Does equipment used to turn captured landfill methane into pipeline-quality renewable natural gas (RNG) qualify for Illinois's manufacturing machinery and equipment sales tax exemption?

Plain-English summary

A company that captures raw landfill gas (methane) and processes it into pipeline-quality renewable natural gas (RNG) at an Illinois site asked the Illinois Department of Revenue for a Private Letter Ruling confirming that its equipment qualifies for the state's manufacturing machinery and equipment sales tax exemption. The company's nine-step process -- methane capture, hydrogen sulfide removal, cooling, compression, carbon dioxide removal, nitrogen/oxygen removal, dehydration, final compression, and emissions control -- transforms raw landfill gas into RNG that is injected into local natural gas pipelines for transportation use. The taxpayer argued this transformation meets Illinois's statutory definition of "manufacturing" and that the machinery, equipment, and consumables used throughout the process should therefore be exempt from Illinois sales and use tax under 35 ILCS 120/2-5(14) and 35 ILCS 120/2-45.

The Department disagreed. While it did not dispute that the process could otherwise resemble manufacturing, it focused on a specific carve-out written into the exemption itself: 86 Ill. Adm. Code 130.330(k) excludes machinery and equipment used in "the generation or treatment of natural or artificial gas for wholesale or retail sale that is delivered to customers through pipes, pipelines, or mains" from the manufacturing exemption, regardless of whether the underlying activity otherwise looks like manufacturing. The Department found that the taxpayer's process of removing impurities, cooling, compressing, and destroying byproducts to convert landfill gas into pipeline-quality RNG -- using the same kinds of steps that ordinary fossil natural gas undergoes to become pipeline-ready -- amounts to "treatment" of natural or artificial gas under a plain reading of that exception. Because the finished RNG is also injected into pipelines for delivery to customers, both elements of the exception were satisfied.

As a result, the Department concluded that the taxpayer's operation does not qualify for the manufacturing machinery and equipment exemption, and the machinery, equipment, and other tangible personal property purchased for use in the RNG facility are not exempt from Illinois Retailers' Occupation Tax or Use Tax. This is a Private Letter Ruling, so it legally binds the Department only as to the specific (here redacted) taxpayer who requested it, and only to the extent the facts it described were correct and complete.

What this means for you

Renewable natural gas and landfill-gas-to-energy operators

If your facility captures biogas or landfill gas and processes it (cleaning, cooling, compressing, purifying) into pipeline-quality gas that is then injected into pipelines for sale or transport, this ruling indicates the Department will likely treat that activity as "treatment of natural or artificial gas" rather than as exempt manufacturing -- even if the transformation from raw gas to finished fuel otherwise looks like a manufacturing process. The pipeline-delivery element of the exception appears to be decisive here.

Manufacturers evaluating the manufacturing machinery and equipment exemption generally

The general manufacturing exemption under 35 ILCS 120/2-5(14) and 35 ILCS 120/2-45 can be broad, covering machinery, equipment, and production-related tangible personal property (including certain consumables) used primarily in transforming raw materials into a product with a different form, use, or name. But the exemption has specific statutory exceptions -- for electricity generation, gas generation/treatment, and water treatment delivered through pipes, pipelines, or mains -- that override an otherwise-qualifying manufacturing analysis. Always check whether your end product or process falls into one of these carve-outs before assuming manufactured-goods treatment applies.

Accountants and tax professionals advising energy-sector clients

Note that the Department's discussion draws a direct comparison between RNG treatment and conventional fossil natural gas treatment, reasoning that similar purification/compression steps used to make gas pipeline-ready support classifying the RNG process as "treatment" rather than "manufacturing" for purposes of this exemption. This reasoning could be relevant to other gas-processing, biogas, or similar energy-conversion fact patterns, though as a PLR it is directly binding only on this taxpayer.

Common questions

Q: Did the Department agree that converting landfill gas into RNG is "manufacturing"?
A: The Department's ruling did not need to resolve that question either way, because it found the process falls within the specific exception to the manufacturing exemption for generation or treatment of natural or artificial gas delivered through pipes, pipelines, or mains (86 Ill. Adm. Code 130.330(k)). That exception applies regardless of whether the activity might otherwise be considered manufacturing.

