Do the materials a company buys to build a natural gas-fired power generation facility qualify for Illinois's Enterprise Zone building materials sales tax exemption?

Plain-English summary

This Private Letter Ruling addresses whether the wide range of materials used to build a large natural gas-fired power generation facility can qualify for Illinois's Enterprise Zone building materials exemption. The taxpayer, referred to only as "Company," owned land and was developing a 1,000 megawatt, natural gas-fired, combined-cycle power generation facility intended solely to supply electricity to the utility power grid. Company was working with county officials to expand an existing enterprise zone to include the Facility's location, and once that expansion occurred, it planned to obtain Enterprise Zone Building Materials Exemption Certificates for itself and its contractors.

Under the Enterprise Zone building materials exemption (35 ILCS 120/5k), a retailer who makes a "qualified sale" of building materials that will be incorporated into real estate located in an enterprise zone -- through remodeling, rehabilitation, or new construction -- can deduct those receipts when calculating Retailers' Occupation Tax. A "qualified sale" requires that the materials be part of a building project for which an Enterprise Zone Building Materials Exemption Certificate has been issued to the purchaser. The Department's regulation, 86 Ill. Adm. Code 130.1951(e), further requires that the property purchased be "building materials," meaning items purchased for physical incorporation into real estate.

Company grouped its materials into three categories to make its case. Group I consisted of core power-generation systems -- turbines, generators, heat recovery steam generators, air-cooled condensers, fire protection systems, water pumps, boilers, large tanks, major electrical equipment, instrumentation, air compressors, and pollution control facilities -- each of which would be anchor-bolted to concrete or welded/bolted to other permanently affixed structures, with piping hardpiped and electrical connections hardwired. Group II consisted of buildings housing the equipment (including a 100-ton bridge crane permanently mounted inside one building), and Group III consisted of piping, valves, cabling, structural steel, and repair/replacement parts used throughout the Facility.

The Department applied its long-standing "intention test" for determining whether property is permanently affixed to realty: (1) the item must be physically affixed to the realty, (2) it must be applied to the use or purpose for which the realty is put, and (3) the intent of the person affixing it must be examined, with an eye toward whether the item is essential to that use. The Department noted this same question -- whether materials for an electric generating facility qualify for the building materials exemption -- had already been addressed in numerous prior PLRs going back to 1999, each time finding that permanently affixed generation equipment, piping, cabling, and transformers qualified.

Reviewing Company's item-by-item description of how each material would be affixed (bolted, welded, hardpiped, or hardwired to a concrete-anchored structure) and its stated intent that the materials remain permanently dedicated to power generation, the Department ruled that all of the listed Materials Categories qualify as "building materials to be incorporated into real estate" for purposes of the Section 5k exemption. The ruling is conditioned on the Facility actually being located within an enterprise zone and Company holding a valid Exemption Certificate at the time of purchase, and it will expire ten years from the date of the letter or sooner if the law or facts change.

What this means for you

If you are building an industrial or power facility in an enterprise zone

Materials that will be permanently and physically incorporated into your facility -- not just delivered on-site -- can qualify for the Enterprise Zone building materials exemption, even highly specialized industrial equipment like turbines, boilers, and generators, as long as they are truly affixed to the realty (bolted, welded, hardpiped, or hardwired) and essential to the facility's use. The exemption is not limited to conventional building materials like lumber or drywall.

Certificates and timing matter

The exemption only applies to "qualified sales": the property must sit within a properly established or expanded enterprise zone, and the purchaser (or its contractors) must have obtained an Enterprise Zone Building Materials Exemption Certificate from the Department before or at the time the materials are purchased. Buying materials before the zone expansion is finalized or before certificates are issued would not qualify.

The affixation analysis is item-by-item and fact-specific

The Department repeatedly stressed that qualification is determined on an item-by-item basis using the three-factor intention test. Simply calling something "equipment" instead of "building materials" doesn't disqualify it -- what matters is documented proof of how each item is physically attached to the realty (anchor-bolted, welded, hardpiped, hardwired) and whether it's essential to the property's dedicated use. Keeping engineering diagrams and a detailed materials exhibit, as Company did here, strengthens a similar request.

