Is the ink and solvent a steel-framing manufacturer mixes and applies inline to identify and trace parts during roll forming exempt from Illinois sales/use tax as manufacturing machinery and equipment, or as production related tangible personal property?

Plain-English summary

A manufacturer of steel framing wrote to the Illinois Department of Revenue asking about the taxability of ink and solvent it uses in its production process. The company explained that it receives raw steel "master coils" from a vendor, slits the coils into appropriate widths, and uses roll-forming equipment to process the slit coil into finished products. As part of that roll-forming process, the company purchases ink and solvent that are mixed together in a machine and then applied inline to the coil strip while it is being formed on the roll former, creating a string of identifying and traceability information on the finished part. The company asked whether this ink and solvent would be considered "production related tangible personal property" ("TTP" in the letter, likely a typo for TPP) and therefore tax-exempt under Illinois Public Act 101-9.

Because the inquiry asked the Department to apply the law to the company's specific fact pattern, it would ordinarily call for a binding Private Letter Ruling (PLR), but the Department responded with a General Information Letter (GIL) instead -- a non-binding response that only directs the taxpayer to the relevant statutes and regulations rather than resolving the taxpayer's facts. The Department's response lays out the framework: the Retailers' Occupation Tax (Illinois's sales tax) taxes retail sales of tangible personal property (35 ILCS 120/2; 86 Ill. Adm. Code 130.101), and Use Tax applies to the privilege of using tangible personal property purchased at retail (35 ILCS 105/3; 86 Ill. Adm. Code 150.101). However, the Retailers' Occupation Tax does not apply to sales of machinery and equipment used primarily in manufacturing or assembling tangible personal property for wholesale or retail sale or lease (35 ILCS 120/2-5(14); 86 Ill. Adm. Code 130.330(a)) -- this is the manufacturing and assembling machinery and equipment ("MM&E") exemption.

The Department explained that, effective July 1, 2019, Public Act 101-9 permanently expanded the MM&E exemption to include "production related tangible personal property" -- items that had previously been eligible for the now-expired Manufacturer's Purchase Credit (35 ILCS 120/2-45(5); 86 Ill. Adm. Code 130.330, 130.331). Production related tangible personal property means all tangible personal property used or consumed in a production-related process by a manufacturer in a manufacturing facility, or by a graphic arts producer in graphic arts production, as well as property used or consumed in research and development (86 Ill. Adm. Code 130.330(h)(1)). The Department listed several illustrative (non-exclusive) categories of production-related uses, including "[s]upplies and consumables used in a manufacturing process in a manufacturing facility, including fuels, coolants, solvents, oils, lubricants, and adhesives" (86 Ill. Adm. Code 130.330(h)(2)(B)) and property used for pre-production and post-production material handling, receiving, quality control, inventory control, storage, staging, and packing for shipping (130.330(h)(2)(D)).

The GIL never expressly states whether this particular company's ink and solvent qualifies as production related tangible personal property or otherwise falls within the exemption -- it lays out the legal framework, including a category (solvents used in a manufacturing process) that closely matches the taxpayer's described facts, but leaves the fact-specific application unresolved, which is typical of a GIL.

What this means for you

Manufacturers using ink, solvent, coatings, or similar consumables in production

If your business, like the roll-forming company here, uses supplies or consumables (ink, solvent, coolants, oils, lubricants, adhesives, etc.) as part of a manufacturing process, this GIL is a useful roadmap: the "production related tangible personal property" category added by P.A. 101-9 explicitly lists "solvents" among the illustrative supplies and consumables that can qualify for the MM&E exemption (86 Ill. Adm. Code 130.330(h)(2)(B)). But because this is a GIL, not a PLR, the Department has not confirmed that this specific taxpayer's ink and solvent actually qualifies -- you cannot rely on this letter to protect your own purchases. If you want a binding answer for your own facts, you would need to request a PLR under 2 Ill. Adm. Code 1200.110.

Manufacturers purchasing machinery and equipment generally

The broader MM&E exemption under 35 ILCS 120/2-5(14) and 86 Ill. Adm. Code 130.330 covers machinery and equipment used primarily in manufacturing or assembling tangible personal property for wholesale or retail sale or lease -- including replacement machinery, machinery for expanded or new facilities, and machinery used in the general maintenance or repair of exempt machinery. Since July 1, 2019, that exemption also reaches "production related tangible personal property" more broadly, not just conventional machinery and equipment.

Accountants and tax professionals

The GIL's own truncated summary header contains a citation typo: it reads "35 ILCS 120/25(14)," but the Department's full response consistently cites "35 ILCS 120/2-5(14)" for the MM&E exemption -- cite to 2-5(14), not 25(14). Also remember the standard GIL caveat: this letter does not state whether the taxpayer's specific ink/solvent purchases qualify, is not a statement of Department policy, and is not binding -- clients wanting certainty on their own facts should pursue a PLR.