Q: Why did the Department conclude this was "treatment" of gas?
A: The Department found that the steps in the taxpayer's process -- removing impurities (H2S, CO2, N2, O2), cooling, compressing, dehydrating, and destroying off-spec byproducts -- mirror the kinds of processes used to convert conventional fossil natural gas into pipeline-quality gas, and that each step, separately and as a whole, amounts to "treatment" of natural or artificial gas under a plain reading of the exception.

Q: Does it matter that the finished RNG is injected into pipelines?
A: Yes. The exception under 86 Ill. Adm. Code 130.330(k) requires that the gas be delivered to customers through pipes, pipelines, or mains. Because the taxpayer's finished RNG is injected into local natural gas pipelines for transportation use, the Department found this element of the exception was also satisfied.

Q: Is the machinery and equipment used at this facility exempt from Illinois sales and use tax?
A: No. The Department ruled that the taxpayer's operation does not qualify for the manufacturing machinery and equipment exemption, so machinery, equipment, and other tangible personal property purchased for use in the operation are not exempt from Illinois Retailers' Occupation Tax or Use Tax.

Q: Can another company with a similar RNG or gas-processing facility rely on this ruling?
A: No. As a Private Letter Ruling, this only binds the Department with respect to the specific taxpayer who requested it, and only to the extent the facts it described were correct and complete. Other taxpayers with similar facts can look to the reasoning for guidance but should request their own ruling or consult a tax professional.

Citations and references

• 35 ILCS 120/2-5(14) (manufacturing machinery and equipment exemption)
• 35 ILCS 120/2-45 (definitions of machinery, equipment, and production-related tangible personal property)
• 86 Ill. Adm. Code 130.330 (manufacturing machinery and equipment exemption rule)
• 86 Ill. Adm. Code 130.330(b)(1) (definition of manufacturing process)
• 86 Ill. Adm. Code 130.330(c)(1)-(2) (machinery and equipment definitions; maintenance/repair and in-house manufacture)
• 86 Ill. Adm. Code 130.330(d) (chemicals/catalysts as equipment)
• 86 Ill. Adm. Code 130.330(h)(2)(B) (production-related tangible personal property; supplies and consumables)
• 86 Ill. Adm. Code 130.330(k) (exception for generation or treatment of natural or artificial gas delivered through pipes, pipelines, or mains)
• 86 Ill. Adm. Code 130.101 (Retailers' Occupation Tax imposition)
• 86 Ill. Adm. Code 150.101 (Use Tax imposition)
• 2 Ill. Adm. Code 1200.110 (Private Letter Ruling procedures and binding effect)

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2025.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2025/st25-0008-plr.pdf

Original ruling text

ST 25-0008-PLR 12/29/2025 MANUFACTURING MACHINERY & EQUIPMENT
This letter discusses the exception to the manufacturing machinery and equipment
exemption for the generation or treatment of natural or artificial gas for wholesale or
retail sale that is delivered to customers through pipes, pipelines, or mains. 86 Ill.
Adm. Code 130.330(k). (This is a PLR).
December 29, 2025
NAME
COMPANY
ADDRESS
EMAIL
Dear NAME:
This letter is in response to your letter dated September 22, 2025, 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 https://tax.illinois.gov/ to review regulations, letter rulings and other types of
information relevant to your inquiry.
Review of your request disclosed that all the information described in paragraphs 1
through 8 of Section 1200.110 appears to be contained in your request. This Private Letter
Ruling will bind the Department only with respect to COMPANY1, for the issue or issues
presented in this ruling, and is subject to the provisions of subsection (e) of Section
1200.110 governing expiration of Private Letter Rulings. Issuance of this ruling is conditioned
upon the understanding that neither COMPANY1, nor a related taxpayer is currently under
audit or involved in litigation concerning the issues that are the subject of this ruling request.
In your letter you have stated and made inquiry as follows:
COMPANY1 (“COMPANY2,” or “Taxpayer”), located at ADDRESS1, currently
has one Illinois site under construction in COUNTY, Illinois.