Common questions

Does the Enterprise Zone exemption only cover typical construction materials like lumber and concrete?
No. The Department found that specialized industrial equipment -- turbines, generators, boilers, tanks, and control systems -- can also qualify as "building materials to be incorporated into real estate," as long as the items are permanently affixed to the realty and essential to the facility's dedicated use.

What test does the Department use to decide if an item is "affixed" to real estate?
It uses a three-factor "intention test": (1) whether the item is physically affixed to the realty, (2) whether it is applied to the use or purpose for which the realty is put, and (3) the intent of the person affixing it, with particular attention to whether the item is essential to that use.

Do I need an Exemption Certificate before buying the materials?
Yes. To make a "qualified sale," the purchase must be part of a building project for which an Enterprise Zone Building Materials Exemption Certificate has already been issued to the purchaser by the Department.

Does this ruling apply to any company building a similar facility?
No. As a Private Letter Ruling, it binds the Department only with respect to the specific taxpayer who requested it, and only to the extent the facts described in the request are correct and complete. Other taxpayers cannot rely on it directly, though it illustrates how the Department applies the exemption.

How long does this ruling remain valid?
The ruling is revoked and ceases to bind the Department ten years after the date of the letter (September 14, 2017), or earlier if there is a pertinent change in statutory law, case law, rules, or in the facts on which the ruling was based.

Citations and references

• 35 ILCS 120/2 -- imposes the Retailers' Occupation Tax on persons selling tangible personal property at retail
• 35 ILCS 120/2-10 -- measures the Retailers' Occupation Tax by the retailer's gross receipts
• 35 ILCS 120/5k -- the Enterprise Zone building materials exemption, allowing a deduction for qualified sales of building materials incorporated into real estate in an enterprise zone
• 86 Ill. Adm. Code 130.101 -- general Retailers' Occupation Tax regulation
• 86 Ill. Adm. Code 130.1951 -- Department regulation implementing the Enterprise Zone building materials exemption, including the definition of "qualified sale" and examples of qualifying building materials (subsections (c)(2), (d)(1), (d)(2), and (e))
• 86 Ill. Adm. Code 150.101 -- Use Tax regulation on the privilege of using tangible personal property purchased at retail
• 2 Ill. Adm. Code 1200.110 -- governs Private Letter Ruling procedures, binding effect, and expiration
• 2 Ill. Adm. Code 1200.120 -- governs General Information Letters, which are non-binding
• Prior PLRs and GILs cited by the Department as precedent: ST 08-0003-PLR, ST 05-0016, ST-04-0105, ST-01-0141, ST-00-0156, ST-96-0138, ST 99-0009, ST 00-0013, ST 00-0025, ST 00-0026, ST 00-0033, ST 00-0034, ST 01-0001, ST 01-0012, ST 01-0014, ST 01-0040, ST 01-0045, ST 02-0012, ST 05-0020

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2017.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2017/st-17-0009-plr.pdf

Original ruling text

ST 17-0009-PLR 09/14/2017 ENTERPRISE ZONES
Under the Enterprise Zone building materials exemption, a deduction from Illinois Retailers’
Occupation Tax liability exists for gross receipts from retail sales of 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.
(See 35 ILCS 120/5k and 86 Ill. Adm. Code 130.1951(e).) (This is a PLR.)

