Does the July 1, 2019 expansion of Illinois's manufacturing machinery and equipment exemption cover propane fuel for forklifts, earplugs, protective gloves, quality-control gloves, and nitrogen used in a steel stamping press die?

Plain-English summary

A manufacturing company asked the Department to confirm, in writing, that five specific items used at its facility qualified for the manufacturing and assembling machinery and equipment exemption, following its July 1, 2019 expansion to cover "production related tangible personal property" (86 Ill. Adm. Code 130.330, 130.330(h)). The five items were: (1) propane used as fuel to power forklifts within production material handling; (2) earplugs required to be worn within the production facility, as protective apparel; (3) gloves required to be worn within the production facility, as protective apparel; (4) gloves required to be worn within the production facility to keep skin oils off steel, as a quality-control measure; and (5) nitrogen in a cylinder used in die assembly springs as part of die function in a steel stamping press.

The Department did not confirm or deny each item individually. Instead, it restated the general rule that took effect July 1, 2019: production-related tangible personal property is exempt if it is used or consumed in a production-related process by a manufacturer in a manufacturing facility where a manufacturing process takes place (or by a graphic arts producer in graphic arts production), or if it is used or consumed in research and development regardless of whether that R&D happens inside or outside a manufacturing or graphic arts production facility.

The Department's own general examples. The Department then listed examples of production-related property from its emergency regulations: (1) tangible personal property incorporated into real estate within a manufacturing facility for a production-related process; (2) supplies and consumables used in the manufacturing process, specifically naming fuels, coolants, solvents, oils, lubricants, and adhesives; (3) hand tools, protective apparel, and fire and safety equipment used or consumed within the manufacturing facility; and (4) property used or consumed in the facility for pre-production and post-production material handling, receiving, quality control, inventory control, storage, staging, and packing for shipping or transportation.

What the Department didn't do. The letter never says "yes, all five of your items qualify." It leaves the taxpayer to match its own facts to the general categories -- which do closely track the taxpayer's examples (fuel maps to category 2; protective-apparel earplugs and gloves map to category 3; and the skin-oil quality-control gloves map to category 4) -- but the nitrogen used in the stamping-press die is not addressed by name in the Department's list of examples.

What this means for you

Manufacturers evaluating fuel, PPE, or process-consumable purchases

The Department's response confirms that supplies and consumables used in the manufacturing process -- including fuels -- and protective apparel used within a manufacturing facility are the kinds of items the July 1, 2019 expansion was designed to reach. But this GIL does not itself grant exempt status to propane, earplugs, or gloves at any particular company; you still need to apply the general categories in 86 Ill. Adm. Code 130.330(h) to your own facts, and document how each item is used or consumed in a production-related process.

Businesses with items that don't map cleanly onto the Department's examples

The Department's four listed examples do not mention nitrogen or other pressurized gases used in press or die operation. If your item doesn't fall obviously within one of the four categories, this GIL by itself does not resolve the question -- consider requesting a Private Letter Ruling (PLR) under 2 Ill. Adm. Code 1200.110, which is binding on the Department for your specific facts, rather than relying on a GIL.

Tax professionals advising manufacturing clients

Because a GIL is not binding and does not constitute Department policy, don't treat this letter as authorizing exemption for any of the five listed items by name. Use it only to identify the general categories the Department applies, and advise clients to independently confirm exempt treatment for edge-case items (like process gases) through a PLR or other authoritative source.

Common questions

Q: Did the Department confirm that propane, earplugs, gloves, and nitrogen are all exempt?
A: No. The Department did not individually confirm or deny any of the five specific items. It restated the general rule and its own general examples of production-related tangible personal property, leaving the taxpayer to apply them to its own facts.

Q: What is "production related tangible personal property"?
A: Tangible personal property used or consumed in a production-related process by a manufacturer in a manufacturing facility where a manufacturing process takes place, or by a graphic arts producer in graphic arts production, or used or consumed in research and development regardless of location. See 86 Ill. Adm. Code 130.330(h).

