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Illinois Manufacturer’s Purchase Credit

Attention Illinois manufacturers! The state wants to double your benefits! It sounds too good to be true, but the Manufacturer’s Purchase Credit (MPC) is real. 

The MPC is available to Illinois manufacturers and graphic-arts producers. The credit is earned by purchasing machinery and equipment that qualifies for a manufacturing exemption from sales tax. Did you know that under Illinois law, manufacturers are exempt from paying sales tax on purchases of “manufacturing machinery, equipment, and materials” including repair parts used more than 50% in the manufacturing process? That means many of the purchases made by manufacturers qualify for the credit. 

The amount of the credit is equal to 50% of the sales tax (rate of 6.25%) that would have been owed on the purchase. For example, if a manufacturer purchases a $1,000 piece of machinery (tax exempt), the credit earned is $31.25 ($1,000 x 6.25% x 50% = 31.25). When a purchase is made that qualifies for the credit, the manufacturer should fill out Illinois Form ST-16. This form summarizes monthly purchases and the amount of the credit earned. It must be filed by June 30 of the year following the end of the year in which the purchases were made. And if you cannot complete the form by June 30, at least submit a return to be amended. If a return isn't postmarked by June 30, the chance to claim the credit disappears and you've lost the credit for the year.

Once the credit has been earned, it may be applied against sales or use tax on future purchases of “production-related tangible personal property” that do not qualify for sales-tax exemption. “Production-related tangible personal property” is purchased for incorporation into real estate within a manufacturing or graphic-arts facility; used or consumed in activities such as preproduction material handling, receiving, quality control, inventory control, storage, staging, and packaging for shipping and transportation purposes; and used or consumed for research and development. When the purchase is made, it is necessary to provide the retailer with Illinois Form ST-16-C, Manufacturer’s Credit Certificate, in order to claim the credit. 

At the end of the year, it is also required that Illinois Form ST-17, Annual Report of Manufacturer’s Purchase Credit Used, be filed. This form summarizes monthly summarizes monthly production-related purchases and the amount of credit applied. Like Form ST-16, it must be filed by June 30 of the year in which the credit was applied. 

If you’re a manufacturer or graphic-arts producer, you should be taking advantage of this credit. In order to better understand how to cash in on these opportunities, please contact Jason Parish at jparish@BlackmanKallick.com or 312-980-2959, Laura Miller at  lmiller@BlackmanKallick.com or 312-980-3283, 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.