September 14, 2017

Re:

Private Letter Ruling Request
Retailers’ Occupation Tax and Use Tax
COMPANY

Dear Xxxxx:
This letter is in response to your letter dated June 5, 2017 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.
Review of your request disclosed that all the information described in paragraphs 1 through 8
of Section 1200.110 appears to be contained in your request. This Private Letter Ruling will bind the
Department only with respect to COMPANY, for the issue or issues presented in this ruling, and is
subject to the provisions of subsection (e) of Section 1200.110 governing expiration of Private Letter
Rulings. Issuance of this ruling is conditioned upon the understanding that neither COMPANY, nor a
related taxpayer is currently under audit or involved in litigation concerning the issues that are the
subject of this ruling request. In your letter you have stated and made inquiry as follows:
On behalf of our client, COMPANY (“Company”), we respectfully request the Illinois
Department of Revenue issue a Private Letter Ruling pursuant to 2 Ill. Adm. Code Sec.
1200.110 with respect to the following factual situation and ruling requested below.
General Information

ST 17-0009-PLR
Page 2

1. Enclosed please find an original Form Il-2848 Power of Attorney, authorizing
   FIRM(“FIRM”) to represent Company before the Illinois Department of Revenue (the
   ‘Department’) and obtain a Private Letter Ruling.
2. This Private Letter Ruling (‘PLR’) is not requested with regard to hypothetical or
   alternative proposed transactions. The PLR is requested to determine the state and
   local Retailer’s Occupation Tax and Use Tax consequences of the actual business
   practices of the Company.
3. Company is not currently engaged in litigation with the Department in regard to this
   or any other tax matter.
4. Company is not currently under audit by the Department in regard to any tax matter.
5. The Company has not previously requested the Department to issue a Private Letter
   Ruling on this matter.
6. The Company requests that certain information be deleted from the PLR prior to
   dissemination to others. The Company requests that its name, address, location of
   its plant, enterprise zone name and the name of its representative be deleted. If,
   and to the extent, permissible, Company also requests the exclusion/deletion of the
   detailed Materials Exhibit and plant facility diagrams from any published ruling
   document.
7. The Company knows of no authority contrary to the authorities referred to and cited
   below.
   Statement of Facts
8. Company is the owner of a parcel of land located in CITY, Illinois (COUNTY).
9. Company is proceeding with the development of the land to build and operate a
   1,000 megawatt, natural gas-fired, combined-cycle, power generation facility (the
   “Facility’) for supply of electricity to the utility power grid.
   3.

The generation of electricity is the sole purpose for which Facility and land is
dedicated.

4. Each of the listed materials (see #8 below) is critical to the Facility’s design and
   process and is integral and dedicated to Facility.
5. Company is entering into contracts to purchase and permanently incorporate
   materials into the power generation facility.
6. Company will contract with suppliers to directly procure certain materials.
7. Company will contract with a construction contractor to engineer, procure and
   construct the Facility, including installation and construction of all materials directly
   procured by Company.

ST 17-0009-PLR
Page 3

8. A complete listing of the materials that are the subject of this request is included in
   the enclosed Materials Exhibit, which includes explanations of the description and or
   function of the materials and the manner of affixation to real estate. Also enclosed,
   is a diagram of the plant design overlayed upon the land with some Materials
   Categories labeled for additional context.
   9 Each material and/or component is intended to be permanently affixed to the real
   estate, and is being specifically designed, fabricated and constructed for exclusive,
   permanent, physical incorporation into the facility for purposes of generating
   electricity.
   10 Company has been working with officials from COUNTY to provide for the expansion
   of the NAME Enterprise Zone currently located in COUNTY to include Company’s
   Facility.
9. Upon the expansion of the enterprise zone noted in #10 above, Company will submit
   the information required by 86 Ill. Adm. Code 130.1951(c)(2)(A) to the Enterprise
   Zone Administrator and request that the Administrator seek Exemption Certificates
   from the Department for Company and its Contractors as provided in 86 Ill. Adm.
   Code 130.1951(c)(2).
10. The negotiation of procurement and construction contracts is on-going.
    Ruling Requested
    The materials, including all listed components (as represented in summary by the
    Materials Categories that follow and in detail in the enclosed Materials Exhibit) and
    considering the manner of affixation to realty as indicated in the Materials Exhibit, are
    “building materials to be incorporated into real estate” for purposes of the exemption
    provided in 35 ILCS 120/5k (the “EZ Exemption”).
    Materials Categories
    A. Power Generation Equipment (natural gas and steam turbines, electric
    generator)
    B. Heat Recovery Steam Generator
    C. Air Cooled Condenser
    D. Fire Protection System
    E. Water Pumps – Various Systems
    F. Closed Cooling Water System
    G. Auxiliary Boiler
    H. Large Field Erected Tanks
    I. Building (Power Generation Equipment)
    J. Control/Admin/Warehouse Building
    K. Chemical Feed & Electrical Equipment Building
    L. Piping Materials
    M. Valves and Specialties
    N. Major Electrical – Generated Power & Facility Source Power
    O. Electrical – Balance of Plant
    P. Instrumentation and Controls