COMPANY1/NAME
Page 2
December 29, 2025
COMPANY2 is not currently under audit by the Illinois Department of Revenue,
nor is there any litigation pending with the Department related to the issue
presented in this request.
To the best of the knowledge of both COMPANY2 and its representative,
COMPANY, the Department has not previously ruled on the same or a similar
issue for COMPANY2 or any predecessor entity. Furthermore, neither
COMPANY2 nor its representatives have previously submitted the same or a
similar issue to the Department and subsequently withdrawn it prior to the
issuance of a letter ruling.
Please accept this letter as a formal request for an Opinion of the Tax
Commissioner regarding the application of Illinois Sales and Use Tax to the
fact pattern described below.
I. BACKGROUND
COMPANY2 develops and operates landfill-based waste-to-renewable
energy projects. At its Illinois site in COUNTY, currently under construction,
COMPANY2 is engaged in the manufacturing of renewable natural gas (RNG)
through a multi-step process. This process begins with the capture of raw
landfill gas (methane), which is then cleaned, refined, and upgraded into
pipeline-quality RNG. The final product is injected into local natural gas
pipelines for transportation use. COMPANY2 constructs and operates this
manufacturing facility on leased landfill property, using the landfill gas as a
raw material input and producing RNG as the output. This transformation of
landfill gas into a marketable fuel product constitutes a manufacturing
activity under Illinois law.
The following is the step-by-step RNG manufacturing process at the
COMPANY1 facility.

1. Methane Capture
   •
   •

Source: Raw landfill gas (LFG), primarily methane, is collected from
the landfill.
Equipment:
o LFG Blower: A 100% capacity blower increases the pressure of the
raw LFG from 0.0 psig to 12.5 psig, enabling it to move through the
system.

2. Hydrogen Sulfide (H₂S) Removal

COMPANY1/NAME
Page 3
December 29, 2025
•
•

Purpose: Removes corrosive and toxic H₂S from the gas stream.
Equipment:
o H₂S Removal Vessel: A 6-foot diameter x 9-foot vessel filled with
Darco media. Media is replaced approximately every 12 months.

3. Cooling the Gas
   • Purpose: Reduces temperature to condense moisture and prepare for
   compression.
   • Equipment:
   o Chiller and Heat Exchanger: Lowers LFG temperature to 45°F.
4. Compression
   • Purpose: Increases pressure for further processing.
   • Equipment:
   o Two Flooded Screw-Type Compressors: Boost pressure from 4
   psig to 205 psig.
   o LFG-to-Air Cooler: Cools the compressed gas.
   o Heat Exchanger: Further reduces temperature to 60°F.
5. Carbon Dioxide (CO₂) Removal
   • Purpose: Separates CO₂ to increase methane purity.
   • Equipment:
   o Air Liquide Membrane System: Selectively removes CO₂.
   o Three Activated Carbon Vessels: Assist in purification.
6. Nitrogen (N₂) and Oxygen (O₂) Removal
   • Purpose: Further purifies the gas to meet pipeline specifications.
   • Equipment:
   o ARI Pressure Swing Adsorption (PSA) System: Removes N₂ and
   O₂.
7. Dehydration
   • Purpose: Removes remaining moisture from the product gas.
   • Equipment:
   o Non-Regenerative Media Dehydration Vessel: Used during
   startup and media changeouts.
8. Final Compression
   • Purpose: Prepares RNG for pipeline injection.
   • Equipment:
   o Product Gas Compressor: Increases pressure to 320 psig.

COMPANY1/NAME
Page 4
December 29, 2025

9. Emissions Control
   • Purpose: The emissions control stage plays a critical role in the RNG
   production process by destructing unusable byproducts and ensuring
   operational flexibility during upset conditions. These control devices
   help manage off-spec gas streams and other residuals that may arise
   due to fluctuations in input quality or temporary process imbalances.
   By safely destroying these byproducts, the system maintains
   compliance with environmental regulations and protects the integrity
   of the final RNG product.
   • Equipment:
   o Thermal Oxidizer (TOX): Destroys VOCs (98% efficiency), controls
   NOx and CO emissions.
   o Off-Specification Flare: Burns unusable gas diverted from various
   stages:
    After initial chilling
    Between CO₂ and N₂ removal
    Final product gas diversion
   COMPANY2 has engaged a general contractor for this project and has
   contracted with them to build a renewable natural gas facility.
   COMPANY2 has engaged various other vendors to provide the equipment
   needed for the process. Such equipment, will be installed by the general
   contractor.
   II. ISSUES
10. Does COMPANY2’s operation outlined above qualify for the
    manufacturing exemption pursuant to ILCS § 120/2-5(14) and ILCS §
    120/2-45? If so, at what point in the process does the exempt
    manufacturing activity begin and end, based on the equipment and
    steps outlined above?
11. If COMPANY2’s operation qualifies as manufacturing, is the
    equipment used in the process (as outlined above) and any
    consumables exempt from Illinois sales and use tax under the
    manufacturing machinery and equipment exemption, including
    production-related tangible personal property as defined in ILCS §
    120/2-45 and related regulations?
    III. POSITION

