I bought a semi-trailer that I'll pair with my truck leased to an interstate for-hire carrier -- does the trailer qualify for Illinois's rolling stock sales tax exemption, and how do I document it?

Plain-English summary

A small trucking company owner asked the Illinois Department of Revenue whether his recent purchase of a semi-trailer qualified for the "rolling stock" sales tax exemption. His company owns a semi-truck (tractor) that is leased to an interstate for-hire carrier, CARRIER, under a signed lease agreement -- the company itself doesn't hold its own USDOT/MC numbers, but CARRIER does. He'd just bought a semi-trailer meant to be paired with that tractor as a set, with a combined gross vehicle weight of 80,000 pounds, and both the tractor and trailer would be used more than 50% for interstate trucking for hire for over a year. He wanted a written answer on whether the trailer purchase was exempt.

The Department confirmed the trailer can qualify, subject to specific statutory tests. The rolling stock exemption (35 ILCS 120/2-5(13)) exempts from Retailers' Occupation Tax the sale of tangible personal property to owners, lessors, or shippers when that property is utilized by interstate carriers for hire as rolling stock moving in interstate commerce. For a motor vehicle or trailer specifically, 35 ILCS 120/2-51(d-5) spells out what "use as rolling stock moving in interstate commerce" requires:

1. The motor vehicle or trailer transports persons or property for hire;
2. The purchaser (the owner, lessor, or shipper claiming the exemption) certifies that the vehicle or trailer will be used, from the time of purchase and continuing through the statute-of-limitations period for a notice of tax liability, by an interstate carrier holding an active USDOT Number with the Carrier Operation listed as "Interstate" and the Operation Classification listed as "authorized for hire," "exempt for hire," or both; and
3. For motor vehicles, the gross vehicle weight rating must exceed 16,000 pounds.

If the item ever stops meeting these tests, tax becomes due on the selling price -- though with a reasonable depreciation allowance for the period during which it did qualify.

How to document it depends on who's driving the truck. If the purchaser himself will use the trailer as an interstate carrier, he needs his own active, qualifying USDOT Number. But here, since the trailer will instead be paired with a tractor already leased to CARRIER for interstate for-hire use, the purchaser may instead provide CARRIER's qualifying USDOT Number, identify CARRIER as the lessee, and provide a copy of the lease. A retailer who accepts, in good faith, a properly completed Form RUT-7 (Rolling Stock Certification for Motor Vehicles and Trailers) containing either the purchaser's or the purchaser's lessee's qualifying active USDOT Number satisfies the exemption requirements.

If tax was already paid in error, a refund path exists -- but it runs through the retailer. A retailer who has paid Retailers' Occupation Tax on a sale that was eligible for the rolling stock exemption may file a claim for credit or refund under 86 Ill. Adm. Code 130.1501. To do so, the retailer must first unconditionally refund the tax to the purchaser who paid it -- satisfied by providing an unconditional promissory note or irrevocable credit memorandum. The retailer isn't legally required to pursue this; it's a matter of business between the purchaser and the retailer.

What this means for you

For trucking owner-operators leasing equipment to interstate carriers

If you own a tractor or trailer that you lease to an interstate for-hire carrier rather than operate yourself, you don't need your own USDOT Number to claim the rolling stock exemption. You can instead rely on your lessee's active, qualifying USDOT Number -- provided you identify the lessee and hand over a copy of the lease. Make sure the lease and your usage plans actually support more than 50% interstate for-hire use, since that's central to the exemption.

For anyone who paid the tax and now wants a refund

If your retailer charged you Retailers' Occupation Tax on a rolling-stock-eligible trailer or tractor, you can't file the refund claim yourself -- only the retailer can, under 86 Ill. Adm. Code 130.1501, and only after unconditionally refunding the tax to you first. Since the retailer isn't required by law to do this, it comes down to a business conversation between you and the retailer, and you'll need to provide the retailer with the same documentation (USDOT Number, lessee identification, lease copy, or Form RUT-7) that would have supported the exemption at the time of sale.

For retailers selling trailers or motor vehicles for interstate for-hire use

Accepting a properly completed Form RUT-7 in good faith -- one that shows either the purchaser's or the purchaser's lessee's active, qualifying USDOT Number -- satisfies the exemption requirements on the sale. That protects the retailer's position even when the purchaser isn't the one driving the equipment in interstate commerce.

Common questions

Q: What if I lease the trailer to someone else's interstate operation instead of driving it myself?
A: That's fine. Under 35 ILCS 120/2-51(d-5), if you'll lease the trailer to another carrier for use as rolling stock moving in interstate commerce, you may provide that lessee's active, qualifying USDOT Number instead of your own, as long as you also identify the lessee and provide a copy of the lease.

Q: Does the 16,000-pound gross vehicle weight threshold apply to the trailer, or just the tractor?
A: The statute's text ties the gross-vehicle-weight-rating test to "motor vehicles." In this ruling, the combined tractor-and-trailer gross vehicle weight was 80,000 pounds -- well above that threshold either way -- so the point wasn't in dispute here.

Q: What happens if the trailer later fails the test?
A: If the trailer stops meeting the requirements of 35 ILCS 120/2-51(d-5) -- for example, it's no longer used for interstate for-hire transport, or the qualifying USDOT Number lapses -- tax becomes due on the selling price, with a reasonable depreciation allowance for the period during which the trailer did qualify for the exemption.

Q: What paperwork actually proves the exemption to the retailer at the time of sale?
A: Form RUT-7, Rolling Stock Certification for Motor Vehicles and Trailers. A retailer who accepts a properly completed Form RUT-7 in good faith, containing either the purchaser's or the purchaser's lessee's active, qualifying USDOT Number, satisfies the exemption requirements.