ST 17-0009-PLR
Page 4
Q. Air Compressors and Dryers
R. Structural Steel Materials
S. Pollution Control Facilities – Other
T. Repair and Replacement Materials (for all of the above Materials
Categories)
We note and understand that, for the EZ Exemption to apply, “building materials to be
incorporated into real estate” must be, at the time of purchase, purchased in a
“qualifying sale” and, therefore, part of a building project for which an Enterprise Zone
Building Materials Exemption Certificate has been issued to the purchaser by the
Department (see 35 ILCS 120/5k(a)-(b)).
Statement of Authorities Supporting Taxpayer’s Views
The Illinois Retailers’ Occupation Tax (“ROT”) Act imposes a tax on persons engaged in
the business of making retail sales of tangible personal property. 35ILCS 120/2. The
ROT is measured by the retailer’s gross receipts. 35ILCS 120/2-10. Pursuant to
Section 5k of the ROT Act, “[e]ach retailer who makes a qualified sale 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, may deduct receipts from such sales when
calculating the tax imposed by the [ROT Act].” 35 ILCS 120/5K(a) [sic]. “[O]n and after
July 1, 2013, ‘qualified sale’ means a sale of building materials that will be incorporated
into real estate as part of a building project for which an Enterprise Zone Building
Materials Exemption Certificate has been issued to the purchaser by the Department.”
35 ILCS 120/5K [sic].
The Illinois Regulations provide, in order to qualify for the Enterprise Zone exemption
the materials being purchased must be “building materials,” i.e., the materials must be
purchased for physical incorporation into real estate. 86 Ill. Adm. Code 130.1951(e).
The Regulation also provides several examples, including common building materials,
plumbing heating, electrical, central air conditioning systems and related components
(see 86 Ill. Adm. Code 130.1951(e)(1)-(5)).
In Private Letter Ruling ST 08-0003-PLR, involving a request similar to Company’s
request, the Department outlined the inquiry that must be made in order to determine
whether materials are permanently affixed to real estate:
The Department has invoked the intention test in the context of letter
rulings concerning construction contractors (see Private Letter Ruling ST
05-0016 (October 7, 2005) and General Information Letters ST-04-0105
(July 1, 2004), ST-01-0141 (July 27, 2001), ST-00-0156 (July 27, 2000)
and ST-96-0138 (March 13, 1996)). General Information Letter ST 000156 sets forth the intention test as follows: “In determining whether an
item is permanently affixed to real estate, a very fact-specific inquiry must
be made regarding whether the item is intended to remain with the realty.
In order to make a finding that the item is permanently affixed, at least
three factors must generally be examined. First, the item must be affixed
to the realty. The item must also be applied to the use or purpose to