COMPANY1/NAME
Page 5
December 29, 2025

1. COMPANY2’s operation qualifies for the manufacturing exemption
   pursuant to ILCS § 120/2-5(14) and ILCS § 120/2-45 because the
   process transforms raw landfill methane gas into renewable natural
   gas (RNG)—a product with a different form, use, and name. This
   transformation involves a series of chemical and mechanical
   operations that meet the statutory definition of a “manufacturing
   process” as outlined in the Discussion section.
   The manufacturing process begins at Step 1, when methane is
   captured and pressurized for processing, and continues through Step
   9, where emissions control equipment ensures that only pipelinequality RNG is delivered. The emissions control stage is integral to the
   completion of the final product and is therefore part of the last
   operation in the manufacturing series.
2. Since COMPANY2’s operation qualifies for the manufacturing
   exemption, the equipment used in Steps 1 through 9—each of which
   contributes to the transformation of landfill methane into renewable
   natural gas—qualifies for exemption under ILCS § 120/2-5(14) and
   ILCS § 120/2-45.
   This includes:
   •

Machinery and equipment used directly in the manufacturing
process;

•

Production-related tangible personal property, which is used
primarily (i.e., over 50% of the time) in manufacturing or in activities
that are integral to the manufacturing process; and

•

Consumables, such as media used in hydrogen sulfide removal
vessels and activated carbon used in gas purification, which are
depleted or consumed during the manufacturing process and are
necessary to produce the final product.

These items are essential to the transformation of raw landfill gas into
pipeline-quality RNG and are therefore considered part of the
manufacturing process under Illinois law and Department of Revenue
guidance.

COMPANY1/NAME
Page 6
December 29, 2025
After conducting a review, COMPANY2 and its Representative have
determined that there are no known authorities contrary to the taxpayer’s
views. To the best of our knowledge, and based on diligent research, we were
unable to locate any legal, regulatory, or administrative authority that
conflicts with the position presented in this request.
IV. DISCUSSION
Illinois imposes a sales tax upon every person who sells at retail or distributes
tangible personal property in Illinois, rents of furnished taxable things or
services, stores for use or consumption in Illinois any item of tangible
personal property in Illinois or leases or rents such property in Illinois.
Generally, “tangible personal property” means personal property that can be
seen, weighed, measured, felt, or touched, or that is in any other manner
perceptible to the senses. 1
The sales tax is levied upon every person who engages in the business of
selling at retail or distributing tangible personal property in Illinois. A “sale at
retail” means any transfer of the ownership of or title to tangible personal
property to a purchaser, for the purpose of use or consumption, and not for
the purpose of resale in any form as tangible personal property to the extent
not first subject to a use for which it was purchased, for a valuable
consideration, provided that the property purchased is deemed to be
purchased for the purpose of resale, despite first being used, to the extent to
which it is resold as an ingredient of an intentionally produced product or
byproduct of manufacturing. Transactions whereby the possession of the
property is transferred but the seller retains the title as security for payment
of the selling price shall be deemed to be sales. 2, 3
Manufacturing
Sales of tangible personal property are exempt where the purpose of the
purchaser is to use the “machinery and equipment” primarily in a
manufacturing operation to produce tangible personal property for sale. 4
For purposes of this exemption, “machinery and equipment” includes, but is
not limited to, any of the following:

Black’s Law Dictionary, 2nd Ed.
ILCS § 120/2
3
Ill. Admin. Code 130.201
4
ILCS § 120/2-5
1
2

