Does Illinois sales/use tax exemption for aircraft maintenance parts still require the seller or repairer to hold an FAA Air Agency Certificate and operate a Part 145 repair station?

Plain-English summary

A company representative (identified only as NAME/COMPANY) wrote to the Illinois Department of Revenue with a follow-up question about the sales tax exemption for aircraft maintenance parts. The company's sales tax software vendor treated repair parts as non-taxable by default, and the requester wanted to know whether sellers of those parts should be collecting exemption certificates, and specifically whether the exemption's FAA-related qualification requirements applied to Part 91 operators whose aircraft technicians hold FAA A&P certificates -- as opposed to requiring the technician's business to be a full FAA-certified repair station.

The Department's response explains that Illinois "sales tax" is really two taxes: the Retailers' Occupation Tax (imposed on retailers selling tangible personal property at retail, 86 Ill. Adm. Code 130.101) and the Use Tax (imposed on the privilege of using property purchased at retail, 86 Ill. Adm. Code 150.101). Both taxes have historically exempted materials, parts, equipment, components, and furnishings incorporated into an aircraft as part of its modification, refurbishment, completion, replacement, repair, or maintenance -- but only when sold to a person who (i) holds an Air Agency Certificate and is empowered to operate an approved FAA repair station, (ii) has a Class IV Rating, and (iii) conducts operations under Part 145 of the Federal Aviation Regulations (35 ILCS 120/2-5(40); see also 35 ILCS 105/3-5(35) and 86 Ill. Adm. Code 130.120(rr)). The exemption excludes aircraft operated by commercial air carriers providing scheduled passenger service under FAA Part 121 or Part 129.

The Department then flagged the key legal development driving the question: Public Act 103-0009 amends this exemption effective January 1, 2024. The amendment (1) extends the exemption's sunset date from December 31, 2024 to December 31, 2029; (2) expands the covered activity to include "the modification, replacement, repair, and maintenance of aircraft engines or power plants" (previously the exemption covered the airframe/aircraft generally but not engines specifically); and (3) removes the requirement that the person claiming the exemption hold an Air Agency Certificate/repair-station authorization, have a Class IV Rating, or operate under Part 145 -- the exemption applies "without regard to" those FAA qualifications starting January 1, 2024. The Department also noted the exemption's legislative history: it was first enacted (effective 2010) to help Illinois aircraft-refurbishment facilities compete with similar out-of-state facilities (citing statements by Senator Clayborne on S.B. 450, 96th Gen. Assem.), and was narrowed in August 2013 by Public Act 98-0534 to add the FAA-qualification requirements that Public Act 103-0009 now removes.

What this means for you

Aircraft parts sellers and their exemption-certificate practices

Before January 1, 2024, a seller could only treat a sale of qualifying aircraft parts/materials as exempt if the buyer met all three FAA-related criteria (Air Agency Certificate/repair-station authorization, Class IV Rating, and Part 145 operations). Starting January 1, 2024, those three qualifications are no longer required -- the exemption for parts used in aircraft modification, refurbishment, completion, replacement, repair, or maintenance applies regardless of whether the buyer holds them. Sellers should update exemption-certificate practices to reflect that the FAA-credential gate is gone, though the underlying activity (aircraft modification/refurbishment/repair/maintenance) must still qualify.

Aircraft maintenance and repair businesses, including Part 91 operators

The letter is responsive to a question about whether Part 91 operators (private, non-commercial aircraft operations) with technicians holding FAA A&P certificates -- but not full repair-station status -- can buy exempt parts. The Department's answer, in substance, is that after January 1, 2024, the FAA repair-station/Class IV/Part 145 gate no longer applies at all, which removes the distinction the requester was asking about. The GIL does not, however, expressly confirm how the exemption applied to Part 91/A&P-only technicians during 2023, before the amendment took effect; for that earlier period, the pre-2024 three-part FAA test set out in the letter would have governed.

Accountants and tax professionals

Track the exemption's statutory home across two parallel provisions: 35 ILCS 120/2-5(40) under the Retailers' Occupation Tax Act and 35 ILCS 105/3-5(35) under the Use Tax Act, both interpreted through 86 Ill. Adm. Code 130.120(rr). Also track the sunset date change -- Public Act 103-0009 pushed the exemption's expiration from December 31, 2024 to December 31, 2029 -- so this is not a permanent exemption and will need to be revisited again as that date approaches. Because this is a GIL, it is not binding on the Department and does not resolve any particular taxpayer's facts; a business wanting a binding answer on its own transactions would need to request a PLR.

Common questions

Q: Do sellers of aircraft parts still need to verify the buyer holds an FAA Air Agency Certificate and Class IV Rating before treating the sale as exempt?
A: Not as of January 1, 2024. Public Act 103-0009 removed those requirements (along with the Part 145 operations requirement) from the exemption in 35 ILCS 120/2-5(40); the exemption now applies without regard to whether the buyer holds them.

Q: What changed about which aircraft components qualify for the exemption?
A: Effective January 1, 2024, the exemption expands to cover "the modification, replacement, repair, and maintenance of aircraft engines or power plants," in addition to the airframe-related materials, parts, equipment, components, and furnishings it already covered.

Q: Is this exemption permanent?
A: No. It currently runs through December 31, 2029, per Public Act 103-0009's extension of the prior December 31, 2024 sunset date. The exemption does not apply to aircraft operated by commercial air carriers providing scheduled passenger service under FAA Part 121 or Part 129.