ST 17-0009-PLR
Page 5
which the realty is put. Finally, the intent of the person affixing the item
must be examined. Another factor often examined is whether the item is
essential to the use to which the real estate has been put.”
The Department also advised:
Generally, the determination of whether an item qualifies for the
exemption must be made on an item-by-item basis. ST 08-0003-PLR.
Available authority does not specifically define what qualifies as “affixed to realty”.
Department rulings have focused on the permanency and immovable nature of
materials upon affixation and incorporation into real estate. ST 08-0003-PLR, ST010040-PLR. Examples of “affixed” materials include embedding materials in concrete,
anchor bolting materials directly to concrete, and bolting or welding materials to
components or steel, building or other structures that are embedded in or bolted to
concrete. See ST 08-0003-PLR, ST-01-0040-PLR. Integrating materials and/or
components into facilities, structures or systems through hardwired electrical or
hardpiped plumbing (for chemicals, gas, steam, water) are other examples affixing
materials to realty. See ST 08-0003-PLR, ST-01-0040-PLR.
Analysis
Materials Group 1
The following “Group 1” Materials Categories consist of the primary power generation
facility systems that are essential to plant operations:
A. Power Generation Equipment (natural gas and steam turbines, electric
generator)
B. Heat Recovery Steam Generator
C. Air Cooled Condenser
D. Fire Protection System
E. Water Pumps – Various Systems
F. Closed Cooling Water System
G. Auxiliary Boiler
H. Large Field Erected Tanks
N. Major Electrical – Generated Power & Facility Source Power
P. Instrumentation and Controls
Q. Air Compressors and Dryers
S. Pollution Control Facilities – Other
Company intends Group 1 materials (as represented by the preceding Materials
Categories) to be permanently dedicated and affixed to the facility and physically
incorporated into the real estate. As noted above, the generation of electricity is the
sole purpose for which the land and Facility is dedicated. Each of the above systems
are essential and integral to the operations of Facility.
Company’s contractors will permanently affix each component material to the real
estate. Each material component, as explained in detail in the Materials Exhibit, will be

ST 17-0009-PLR
Page 6
either (i) directly anchor bolted to a concrete foundation, or (ii) will be permanently
bolted or welded to another component, steel framing, or a housing or building structure
that is anchor bolted to a concrete foundation. All piping interconnecting the various
systems for water, steam, gas, and chemicals, will be hardpiped to each applicable
system component (welded or flanged as required). All electrical connections are
hardwired and permanently fastened. As a result of the manner of affixing the materials
to the real estate, and aligned with Company’s intentions and the dedicated use of the
real estate, the Group 1 materials will be permanently incorporated into real estate and
immovable.
Materials Group II
The following “Group II” Materials Categories consist of buildings, which house major
facility components and personnel and storage operations, and are essential to plant
operations:
I. Building (Power Generation Equipment)
J. Control/Admin/Warehouse Building
K. Chemical Feed & Electrical Equipment Building

Company intends to permanently incorporate the Group II buildings and related
infrastructure materials into the real estate and dedicate the buildings to Facility’s power
generation operations. As noted above, the generation of electricity is the sole purpose
for which the land and Facility is dedicated. The buildings provide shelter and support
structure to key systems components and operations and are, therefore, essential and
integral to the power generation operations. Building and related infrastructure
materials are clear examples of “building materials to be incorporated into real estate”
as indicated in the Department’s Regulation, 86 Ill Adm. Code Sec. 130.1951(e)(1)-(5).
Company’s contractors will construct the buildings, including installation of prefabricated components, and permanently affix materials to the real estate or to other
permanently affixed materials (as detailed in the Materials Exhibit). Within the power
generation building (and dedicated to the operations herein), a 100-ton Bridge Crane
(see Materials Exhibit, Component 112 for additional detail) is permanently mounted to
steel support columns and beans (anchor bolted to the building’s concrete foundation),
affixed to the building structure for additional support and hardwired to electrical power
sources. As a result of the manner of affixing the materials to the real estate, and
aligned with Company’s intentions and the dedicated use of the real estate, the Group II
materials (buildings and related infrastructure, including the Bridge Crane) are
permanently incorporated into real estate and are immovable.
Materials Group III
The following “Group III” Materials Categories consist of various materials (e.g.,
communications cable, electric cable, electric panelboards, conduit, pipe, hangers,
valves, structural steel, anchor bolts, component materials repair or replacement parts
(See Materials Exhibit for complete listing and details)) used throughout Facility in

