News and Insights

Illinois Changes May Impact Manufacturers and Remote Sellers

Tax Development Sep 28, 2016

The state of Illinois revised its manufacturing rules and added a rebuttable presumption for remote selling rules. Both changes became effective on September 12, 2016.

Manufacturing
Ill. Admin. Code tit. 86, §130.330, which addresses the applicability of sales and use tax to manufacturing machinery and equipment has been revised to stipulate, among other things, that the manufacturing exemption does not apply to machinery and equipment used in 1) the wholesale or retail generation of electricity, 2) the creation or treatment of natural or artificial gas delivered via pipes, pipeline, or mains on a wholesale or retail basis, or 3) the treatment of water delivered via pipes, pipelines, or mains to customers on a wholesale or retail basis.  

Remote Sales
Under 35 ILCS 105/2, out-of-state retailers are presumed to be maintaining a place of business in Illinois and required to collect use tax on sales to Illinois customers if the following conditions are met:

  • the retailer has a contract with a person located in the state under which the person, for a commission or like consideration, refers potential customers to the retailer by providing a promotional code or other mechanism that allows the retailer to track purchases referred by such persons;
  • the cumulative gross receipts from sales of tangible personal property by the retailer to customers who are referred to the retailer by all persons in the state under such contracts exceed $10,000 during the preceding four quarterly periods; and
  • the retailer does not prove that such contacts are insufficient to meet the nexus standards of the U.S. Constitution.

The rebuttable presumption added allows a retailer by “maintaining in its records documentation that shows that persons with whom the retailer has agreements have not engaged in solicitation activities on behalf of the retailer in Illinois that are sufficient to meet the nexus standards of the United States Constitution during the preceding 4 quarterly periods,” to show that nexus does not exist.