COMPANY1/NAME
Page 7
December 29, 2025
•
•
•
•

•

Machinery is generally major mechanical machines or major
components of such machines contributing to a manufacturing or
assembling process
Equipment is generally any 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; or
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; or any parts which require
periodic replacement in the course of normal operation;
Equipment generally shall not include hand tools , solvents, water,
acids, oil, and similar consumables that interact with the product and
that are an integral part of the manufacturing operation. 5

“Manufacturing process” means 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 a procedure commonly regarded as
manufacturing, processing, fabricating, or refining that changes some existing
material into a material with a different form, use, or name. The manufacturing
process shall be deemed to commence with the first operation or stage of
production in the series, and shall not be deemed to end until the completion
of the final product in the last operation or stage of production in the series. 6
The manufacturing and assembling machinery and equipment exemption
includes production related tangible personal property.
“Production related tangible personal property” means all tangible personal
property that is used or consumed by the purchaser in a manufacturing facility
in which a manufacturing process takes place and includes, without
limitation:

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.
   5
   6

Ill. Admin. Code 130.330
ILCS § 120/2-45

COMPANY1/NAME
Page 8
December 29, 2025

2. Supplies and consumables used in a manufacturing facility including
   fuels, coolants, solvents, oils, lubricants, and adhesives, hand tools,
   protective apparel, and fire and safety equipment used or consumed
   within a manufacturing facility
3. Tangible personal property that is used or consumed in activities such
   as research and development, preproduction material handling,
   receiving, quality control, inventory control, storage, staging, and
   packaging for shipping and transportation purposes. 7
   The exemption does not include machinery and equipment used in (i) the
   generation of electricity for wholesale or retail sale; (ii) the generation or
   treatment of natural or artificial gas for wholesale or retail sale that is
   delivered to customers through pipes, pipelines, or mains; or (iii) the
   treatment of water for wholesale or retail sale that is delivered to customers
   through pipes, pipelines, or mains.
   V. CONCLUSION
   We respectfully request that the Illinois Department of Revenue find that
   COMPANY2’s purchases for the operation of its Illinois site are exempt from
   Illinois sales and use tax pursuant to ILCS § 120/2-5(14) and ILCS § 120/2-45.
   Illinois law provides an exemption from sales and use tax for machinery and
   equipment used primarily and directly in manufacturing (when used by a
   manufacturer as defined by statute), as well as for certain consumable items
   that are essential to the manufacturing process. COMPANY2’s process of
   collecting landfill methane and converting it into renewable natural gas
   constitutes a manufacturing activity under Illinois law, as it transforms raw
   material into a product with a different form, use, and name.
   Accordingly, the machinery, equipment, and consumables used directly in
   this manufacturing process should qualify for exemption from Illinois sales
   and use tax.
   If this ruling request does not provide sufficient information to support our
   conclusions, we respectfully request an opportunity to meet with the
   Department to discuss the matter further. Likewise, if the Department
   disagrees with our conclusions, we respectfully request that the Department
   contact us prior to issuing a ruling.

7

ILCS § 120/2-45

COMPANY1/NAME
Page 9
December 29, 2025
Under penalties of perjury, I declare that I have examined this request,
including the accompanying documents, and to the best of my knowledge and
belief, the facts presented in support of the requested ruling are true, correct,
and complete.
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.
Retailers’ Occupation Tax, however, does not apply to sales of machinery and
equipment used primarily (over 50% of the time) in the manufacturing or assembling of
tangible personal property for wholesale or retail sale or lease. See 86 Ill. Adm. Code
130.330. The manufacturing process is the production of articles of tangible personal
property or assembling different articles of tangible personal property by procedures
commonly regarded as manufacturing, processing, fabricating, or refining, which changes
some existing material or materials into a material with a different form, use, or name. These
changes must result from the process in question and be substantial and significant. See 86
Ill. Adm. Code 130.330(b)(1).
Machinery means major mechanical machines or major components of such
machines contributing to a manufacturing or assembling process. See 35 ILCS 120/2-45(3).
Equipment means independent devices or tools 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.
See 35 ILCS 120/2-45(4); 86 Ill. Adm. Code 130.330(c)(2). Equipment also includes
chemicals or chemicals acting as catalysts if the chemicals or chemicals acting as catalysts
effect a direct and immediate change upon a product being manufactured or assembled for
wholesale or retail sale or lease. See 35 ILCS 120/2-45(4); 86 Ill. Adm. Code 130.330(d). The
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. See 35 ILCS 120/2-45; 86 Ill. Adm. Code 130.330(c)(1).
Production related tangible personal property is included in the exemption.
Production related tangible personal property means all tangible personal property used or