ST 17-0009-PLR
Page 7
conjunction with various materials components and processes and are essential to plant
operations:
L. Piping Materials
M. Valves and Specialties
O. Electrical – Balance of Plant
R. Structural Steel Materials
T. Repair and Replacement Materials (for all Materials Categories)

Company intends Group III Materials Categories to be permanently dedicated and
affixed to the power generation facility and physically incorporated into the real estate.
As noted above, the generation of electricity is the sole purpose for which the land and
Facility is dedicated. Each of the above materials are essential and integral to the
operations of Facility.
Company’s contractors will permanently affix each component to the real estate as
indicated in the following examples (see Materials Exhibit for full listing and manner of
affixation). Pipe materials and valves, for example, are hardpiped (welded or flanged)
to various permanently affixed materials components throughout Facility and installed
underground or hanger-mounted above ground to building, steel frames or systems
component structures. Electric and communication cable is run through conduit or trays
above and below ground (above-ground conduit is also permanently fastened to such
support structures). Structural steel is needed throughout the plant to create support
framing and infrastructure and is welded or bolted to structures or material components
or anchor-bolted to concrete throughout the plant as needed. Repair and replacement
materials (excluding any consumable maintenance items) are ordered and or
inventoried as necessary to keep the plant operational. Such repair and replacement
materials shall be affixed and incorporated into the facility in the same manner as the
original installation. As a result of the manner of affixing the materials to the real estate,
and aligned with Company’s intentions and the dedicated use of the real estate, the
Group III materials are permanently incorporated into real estate and are immovable.
Conclusion
Company’s Materials Categories and components thereof (as detailed in the Materials
Exhibit and as analyzed above in Materials Groups I – III) are intended to be
permanently affixed and incorporated into real estate and fully dedicated to the use for
which the real estate is put, i.e., generation of electricity. Company’s contractors will
permanently affix the materials and material components to real estate hereby
rendering the materials immovable and further showing Company’s intent for the
materials to remain with the real estate. Therefore, the Materials Categories and
components thereof qualify as “building materials to be incorporated into real estate” for
purposes of the EZ Exemption. Accordingly, we respectfully request the Department
issue the Ruling Requested above.
If the Department is unable to issue the Requested Ruling based upon the information
provided in this request, we request that the Department contact me at (XXX)XXXXXXX to determine what additional information is required or allow the taxpayer to

ST 17-0009-PLR
Page 8
rescind this ruling request.
request.

Thank you, in advance, for your consideration of this

DEPARTMENT’S RESPONSE:
The Retailers' Occupation Tax Act imposes a tax upon persons engaged in this State in the
business of selling tangible personal property at retail to purchasers for use or consumption. See 86
Ill. Adm. Code 130.101. Use Tax is imposed on the privilege of using, in this State, any kind of
tangible personal property that is purchased anywhere at retail from a retailer. See 86 Ill. Adm. Code
150.101. These taxes comprise what is commonly known as “sales tax” in Illinois.
Under the Enterprise Zone building materials exemption, a deduction from Illinois Retailers’
Occupation Tax liability exists for gross receipts from retail sales of building materials that will be
incorporated into real estate located in an enterprise zone established by a county or municipality
under the Illinois Enterprise Zone Act by remodeling, rehabilitation or new construction. 35 ILCS
120/5k. All “qualified sales” of building materials sold for incorporation into any Illinois enterprise
zone are eligible for the deduction. 86 Ill. Adm. Code 130.1951(d)(1). A “qualified sale” means a sale
of building materials: a) for incorporation into real estate in an Illinois enterprise zone, b) as part of a
building project, c) for which a Certificate of Eligibility for sales tax exemption has been issued, d) by
the administrator of the enterprise zone in which the project is located. 86 Ill. Adm. Code
130.1951(d)(2). In order to qualify for the deduction, the materials being purchased must be building
materials. 86 Ill. Adm. Code 130.1951(e).
The Department’s regulation at 86 Ill. Adm. Code 130.1951(e) provides examples of qualifying
building materials. The enterprise zone exemption includes component parts of building materials
that are permanently affixed to realty. While the examples in the Department’s regulation reflect more
conventional buildings, the fundamental concept of the building materials exemption is that, to qualify,
provided that the other requirements of the regulation are met, the materials at issue must also be
physically incorporated into real estate.
The Department has invoked the intention test in the context of letter rulings concerning
construction contractors. ST 08-0003-PLR (April 1, 2008) identifies a number of letters invoking the
test. ST 00-0156 sets forth the intention test as follows:
“In determining whether an item is permanently affixed to real estate, a very fact-specific
inquiry must be made regarding whether the item is intended to remain with the realty.
In order to make a finding that the item is permanently affixed, at least three factors
must generally be examined. First, the item must be affixed to the realty. The item must
also be applied to the use or purpose to which the realty is put. Finally, the intent of the
person affixing the item must be examined. Another factor often examined is whether
the item is essential to the use to which the real estate has been put.”
In your written request and the attachments, you have described each item of tangible personal
property, explained the functions of the items, and described how each item is permanently affixed to
the real estate.

