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Illinois Offers 5% Sales Tax Credit on Production-Related Tangible Personal Property

On January 11, 2008, the state of Illinois enacted Public Act 095-0707 (the Act), which has temporarily expanded the sales tax exemption for manufacturing machinery and equipment to include production-related tangible personal property (property purchased on July 1, 2007 through June 30, 2008). A taxpayer can claim this exemption only in the form of a credit memorandum—no tax refunds—equal to 5% of the purchase price. Under the Act, the aggregate amount of credit awarded to all taxpayers is capped at $10 million. If the claims for the credit memorandums exceed $10 million, then the Illinois Department of Revenue (the Department) shall reduce the amount of credit memorandum to each taxpayer on a pro-rata basis. Please note that if a taxpayer claims the credit under this provision, such property will not be eligible for the Illinois manufacturer's purchase credit.

How to apply:

1. File exemption report from July 1, 2008 thru September 1, 2008 (Only 60-day window)
2. Exemption report should be filed as prescribed by the Department and should include all pertinent information such as vendor name, Illinois IBT number or federal ID number, description of qualifying production related tangible personal property and purchase price
3. Waiver form signed by the vendor certifying that the vendor will not claim against the taxes paid to the Department on qualifying property, and then the purchaser will file an exemption report with the state.
4. Apply using your own statements that have all the above information—the Department has not yet issued final forms.

The Department will determine the aggregate amount of credit to be issued per taxpayer after September 1, 2008 but no later than November 1, 2008. All affected taxpayers will be notified by the Department of the approved amount within 30 days after making its final determination.

For more information, contact Jason Parish at jparish@BlackmanKallick.com or 312-980-2959, or your Blackman Kallick representative. Our thanks to Deb Rood for her contribution to this article.

This publication is part of Blackman Kallick’s marketing of professional services, and is not written tax advice directed at the specific facts and circumstances of any person and/or entity. Contents of this publication are of a general nature, and you should not act on this information without obtaining professional advice from your business advisor that is appropriately tailored to your individual needs and circumstances. This written advice is not intended or written to be used, and cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.