COMPANY1/NAME
Page 10
December 29, 2025
consumed in a production related process by a manufacturer in a manufacturing facility in
which a manufacturing process takes place, as well as all tangible personal property that is
used or consumed in research and development regardless of use within or without a
manufacturing facility. See 35 ILCS 120/2-45(5); 86 Ill. Adm. Code 130.330(h). This includes
supplies and consumables used in a manufacturing process in a manufacturing facility,
including some chemicals that do not make a direct and immediate change or act as a
catalyst, such as fuels, coolants, solvents, oils, lubricants, and adhesives. See 86 Ill. Adm.
Code 130.330(h)(2)(B).
The exemption does not include machinery and equipment used in the generation of
electricity for wholesale or retail sale; the generation or treatment of natural or artificial gas
for wholesale or retail sale that is delivered to customers through pipes, pipelines, or mains;
or the treatment of water for wholesale or retail sale that is delivered to customers through
pipes, pipelines, or mains. See 35 ILCS 120/2-5(14), 2-45; 86 Ill. Adm. Code 130.330(k).
Per the U.S. Environmental Protection Agency and the U.S. Department of Energy,
renewable natural gas (RNG) is a term of art used to describe gas obtained from biological
sources (biogas) and treated for use as a fuel source in place of fossil natural gas, 8 and is
pipeline-quality gas that is fully interchangeable with conventional natural gas. 9 It is our
understanding that COMPANY2 captures its biogas at the same site that it treats it, the
COMPANY1 landfill in COUNTY, Illinois, and then treats that gas by, through a series of
steps, removing impurities, cooling the gas, compressing the gas, and destroying
byproducts, ending up with pipeline-quality RNG. Likewise, fossil natural gas is treated
using similar processes in order to make it into pipeline-quality natural gas. 10 Each of the
steps described in COMPANY2’s process, separately and as a whole, amount to treatment
of natural or artificial gas under a plain reading of the exception to the manufacturing
machinery and equipment exemption.
It is also our understanding that upon completing treatment, COMPANY2 injects the
finished RNG into local natural gas pipelines for transportation use. This satisfies the
remaining prong of the exception to the exemption, for the gas to be delivered for wholesale
or retail sale to customers through pipes, pipelines or mains. Therefore, the Department
finds that COMPANY2’s operation as described does not qualify for the manufacturing
machinery and equipment exemption, and any machinery, equipment, and other tangible
personal property purchased for use in the operation would not be exempt from Retailers’
Occupation Tax or Use Tax under the exemption.

https://www.epa.gov/lmop/renewable-natural-gas (last visited December 12, 2025).
https://afdc.energy.gov/fuels/natural-gasrenewable#:~:text=Renewable%20natural%20gas%20(RNG)%20is,to%20a%20higher%20purity%20standard (last
visited December 12, 2025).
10
https://www.eia.gov/energyexplained/natural-gas/ (last visited December 12, 2025).
8
9

COMPANY1/NAME
Page 11
December 29, 2025
The factual representations upon which this ruling is based are subject to review by
the Department during the course of any audit, investigation, or hearing and this ruling shall
bind the Department only if the factual representations recited in this ruling are correct and
complete. This Private Letter Ruling is revoked and will cease to bind the Department 10
years after the date of this letter under the provisions of 2 Ill. Adm. Code 1200.110(e) or
earlier if there is a pertinent change in statutory law, case law, rules or in the factual
representations recited in this ruling.
I hope this information is helpful. If you have further questions concerning this Private
Letter Ruling, you may contact me at (217) 782-7055. If you have further questions related
to the Illinois sales tax laws, please visit our website at https://tax.illinois.gov/ or contact the
Department’s Taxpayer Information Division at (800) 732-8866.
Very truly yours,

Samuel J. Moore
Chairman, Private Letter Ruling Committee
SJM:EJM:slc