Q: Why was this exemption originally enacted?
A: The Department's letter notes it was first enacted to help Illinois facilities that refurbish aircraft compete with similar refurbishment facilities in neighboring states, citing legislative statements on S.B. 450 (96th General Assembly, 2009).

Citations and references

Statutes:

• 35 ILCS 120/2-5(40) (Retailers' Occupation Tax Act aircraft parts/maintenance exemption, as amended by P.A. 103-0009 effective 1/1/2024)
• 35 ILCS 105/3-5(35) (parallel Use Tax Act exemption)

Regulations:

• 86 Ill. Adm. Code 130.101 (Retailers' Occupation Tax imposition)
• 86 Ill. Adm. Code 150.101 (Use Tax imposition)
• 86 Ill. Adm. Code 130.120(rr) (aircraft parts exemption regulation)

Legislative history cited:

• S.B. 450, 96th Gen. Assem., 35th Reg. Sess. (Ill. 2009) (original enactment, statements of Senator Clayborne)
• Public Act 98-0534 (Aug. 2013) (added FAA-qualification requirements)
• Public Act 103-0009 (removed FAA-qualification requirements, added engines/power plants, extended sunset to 12/31/2029, effective 1/1/2024)

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2023.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2023/st23-0021-gil.pdf

Original ruling text

ST-23-0021-GIL 07/05/2023 MISCELLANEOUS
Beginning January 1, 2024, the exemption for materials, parts, equipment,
components, and furnishings incorporated into or upon an aircraft as part of the
modification, refurbishment, completion, replacement, repair, or maintenance of
the aircraft is expanded to include aircraft engines and power plants and no
longer requires persons claiming the exemption to (i) hold an Air Agency
Certificate and be empowered to operate an approved repair station by the
Federal Aviation Administration, (ii) have a Class IV Rating, and (iii) conduct
operations in accordance with Part 145 of the Federal Aviation Regulations. See
35 ILCS 120/2-5(40). (This is a GIL.)
July 05, 2023

NAME
ADDRESS
Dear NAME:
This letter is in response to your letter dated June 7, 2023, 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:

I am following up on a question I had last month.
COMPANY, our sales tax provider stands by their default setting that parts
used for repair are not taxable in IL. Should sellers of parts be getting an
exemption certificate? What if parts are sold to certified technicians
working for PART 91 operator?
I am writing to get more clarity on the criteria needed for a sales tax
exemption on aircraft parts.
Does the below pertain to a PART
91operators who have aircraft technicians who are FAA A&P Certificate

COMPANY/ NAME
Page 2
July 5, 2023
holders? Is the intent of the law to exempt aircraft parts that are sold for
repair to FAA approved technicians with the qualifications or does it need
to be a repair station?
The exemption applies only to the use of qualifying tangible personal
property by persons who modify, refurbish, complete, repair, replace, or
maintain aircraft and who meet each of the following criteria:
•
The person holds an Air Agency Certificate and is empowered to
operate an approved repair station by the Federal Aviation
Administration.
•
The person must have a Class IV Rating.
•
The person must conduct operations in accordance with Part 145 of
the Federal Aviation Regulations.
I appreciate any guidance and assistance
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.
Both the Retailers’ Occupation Tax Act and the Use Tax Act provide for specific
exemptions for the sale and use of certain tangible personal property.
Beginning January 1, 2010 and continuing through December 31, 2024,
materials, parts, equipment, components, and furnishings incorporated
into or upon an aircraft as part of the modification, refurbishment,
completion, replacement, repair, or maintenance of the aircraft. . . . This
exemption applies only to the sale of qualifying tangible personal property
to persons who modify, refurbish, complete, repair, replace, or maintain
aircraft and who (i) hold an Air Agency Certificate and are empowered to
operate an approved repair station by the Federal Aviation Administration,
(ii) have a Class IV Rating, and (iii) conduct operations in accordance with
Part 145 of the Federal Aviation Regulations. The exemption does not
include aircraft operated by a commercial air carrier providing scheduled
passenger air service pursuant to authority issued under Part 121 or Part
129 of the Federal Aviation Regulations.
35 ILCS 120/2-5(40). See also 35 ILCS 105/3-5(35) and 86 Ill. Adm.
Code 130.120(rr).

COMPANY/ NAME
Page 3
July 5, 2023
The legislative history of this aircraft maintenance exemption as provided in the
Retailers’ Occupation Tax and Use Tax demonstrates it was first enacted to assist
facilities in Illinois that refurbish aircraft to compete with similar facilities in neighboring
states. S.B. 450, 96th Gen. Assem., 35th Reg. Sess. 188-90 (Ill. 2009) (statements
made by Senator Clayborne). Additionally, in August 2013, Public Act 98-0534 was
enacted to amend this exemption to provide that the exemption applied only to “the sale
of qualifying tangible personal property to persons who modify, refurbish, complete,
repair, replace, or maintain aircraft” and who also meet the requirements of (i)-(iii),
which includes the requirement that the person must be empowered to operate an
approved repair station by the Federal Aviation Administration.
Please note that Public Act 103-0009 amends this exemption effective January 1,
2024, by extending the exemption to December 31, 2029, expanding it to include “the
modification, replacement, repair, and maintenance of aircraft engines or power plants,
and providing that the exemption applies without regard to whether or not those
claiming the exemption (i) hold an Air Agency Certificate and are empowered to operate
an approved repair station by the Federal Aviation Administration, (ii) have a Class IV
Rating, and (iii) conduct operations in accordance with Part 145 of the Federal Aviation
Regulations.
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,

Kimberly A. Rossini
Associate Counsel
KAR:dlb