Citations and references

Statutes and regulations cited:

• 35 ILCS 120/2-5(13) (Retailers' Occupation Tax rolling stock exemption)
• 35 ILCS 120/2-51(d-5) (motor vehicle/trailer qualification test: for-hire use, active qualifying USDOT Number, and, for motor vehicles, gross vehicle weight rating exceeding 16,000 pounds)
• 86 Ill. Adm. Code 130.1501 (procedure for a retailer's claim for credit or refund of tax paid in error)

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2019.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2019/st19-0014-gil.pdf

Original ruling text

ST 19-0014-GIL 07/11/2019 ROLLING STOCK
Under the rolling stock exemption, the Retailers' Occupation Tax does not apply to sales to
owners, lessors, or shippers of tangible personal property that is utilized by interstate carriers
for hire for use as rolling stock moving in interstate commerce. See 35 ILCS 120/2-5(13).
(This is a GIL.)

July 11, 2019

Dear Xxxx:
This letter is in response to your letter dated March 16, 2019, 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:
RE: Official Ruling on Rolling Stock Sales Tax Exemption
I own the trucking company COMPANY. My company owns the semi-truck BRAND, MODEL.
My company operates over 50% interstate. My company doesn’t have own DOT/MC numbers,
but is a lessor to interstate carrier CARRIER (USDOT # ## MC###). We have the signed lease
agreement active.
Recently my company bought a semi-trailer, which is intended to be used as a set with the
above BRAND. The combined gross vehicle weight is 80,000lbs. Both, the tractor and the
trailer, will be used more than 50% on interstate trucking for hire for more than 1 year.
Does the purchase of the trailer qualify for sales tax exemption based on Rolling Stock?
Please provide the written answer on this matter.
DEPARTMENT’S RESPONSE:

ST 19-0014-GIL
Page 2

The Illinois Retailers' Occupation Tax Act imposes a tax upon persons engaged in this State in
the business of selling tangible personal property to purchasers for use or consumption. See 86 Ill.
Adm. Code 130.101. In Illinois, 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 rolling stock exemption, the Retailers' Occupation Tax does not apply to sales to
owners, lessors, or shippers of tangible personal property that is utilized by interstate carriers for hire
for use as rolling stock moving in interstate commerce. See 35 ILCS 120/2-5(13). For purposes of
this exemption, subsection (d-5) of Section 2-51 of the Retailers’ Occupation Tax Act (35 ILCS 120/251(d-5)) provides that “‘use as rolling stock moving in interstate commerce’ means that:
(1) the motor vehicle or trailer is used to transport persons or property for hire;
(2) [. . . ] the purchaser who is an owner, lessor, or shipper claiming the exemption
certifies that the motor vehicle or trailer will be utilized, from the time of purchase and
continuing through the statute of limitations for issuing a notice of tax liability under this Act, by
an interstate carrier or carriers for hire who hold, and are required by Federal Motor Carrier
Safety Administration regulations to hold, an active USDOT Number with the Carrier Operation
listed as “Interstate” and the Operation Classification listed as “authorized for hire”, “exempt for
hire”, or both “authorized for hire” and “exempt for hire” [. . .]; and
(3) for motor vehicles, the gross vehicle weight rating exceeds 16,000 pounds.
If an item ceases to meet requirements (1) through (3) under this subsection (d-5), then
the tax is imposed on the selling price, allowing for a reasonable depreciation for the period
during which the item qualified for the exemption.” See 35 ILCS 120/2-51(d-5).
When a person purchases a trailer that he or she will use as rolling tock moving in interstate
commerce, to document the exemption he or she must have an active USDOT Number with the
Carrier Operation listed as “Interstate” and the Operation Classification listed as “authorized for hire”,
“exempt for hire”, or both “authorized for hire” and “exempt for hire”. If the purchaser will, instead,
lease the trailer to another carrier for use as rolling stock moving in interstate commerce, the
purchaser may provide the lessee’s USDOT Number that meets these same criteria. In addition, the
purchaser must identify the lessee and provide a copy of the lease. A retailer who accepts a properly
completed “Form RUT-7 Rolling Stock Certification for Motor Vehicles and Trailers” in good faith that
contains either the purchaser’s or the purchaser’s lessee’s active USDOT Number meeting these
criteria satisfies the exemption requirements.
A retailer who has paid Retailers’ Occupation Tax on the sale of a trailer that is eligible for the
rolling stock exemption may file a claim for credit or refund of the tax paid in error. Refunds and
claims for credit are governed by the procedure explained at 86 Ill. Adm. 130.1501. In order to obtain
a credit, the retailer must first demonstrate that he unconditionally refunded the tax to the party from
whom he collected it (the purchaser). The retailer will be considered to have satisfied the
unconditional repayment requirement where it provides its purchaser with an instrument upon which
the purchaser can make a demand upon the retailer/claimant for payment of the tax recovered if the
claim is allowed. The retailer's provision of unconditional promissory notes or irrevocable credit
memoranda to its purchasers who paid tax in error would satisfy this requirement. Consequently, you
will have to approach the retailer about seeking a claim for credit. The retailer is not required by law to
seek a credit; this is a matter of business between you and him. If the retailer agrees to file a claim for

ST 19-0014-GIL
Page 3
credit, you will be required to provide him with the necessary documentation for the Rolling Stock
Exemption as described above.
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,

Samuel J. Moore
Associate Counsel
SJM:rkn