, rehabilitation, or new construction in an enterprise zone. The project needed a Certificate of Eligibility for Sales Tax Exemption from the enterprise-zone administrator.

Trees, shrubs, topsoil, sod, and grass seed generally qualified when physically and permanently transplanted or planted. Hydromulch and fertilizer did not qualify as building materials.

What this means for you

Not every product used on an enterprise-zone construction site was exempt. Permanent physical incorporation and the material's classification, together with valid project eligibility documentation, controlled.

Common questions

Did grass seed and sod qualify? Generally yes, when permanently planted.

Did hydromulch qualify? No.

Did fertilizer qualify? No.

Citations and references

• 86 Ill. Adm. Code 130.1951.

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2015.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2015/st-15-0009.pdf

Original ruling text

ST 15-0009-GIL 01/12/2015 ENTERPRISE ZONES
The enterprise zone building materials exemption is explained in Section 130.1951 of
the Department’s regulations. See 86 Ill. Adm. Code 130.1951. (This is a GIL.)

January 12, 2015

Dear Xxxx:
This letter is in response to your letter dated October 7, 2014, 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:
I am requesting a Private Letter Ruling, on behalf of COMPANY, account number #.
We are a retailer/wholesaler of landscape, outdoor lighting, irrigation and nursery
products and supplies.
Recently we were provided with a Building Materials Exemption Certificate, #, from
Priority Landscape. They also completed Form EZ-1 Building Material Exemption
Certification. They are requesting to be exempt from sales tax on grass seed,
hydromulch, fertilizer, and other miscellaneous landscape products.
What we would like to determine is if these products would qualify as "Building
Materials". In a previous audit, these types of products were disallowed, they did
allow the irrigation system, siting [sic] that it was physically connecting to the
building. But, our customer argues that these products will become a part of the
property.
I have enclosed the documentation that we were provided, along with a description
of the material they would like to purchase.
Thank you in advance for your assistance in this matter,

DEPARTMENT’S RESPONSE:
The Department’s regulation “Public Information, Rulemaking and Organization”
provides that “[w]hether to issue a private letter ruling in response to a letter ruling
request is within the discretion of the Department. The Department will respond to all
requests for private letter rulings either by issuance of a ruling or by a letter explaining
that the request for ruling will not be honored.” 2 Ill. Adm. Code 1200.110(a)(4). The
Department recently met and determined that it would decline to issue a Private Letter
Ruling in response to your request. We hope however, the following General
Information Letter will be helpful in addressing your question.
The Department’s regulation governing various enterprise zone exemptions is
found at 86 Ill. Adm. Code 130.1951. This regulation points out that this exemption
applies to qualified sales of building materials to be incorporated into real estate in an
enterprise zone 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.
Generally, landscape products such as trees, shrubs, topsoil, sod and grass
seed that are physically incorporated (permanently transplanted or planted) do qualify
as building materials and, thus, would qualify for the enterprise zone building materials
exemption. In contrast, though, landscape products such as hydromulch and fertilizer
do not qualify as building materials and would not qualify for the enterprise zone
building materials exemption.
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,

Debra M. Boggess
Associate Counsel
DMB:lkm