Common questions

Q: Did the Department rule that this company's ink and solvent are tax-exempt?
A: Not definitively. The GIL explains the manufacturing machinery and equipment exemption and the "production related tangible personal property" category (which explicitly lists solvents as an example), but it does not expressly state whether this company's specific ink and solvent purchases qualify. That gap is typical of a GIL, which directs taxpayers to the relevant law rather than resolving their facts.

Q: What is the manufacturing machinery and equipment (MM&E) exemption?
A: Under 35 ILCS 120/2-5(14) and 86 Ill. Adm. Code 130.330(a), the Retailers' Occupation Tax does not apply to machinery and equipment used by the purchaser (or a lessee) primarily in manufacturing or assembling tangible personal property for wholesale or retail sale or lease. It also covers replacement machinery, machinery for expanded or new manufacturing facilities, and machinery used to maintain or repair exempt machinery and equipment.

Q: What is "production related tangible personal property," and when did it become exempt?
A: Effective July 1, 2019, under P.A. 101-9, the MM&E exemption was permanently expanded to include production related tangible personal property -- items that had previously been eligible only for the now-expired Manufacturer's Purchase Credit. It covers tangible personal property used or consumed in a production-related process by a manufacturer in a manufacturing facility (or by a graphic arts producer), and property used in research and development. 35 ILCS 120/2-45(5); 86 Ill. Adm. Code 130.330(h)(1).

Q: Does the regulation give examples of what counts as "production related"?
A: Yes. 86 Ill. Adm. Code 130.330(h)(2) lists illustrative (non-exclusive) examples, including: property incorporated into real estate within a manufacturing facility for a production-related process; supplies and consumables used in a manufacturing process, including fuels, coolants, solvents, oils, lubricants, and adhesives; hand tools, protective apparel, and fire/safety equipment; property used for pre- and post-production material handling, receiving, quality control, inventory control, storage, staging, and packing for shipping; and a defined portion of fuel used to rotate a ready-mix cement truck's drum.

Q: Why did the Department issue a GIL instead of a Private Letter Ruling?
A: The company's letter asked the Department to determine whether its specific ink and solvent purchases were tax-exempt -- a fact-specific question that would normally call for a binding PLR under 2 Ill. Adm. Code 1200.110. The Department instead issued a GIL, which only directs the taxpayer to the applicable statutes and regulations (2 Ill. Adm. Code 1200.120) and is not binding on the Department.

Citations and references

Statutes:

• 35 ILCS 120/2-5(14) (manufacturing and assembling machinery and equipment exemption)
• 35 ILCS 120/2-45 (definitions: manufacturing process, assembling process, production related tangible personal property)
• 35 ILCS 120/2 (Retailers' Occupation Tax imposition)
• 35 ILCS 105/3 (Use Tax imposition)

Regulations:

• 86 Ill. Adm. Code 130.101 (Retailers' Occupation Tax generally)
• 86 Ill. Adm. Code 130.330 (manufacturing machinery and equipment exemption)
• 86 Ill. Adm. Code 150.101 (Use Tax generally)
• 2 Ill. Adm. Code 1200.110 (Private Letter Ruling procedure)
• 2 Ill. Adm. Code 1200.120 (General Information Letter procedure)

Other:

• P.A. 101-9 (2019 public act expanding the MM&E exemption to production related tangible personal property, effective July 1, 2019)

Note: the source PDF's truncated top-of-letter summary cites "35 ILCS 120/25(14)," but this is a typo -- the Department's full "DEPARTMENT'S RESPONSE" section correctly and consistently cites 35 ILCS 120/2-5(14).

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2024.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2024/ST24-0003-GIL.pdf

Original ruling text

ST 24-0003-GIL 01/31/2024 MACHINERY AND EQUIPMENT
This letter discusses the manufacturing machinery and equipment exemption. 35 ILCS 120/25(14); 35 ILCS 120/2-45; 86 Ill. Adm. Code 130.330. (This is a GIL.)
January 31, 2024
NAME
COMPANY
ADDRESS
Dear Xxxx
This letter is in response to your letter dated September 15, 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:
COMPANY is a manufacturer of steel framing. We receive our raw materials, master
coils, from a steel vendor. We slit master coils into appropriate widths for making
various products, we use roll forming equipment to continue processing appropriate
slit coil for finished products. We purchase ink and solvent that are mixed thru a
machine and then applied inline to the coil strip as it is being formed on the roll
former. This is a part of the roll forming process as it creates a string of information
on the part that identifies what the part being produced is along with providing
traceability information for the material.
My question is on the taxability of the ink and solvent. Would this be considered
production related TTP [sic] and be tax exempt under the Illinois Public Act P.A. 1010009?

