How did Illinois classify and tax towers, pylons, wall and interior signs, menu boards, neon tubing, and related installation fees?

Plain-English summary

A custom-sign company asked IDOR to classify towers, pylons, wall and interior signs, menu boards, directional signs, and neon tubing as tangible personal property or real estate. It also asked about tax on fabrication, installation, repairs, freight, surveys, engineering stamps, and permits.

IDOR declined to issue the requested Private Letter Ruling and did not classify any listed sign or fee. It said sign vendors could incur Retailers' Occupation Tax, Service Occupation Tax, or Use Tax depending on the facts of the sale.

The Department directed the company to Section 130.2155 for sign vendors, Section 140.101 for service transactions, and Sections 130.1940 and 130.2075 for construction contractors. It also stated that the Illinois State rate was 6.25% and local rates varied by jurisdiction.

What this means for you

No sign type in this letter received a categorical real-property or personal-property answer. Sign businesses must analyze fabrication, installation, repair, and permanent incorporation under the cited rules for each transaction.

Common questions

Did IDOR classify a bolted tower or embedded pylon? No.

Did custom fabrication make every sign a service transaction? The letter did not say that.

Which tax could apply? Retailers' Occupation Tax, Service Occupation Tax, or Use Tax, depending on the facts.

Citations and references

• 86 Ill. Adm. Code 130.2155 and 140.101.
• 86 Ill. Adm. Code 130.1940 and 130.2075.

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2016.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2016/st-16-0015-gil.pdf

Original ruling text

ST 16-0015-GIL 04/25/16 CONSTRUCTION CONTRACTORS
Persons who sell signs may incur a Retailers’ Occupation Tax, Service Occupation Tax or Use
Tax liability, depending upon the circumstances of the particular sale. See 86 Ill. Adm. Code
130.2155 (Tax Liability of Sign Vendors); 86 Ill. Adm. Code 140.101 (Basis and Rate of the
Service Occupation Tax); 86 Ill. Adm. Code 130.1940 (Construction Contractors and Real
Estate Developers) and 86 Ill. Adm. Code 130.2075 (Sales To Construction Contractors, Real
Estate Developers and Speculative Builders). (This is a GIL.)

April 25, 2016

Dear Xxxxx:
This letter is in response to your letter dated March 21, 2016 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:
Could you please forward me a Private Letter Rulings on whether (1). Towers and (2).
Pylons (3) Wall signs (4) Interior signs (5) Menu board (6) Directional sign (7) Neon
border tubing (8) Permit (9) Survey (10) Engineering Stamp would be considered Real
Property or Personal Tangible Property and clarification of how taxes are to be applied.
Factual Background
In general, ABC, is in the business of designing, making, installing, and servicing
custom signs. When a customer need[sic] a sign, ABC representative surveys the
installation site and determines what type of sign is needed. ABC has artists that
design the sign, once the customer accepts the proposal, ABC makes the sign from raw
materials at its facility either in COUNTRY 1 or in STATE 1, USA. Materials used in the
production of signs include, but are not limited to, plastic, aluminum, steel, lamps,
ballasts, transformers, neon, paint, bolts, screws, and vinyl. ABC sells and install[sic]
different types of signage: (1). Towers (2) Pylons. (3) Wall Signs (4) Interior signs (5)
Menu board (6) Directional sign (7) Neon border tubing.

There are various methods of installation depending on the type of signs. All of the
signs made by ABC are installed by sub-contractor. No signs are sold to any other
contractor, fabricator, wholesaler, or retailer. ABC does not keep an inventory of
completed product, because every sign is custom designed and produced.
When ABC contracts with a customer to provide custom made signs, it charges the
customer time and material that includes the sign itself, installation, freight, and if
there is “Survey”, “Engineering stamp fee”, is a professional fee is a passthrough fee that required from the city hall to secure permit and “Permit” fee is a
pass-through fee that the locality charges for a permit to erect a sign. The
customer is billed by ABC and makes no separate payment to the installer.
ABC performs services to signs, which may include repairs to broken or damaged parts,
replacement of burned out bulbs, neon repair, ballasts or transformer replacements,
cleaning/washing, or painting. ABC provides the labor and parts necessary to repair the
sign and bills the customer accordingly.
ABC makes, installs, and services many different types of signs with varying installation
methods. The most common types of signs and method of installation are as follows:
(1) Towers: are standalone structures that are not attached to buildings.
Towers are bolted into foundations and may be removed without being
damaged or damaging the real estate into which they are bolted.
(2) Advertising pylons: are free standing structures that may be bolted into a
foundations[sic] or embedded or cemented into the ground. In the latter
instance, the pylons may not be removed from real estate without being
damaged.
(3) Wall sign: A business sign attached parallel to the wall of a building. This
definition includes painted, individual letter, and cabinet signs located on the
outside of the building, whether located on a wall, mansard, awning, canopy,
or window. These signs are mounted by means of screws and bolts, and
removal would result in varying degrees of damage to the building fascia.
Additionally, individual letters may be mounted on a raceway that is used to
reduce the damage to building fascia, but may result in some damage.
(4) Neon border tubing: This is used to accent and illuminate building fascia and
is attach[sic] by means of bolts and screws around the perimeter of a building.
(5) Interior signs: Some examples of these are Wall mart interior signs which
mount on the walls showing product brand names, wall plaques, etc. This[sic]
signs can be mounted with bolts and screws or with adhesive tape. Damage
might or might not occur to the wall upon removal of the sign.
(6) Menu board: A sign associated with drive through windows and oriented
toward drive through window traffic. The usual installation method is to install
the sign in concrete base, although they are sometimes installed using anchor
bolt method.
(7) Neon border tubing: This is used to accent and illuminate building fascia and
is attached by means of bolts and screws around the perimeter of a building.

Issues

1. Whether signage bolted to a foundation should retain its character as
   “tangible personal property” and signage embedded in the ground should be
   constitute “real property” for Illinois Sales & Use Tax purposes?
2. What are the Illinois State and local sales and use tax consequences of the
   sale, installation and repair of the signage that qualifies as tangible personal
   property to ABC and its customers?
3. What are the Illinois State and local sales and use tax consequences of the
   sale, installation and repair of signage that qualifies as real estate to ABC
   and its customers?
   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 questions.
   Generally, the Retailers’ Occupation Tax rate and Use Tax rate imposed by the State of Illinois
   is 6.25%. See 86 Ill. Adm. Code 130.310. Unlike the State tax rate, local tax rates vary depending on
   the tax rate imposed by the local government in a particular jurisdiction. For local tax rates, see the
   Department’s Tax Rate Database and the Tax Rate Finder on the Department’s website at
   www.tax.illinois.gov. Once on the website, you will see on the left hand side a box entitled “Quick
   Links,” at the bottom of that box is a link entitled “Tax Rate Database.”
   Persons who sell signs may incur a Retailers’ Occupation Tax, Service Occupation Tax or Use
   Tax liability, depending upon the circumstances of the particular sale. See 86 Ill. Adm. Code
   130.2155 (Tax Liability of Sign Vendors); 86 Ill. Adm. Code 140.101 (Basis and Rate of the Service
   Occupation Tax); 86 Ill. Adm. Code 130.1940 (Construction Contractors and Real Estate Developers)
   and 86 Ill. Adm. Code 130.2075 (Sales To Construction Contractors, Real Estate Developers and
   Speculative Builders).
   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

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