Q: What examples did the Department give of production-related property?
A: (1) property incorporated into real estate within a manufacturing facility for a production-related process; (2) supplies and consumables used in the manufacturing process, including fuels, coolants, solvents, oils, lubricants, and adhesives; (3) hand tools, protective apparel, and fire and safety equipment used within the facility; and (4) property used for pre- and post-production material handling, receiving, quality control, inventory control, storage, staging, and packing for shipping.

Q: When did this exemption expansion take effect?
A: July 1, 2019, for production-related tangible personal property purchased on or after that date.

Q: Is this letter binding on the Department?
A: No. It is a General Information Letter (GIL), issued under 2 Ill. Adm. Code 1200.120. A GIL directs taxpayers to relevant regulations or other sources of information; it is not a statement of Department policy and is not binding. A binding determination requires a Private Letter Ruling (PLR) under 2 Ill. Adm. Code 1200.110.

Citations and references

Statutes cited:

• 86 Ill. Adm. Code 130.330 (manufacturing and assembling machinery and equipment exemption)
• 86 Ill. Adm. Code 130.330(h) (defines production related tangible personal property, effective July 1, 2019)

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/st19-0019-gil.pdf

Original ruling text

ST 19-0019-GIL 09/27/2019 MANUFACTURING MACHINERY & EQUIPMENT
Beginning on July 1, 2019, the manufacturing and assembling machinery and equipment
exemption includes production related tangible personal property purchased on or after July 1,
2019. See 86 Ill. Adm. Code 130.330. (This is a GIL).

September 27, 2019

Dear Xxxx:
This letter is in response to your letter dated September 25, 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:
In August, I called the Illinois Department of Revenue Sale [sic] Tax Division concerning the
Manufacturer Purchase Credit enacted July 1, 2019 to get more information and was told to write
this letter. The new law states that fuels, protective apparel, quality control etc. are now eligible
for this tax exemption. Within the manufacturing process at COMPANY, the following are
deemed as eligible for sales tax exemption with the new law.
Propane used as a fuel to power fork lifts within production material handling is exempt. Ear
Plugs required worn within a production facility considered protective apparel is exempt. Gloves
required worn within a production facility considered protective apparel is exempt. Gloves
required worn within a production facility to keep skin oils off of steel as quality control is exempt.
Nitrogen in a cylinder used in die assembly springs as part of die function in a steel stamping
press is exempt.
In writing, please confirm that the assessment of sales tax exemption is true for the above stated
reasons.
DEPARTMENT’S RESPONSE:
Beginning on July 1, 2019, the manufacturing and assembling machinery and equipment
exemption includes production related tangible personal property. Production related tangible personal
property means all tangible personal property used or consumed in a production related process by a

ST 19-0019-GIL
Page 2

manufacturer in a manufacturing facility in which a manufacturing process takes place or by a graphic
arts producer in graphic arts production. Production related tangible personal property also means all
tangible personal property that is used or consumed in research and development regardless of use
within or without a manufacturing or graphic arts production facility. 86 Ill. Adm. Code 130.330(h).
The Department recently filed emergency regulations that incorporate production related
tangible personal property into the manufacturing and assembling machinery and equipment exemption
which can be found on the Department’s website and became effective upon filing. The Department
included examples of items that the Department considered to be production related. For example, the
Department provided that the following tangible personal property would be considered production
related: (1) tangible personal property purchased by a manufacturer for incorporation into real estate
within a manufacturing facility for use in a production related process; or tangible personal property
purchased by a construction contractor for incorporation into real estate within a manufacturing facility
for use in a production related process; (2) supplies and consumables used in a manufacturing process
in a manufacturing facility, including fuels, coolants, solvents, oils, lubricants, and adhesives; (3) hand
tools, protective apparel, and fire and safety equipment used or consumed within a manufacturing
facility; and (4) tangible personal property used or consumed in a manufacturing facility for purposes of
pre-production and post-production material handling, receiving, quality control, inventory control,
storage, staging, and packing for shipping or transportation.
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
DMB:ter