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. 35
ILCS 120/2; 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. 35 ILCS
105/3; 86 Ill. Adm. Code 150.101. These taxes comprise what is commonly known as “sales tax” in
Illinois.
Notwithstanding the fact that the sales may be at retail, the Retailers’ Occupation Tax does
not apply to sales of machinery and equipment that will be used by the purchaser, or a lessee of
the purchaser, primarily in the process of manufacturing or assembling tangible personal property
for wholesale or retail sale or lease, whether the sale or lease is made directly by the manufacturer
or by some other person. 35 ILCS 120/2-5(14); 86 Ill. Adm. Code 130.330(a). The manufacturing
and assembly machinery and equipment exemption includes machinery and equipment that
replaces machinery and equipment in an existing manufacturing facility, as well as machinery and
equipment that are for use in an expanded or new manufacturing facility. The machinery and
equipment exemption also includes machinery and equipment used in the general maintenance or
repair of exempt machinery and equipment or for in-house manufacture of exempt machinery and
equipment. 35 ILCS 120/2-45; 86 Ill. Adm. Code 130.330(c)(1). There may be instances however
in which items of tangible personal property that do not meet the definition of conventional
“machinery and equipment” will meet the definition of “production related tangible personal
property” and qualify for the exemption.
The manufacturing process is the production of any article of tangible personal property,
whether the article is a finished product or an article for use in the process of manufacturing or
assembling a different article of tangible personal property, by procedures commonly regarded as
manufacturing, processing, fabricating, or refining that changes some existing material or materials
into a material with a different form, use, or name. 35 ILCS 120/2-45(1). These changes must
result from the process in question and be substantial and significant. 86 Ill. Adm. Code
130.330(b)(1).
The assembling process is the production of an article of tangible personal property, whether
the article is a finished product or an article for use in the process of manufacturing or assembling a
different article of tangible personal property, by the combination of existing materials in a manner
commonly regarded as assembling that results in an article or material of a different form, use, or
name. 35 ILCS 120/2-45(2); 86 Ill. Adm. Code 130.330(b)(2).
The process or activity must be commonly regarded as manufacturing. To be so regarded, it
must be thought of as manufacturing by the general public. Generally, the scale, scope and
character of a process or operation will be considered to determine if the process or operation is
commonly regarded as manufacturing. Manufacturing includes such activities as processing,
fabricating, and refining. 86 Ill. Adm. Code 130.330(b)(3).

Equipment includes an independent device or tool separate from any machinery but
essential to an integrated manufacturing or assembly process, including computers used primarily
in a manufacturer’s computer assisted design, computer assisted manufacturing (CAD/CAM)
system; any subunit or assembly comprising a component of any machinery or auxiliary, adjunct, or
attachment parts of machinery, such as tools, dies, jigs, fixtures, patterns, and molds; and any
parts that require periodic replacement in the course of normal operation. 35 ILCS 120/2-45(4); 86
Ill. Adm. Code 130.330(c)(2). Exempt equipment also includes chemicals or chemicals acting as
catalysts but only if the chemicals or chemicals acting as catalysts effect a direct and immediate
change upon a product being manufactured or assembled for sale or lease. 35 ILCS 120/2-45(4);
86 Ill. Adm. Code 130.330(d).
However, effective July 1, 2019, chemicals that do not make a direct and immediate change
or act as a catalyst may qualify if they are production related. 86 Ill. Adm. Code 130.330(d). This is
due to the passing of P.A. 101-9, which permanently expanded the MM&E exemption to allow items
that had previously been eligible for the expired Manufacturer’s Purchase Credit (“MPC”) (i.e.,
“production related tangible personal property”) to be eligible for the MM&E exemption. See 35
ILCS 120/2-45(5); 86 Ill. Adm Code 130.330, 331. As a result of P.A. 101-9, beginning on July 1,
2019, the manufacturing and assembling machinery and equipment exemption includes production
related tangible personal property. 35 ILCS 120/245(5). Production related tangible personal property means all tangible personal property used or
consumed in a production related process by a 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)(1).
By way of illustration and not limitation, the following uses of tangible personal property by
manufacturers, including graphic arts producers, will be considered production related:
A)

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.

B)

Supplies and consumables used in a manufacturing process in a
manufacturing facility, including fuels, coolants, solvents, oils, lubricants, and
adhesives.

C)

Hand tools, protective apparel, and fire and safety equipment used or
consumed within a manufacturing facility.

D)

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.
E)

Fuel used in a ready-mix cement truck to rotate the mixing drum in order to
manufacture concrete or cement. However, only the amount of fuel used to
rotate the drum will qualify. The amount of fuel used or consumed in
transportation of the truck will not qualify as production related tangible
personal property. The amount of fuel used in a qualifying manner to rotate
the drum may be stated as a percentage of the entire amount of fuel used or
consumed by the ready-mix truck.

86 Ill. Adm. Code 130.330(h)(2).
I hope this information is helpful. If you require additional information, please visit our website
at https://tax.illinois.gov/ or contact the Department’s Taxpayer Information Division at
(217) 782-3336.
Very truly yours,

Katarzyna Kowalska
Associate Counsel
KK:se