ST 17-0009-PLR
Page 9
The specific question of whether the materials used in constructing an electric generating
facility qualify for the building materials exemption under 35 ILCS 120/5k of the Retailers’ Occupation
Tax has been addressed in numerous private letter rulings issued by the Department in recent years.
In Private Letter Ruling ST 99-0009 (March 9, 1999) the Department ruled that pipe racks, pipe,
supports, and piping tie-ins installed at a natural gas fired power plant qualified for the exemption
because they were permanently affixed to real estate. In Private Letter Ruling ST 00-0013 (July 7,
2000) the Department found that certain materials incorporated into realty within an electricity
generating facility qualified for the exemption. The Department found that turbine generators,
electrical transformers, electrical cabling, piping and other materials that are permanently affixed to
real estate qualified for the exemption in 35 ILCS 120/5k and 86 1ll. Adm. Code Sec. 1951(a)(1).
Thereafter, the Department has consistently ruled that these materials qualified for the exemption if it
was demonstrated that they were permanently affixed to the real estate (see, for example, Private
Letter Rulings ST 00-0025 (October 19, 2000), ST 00-0026 (November 3, 2000), ST 00-0033
(December 11, 2000), ST 00-0034 (December 11, 2000), ST 01-0001 (January 9, 2001), ST 01-0012
(April 5, 2001), ST 01-0014 (April 9, 2001), ST 01-0040 (September 24, 2001), ST 01-0045 (October
26, 2001), ST 02-0012 (June 10, 2002), ST 05-0020 (November 18, 2005) and ST 08-0003 (April 1,
2008).
Generally, the determination of whether an item qualifies for the exemption must be made on
an item-by-item basis. The Department has reviewed each of the items identified in the request, 86
Ill. Adm. Code 130.1951, and its prior letters issued within the last 10 years. Based on its review it is
the Department’s determination that the items would qualify for the building materials in Section 5k of
the Retailers’ Occupation Tax Act.
To qualify for the exemption the property must be located within an enterprise zone and the
Company must possess an Exemption Certificate at the time the building materials are purchased.
The factual representations upon which this ruling is based are subject to review by the
Department during the course of any audit, investigation, or hearing and this ruling shall bind the
Department only if the factual representations recited in this ruling are correct and complete. This
Private Letter Ruling is revoked and will cease to bind the Department 10 years after the date of this
letter under the provisions of 2 Ill. Adm. Code 1200.110(e) or earlier if there is a pertinent change in
statutory law, case law, rules or in the factual representations recited in this ruling.
I hope this information is helpful. If you have further questions concerning this Private Letter
Ruling, you may contact me at (217) 782-2844. If you have further questions related to the Illinois
sales tax laws, 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
Chairman, Private Letter Ruling Committee
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