Does the Illinois manufacturing machinery and equipment exemption cover the welding gases (argon, helium, and O2) a metal fabricator uses in its MIG/TIG welding process?

Plain-English summary

A metal fabrication company located in the Illinois Industrial Corridor asked the Illinois Department of Revenue whether the gases it uses in its welding process could qualify for the state's manufacturing machinery and equipment exemption. The company described itself as a full-service metal fabricator working with stainless steel, aluminum, and carbon steel alloys, performing cutting, forming, rolling, joining, finishing, and assembly. Its welding methods, MIG and TIG, combine welding wire with specially mixed gases — argon, helium, and O2 — to melt the wire and metal together to form a weld.

The Department responded that gases generally are not exempt under the manufacturing machinery and equipment exemption, citing 86 Ill. Adm. Code 130.330(c). This answer specifically corrected an earlier General Information Letter, ST 11-0021-GIL (April 1, 2011), which the taxpayer had cited as support for exempting its gases. On September 29, 2016, the Department issued a correction (ST 16-0042-GIL) stating that the 2011 letter had contained an incorrect statement, and that gases are not generally exempt under the regulation.

Because this is a General Information Letter (GIL) rather than a binding Private Letter Ruling (PLR), it does not resolve the taxpayer's specific gases with binding force. The Department told the company that if it wanted a binding determination on whether its particular welding gases qualify for the exemption, it would need to submit a formal PLR request under 2 Ill. Adm. Code 1200.110.

What this means for you

If you buy consumable gases for manufacturing

Don't assume gases used in welding, cutting, or similar production processes are automatically exempt from Illinois sales/use tax under the manufacturing machinery and equipment exemption. This letter shows the Department's general position is that gases do not qualify, even though an older letter (later corrected) had suggested otherwise. Relying on outdated guidance can create tax exposure.

If you want a definitive, binding answer

A GIL like this one is informational only — it directs you to the relevant regulation but is not binding on the Department. If your business needs certainty about whether a specific gas or consumable qualifies for exemption, you must request a Private Letter Ruling under 2 Ill. Adm. Code 1200.110, which is binding as to your specific, correctly and completely stated facts.

Common questions

Are welding gases (argon, helium, O2) exempt from Illinois sales/use tax as manufacturing machinery and equipment?
Generally, no. The Department stated that gases generally are not exempt under the manufacturing machinery and equipment exemption found at 86 Ill. Adm. Code 130.330(c).

Didn't an earlier Illinois letter say gases used in manufacturing are exempt?
An earlier GIL, ST 11-0021-GIL (2011), had language the taxpayer read as exempting gases consumed in a manufacturing process. The Department corrected that letter on September 29, 2016 (ST 16-0042-GIL), clarifying that the earlier statement was incorrect.

What's the difference between this GIL and a binding ruling?
A General Information Letter (GIL) directs a taxpayer to relevant regulations but is not a statement of Department policy and is not binding, per 2 Ill. Adm. Code 1200.120. A Private Letter Ruling (PLR), requested under 2 Ill. Adm. Code 1200.110, is binding on the Department as to the requesting taxpayer, but only to the extent the facts stated are correct and complete.

How can this manufacturer get a binding answer about its specific gases?
The Department told the company it could submit a PLR request under 2 Ill. Adm. Code 1200.110 to obtain a binding determination on whether its identified welding gases qualify for the exemption.

Citations and references

• 86 Ill. Adm. Code 130.330(c) — governs the manufacturing machinery and equipment exemption and its treatment of gases
• 2 Ill. Adm. Code 1200.110 — procedures for requesting a binding Private Letter Ruling (PLR)
• 2 Ill. Adm. Code 1200.120 — defines and governs General Information Letters (GILs), which are non-binding
• ST 11-0021-GIL (April 1, 2011) — earlier General Information Letter referenced by the taxpayer, later corrected
• ST 16-0042-GIL (September 29, 2016) — Department's correction of ST 11-0021-GIL, clarifying that gases are not generally exempt

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-17-0016-gil.pdf

Original ruling text

ST 17-0016-GIL 06/02/2017

MANUFACTURING MACHINERY AND EQUIPEMENT

Gases generally are not exempt under the manufacturing machinery and equipment
exemption. See 86 Ill. Adm. Code 130.330(c). (This is a GIL.)

June 2, 2017

Dear Xxxxx:
This letter is in response to your letter dated April 24, 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.
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:
COMPANY, a manufacturer, is in the center of the Illinois Industrial Corridor, on 5 acres
of land. We have 40,000 square feet of production space, with doors that are 22 feet
wide and 16 feet high.
A Steel Fabricator would not completely define us, because that would suggest we were
limited to just steel. That would not be true.
We also work with;
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Stainless steel fabrication, and all of the different alloys that this material comes
in.
Aluminum fabrication, and all the different alloys that this material comes in.
Carbon steel fabrication, and Carbon Steel Alloy fabrication.
COMPANY is involved in all aspects of the Fabrication of Metals;
Metal Cutting
Metal Forming, and Rolling
Metal Joining
Metal Finishing
Fabricated Metal and Machinery Assembly

ST 17-0016-GIL
Page 2

COMPANY specializes in Industrial Metal Fabrication, but we are also involved in some
Structural Metal Fabrication, Architectural Metal Fabrication, Metal Art Fabrication, and
Repair Maintenance Welding.
The welding methods COMPANY uses are MIG and TIG welding, which combining
welding wire fed from welding gun (or feed by hand with TIG) & mixed with specially
mixed gases, with combinations of argon, helium, & 02. The wire and gas melt &
combine to form the welds on our manufactured project. The gas acts on the wire along
with heat to combine & form the weld which hold metal together.
We would appreciate an exemption on our specific gases. I refer to letter ruling on you
Illinois.gov Website.
ST11-0021-GIL 04/01/2011 Manufacturing Machinery &
Equipment.
Please refer to consumable material, were it states, “Please note that the rules also
specifically Exempt gases that are consumed in a manufacturing process”.
We are requesting a letter of exemption for our welding gases.

DEPARTMENT’S RESPONSE:
On September 29, 2016, the Department issued a correction to ST 11-0021 (April 1, 2011)
stating that the General Information Letter contained an incorrect statement and gases are not
generally exempt under 86 Ill. Adm. Code 130.330(c). See ST 16-0042-GIL.
If you would like to obtain a binding letter regarding whether or not the gases identified in your
letter qualify for the exemption, you may submit a private letter ruling request in accordance with 2 Ill.
Adm. Code 1200.110.
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

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