Could drainage culverts, pavement concrete and steel, and buried utility lines qualify for Illinois's enterprise-zone building-materials exemption?

Plain-English summary

A requester asked whether infrastructure in an industrial subdivision—including drainage culverts, pavement concrete and steel, and buried utility lines—qualified for Illinois's enterprise-zone program.

The exemption covered retail sales of building materials physically incorporated through construction, remodeling, or rehabilitation into real estate in an enterprise zone. IDOR said the listed infrastructure might qualify if permanently affixed to enterprise-zone real estate, but it could not decide without more information.

For purchases on or after July 1, 2013, the purchaser had to hold an active Department-issued Exemption Certificate when buying the materials. The retailer had to obtain the purchaser's certificate number and the required certification, which could be documented with a completed and signed Form EZ-1.

What this means for you

Infrastructure is not excluded merely because it serves a subdivision rather than a building. The key factual question is permanent physical incorporation into qualifying real estate, backed by an active certificate and retailer documentation at the time of purchase.

Common questions

Did IDOR conclusively exempt the listed infrastructure? No. It said the materials may qualify if permanently affixed.

Could a contractor buy tax-free without an active certificate? No.

Citations and references

• 35 ILCS 120/5k.
• 86 Ill. Adm. Code 130.1951(d) and (e).
• Form EZ-1.

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-16-0036-gil.pdf

Original ruling text

ST 16-0036-GIL 08/18/2016

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.)

August 18, 2016

Dear Xxxxx:
This letter is in response to your letter dated July 8, 2016, in which you requested 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:
Per the enclosed email, I’m requesting a general letter ruling regarding the following
Enterprise Zone question:
In an industrial subdivision, will infrastructure, such as drainage culverts, concrete and
steel for pavement, buried utility lines, etc, qualify for the Enterprise Zone Program.
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 recently updated its Enterprise Zone rule regarding the building materials exemption.
See subsection (d) of 86 Ill. Adm. Code 130.1951, Sales of Building Materials Incorporated into Real
Estate within Enterprise Zones. On and after July 1, 2013, to document the exemption, the retailer
must obtain from the purchaser the purchaser's Exemption Certificate number issued by the
Department, along with a copy of the certification required by subsection (d)(2) of the rule. The
retailer may comply with this certification requirement by securing from the purchaser a completed

and signed Form EZ-1. A construction contractor or other entity may not make tax-free purchases
unless it has an active Exemption Certificate issued by the Department at the time of purchase.
In order to qualify for the building materials exemption, 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 common building materials such as lumber, bricks, cement,
windows, doors, insulation, roofing materials and sheet metal; plumbing systems and components
thereof; heating systems and components thereof; electrical systems and components thereof;
central air conditioning systems; built-in cabinets and appliances; and floor coverings such as tile,
linoleum and carpeting that are glued or otherwise permanently affixed to the real estate can qualify
for the exemption. 86 Ill. Adm. Code 1951(e).
Without more information we cannot advise if the infrastructure you describe would qualify for the
exemption. However, drainage culverts, concrete and steel for pavement, and buried utility lines may
qualify for the exemption if they are permanently affixed to real estate in an enterprise zone.
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:bkl