Illinois Administrative Code › Title 86 - REVENUE › Part 130 - RETAILERS' OCCUPATION TAX › Subpart S - SPECIFIC APPLICATIONS › Section 130.2115 - Sellers of Machinery, Tools and Special Order Items

Current through Register Vol. 48, No. 28, July 12, 2024
a) When Liable For Retailers' Occupation Tax
1) Sellers of machinery, tools, dies, jigs,
				patterns, gauges, models, exhibits, and the like to users or consumers incur
				Retailers' Occupation Tax liability except as specified in subsection (b) of
				this Section, and except to the extent that the item sold is exempted by the
				provisions of the Act. This is true whether the seller installs the tangible
				personal property for the purchaser or not. (For information concerning the
				taxability of receipts from installation charges, see Section
				130.450
				of this Part.)
2) The fact that it
				is not a stock item and is only produced after an order is received, or is an
				alteration of a standard item, is not sufficient to exempt it from Retailers'
				Occupation Tax unless it meets all the exemption tests of subsection
				(b).
3) Even if the sale would
				otherwise qualify for exemption under subsection (b) of this Section, the sale
				is taxable if the designing of the property that is to be sold is done by the
				purchaser, or by someone other than the seller hired by the purchaser, but the
				sale is not taxable if the seller is responsible for furnishing the service of
				designing the property or for contributing substantially to the designing of
				the property.
4) However, a single
				order from a purchaser for 50 or more of the same item or simultaneous orders
				from a purchaser for 50 or more in the aggregate of the same item that would
				otherwise qualify for exemption under subsection (b) of this Section will be
				deemed to be volume production and will be subject to Retailers' Occupation Tax
				on the total amount received by the seller from any such volume production
				order or orders. For purposes of this subsection (a)(4), "simultaneous orders"
				consist of any orders placed on the same day by the same purchaser. Also, even
				if an item qualifies for Retailers' Occupation Tax exemption under subsection
				(b) of this Section, subsequent sales by the seller of the same item without
				material change to any purchaser for use (so-called repeat orders) are subject
				to the Retailers' Occupation Tax because the skill that is involved after the
				first item is made is production skill and not specialized engineering and
				design skill. For purposes of this subsection (a)(4), a "repeat order" is an
				order for the same item without material change that is placed by the same
				purchaser on a date after the date that the original order for that item was
				placed or an order for the same item without material change that is placed by
				another purchaser at any time after the original order for that item.
EXAMPLES:
A) Single
				orders. For example, on May 1, a building contractor special orders 75
				identical roof trusses in a single order that are to be engineered and
				fabricated by the seller and would otherwise qualify for exemption under
				subsection (b) of this Section. Even though the seller may use his or her skill
				to design and build the 75 identical roof trusses, the seller will be deemed to
				be engaged in volume production and will incur Retailers' Occupation Tax
				liability on those sales.
B)
				Simultaneous Orders
i) Simultaneous orders of
				50 or more. For example, on May 1, a purchaser special orders a single order of
				40 electrical turbines that are to be engineered and fabricated by the seller
				and would otherwise qualify for exemption under subsection (b) of this Section.
				On that same day, the same purchaser places another order for 25 electrical
				turbines that are identical to the 40 other electrical turbines ordered earlier
				that day. Even though the seller may use his or her skill to design and build
				the 65 identical electrical turbines, the seller will be deemed to be engaged
				in volume production and will incur Retailers' Occupation Tax liability on
				those sales.
ii) Simultaneous
				multiple orders of fewer than 50. For example, on May 1, a purchaser special
				orders a single order of 20 identical rain gutter components that are to be
				engineered and fabricated by the seller and would otherwise qualify for
				exemption under subsection (b) of this Section. On that same day, the same
				purchaser places another order for 25 rain gutter components that are identical
				to the 20 other rain gutter components ordered earlier that day. Since that
				purchaser has ordered fewer than 50 identical rain gutter components on that
				date, the seller will not be deemed to be engaged in volume production with
				these orders and would be exempt from Retailers' Occupation Tax liability on
				those sales. However, the seller will incur either Service Occupation Tax
				liability or Use Tax liability, depending upon the seller's activities in
				relation to the sale of those 45 rain gutter components. See the Department's
				Service Occupation Tax rules, 86 Ill. Adm. Code 140.
C) Repeat order by same purchaser. For
				example, on June 1, a purchaser orders 20 identical window cladding materials
				that are to be engineered and fabricated by the seller and would otherwise
				qualify for exemption under subsection (b) of this Section. The seller will
				incur Service Occupation Tax liability or Use Tax liability depending upon the
				seller's activities, rather than Retailers' Occupation Tax liability, in
				relation to those sales. See the Department's Service Occupation Tax rules, 86
				Ill. Adm. Code 140. If, however, on June 2, the same purchaser orders another
				10 window cladding materials that are identical to the first 20 window cladding
				materials ordered by that purchaser, then the seller will incur Retailers'
				Occupation Tax liability on the sales of those 10 additional window cladding
				materials because those transactions are considered subsequent sales by the
				seller of the same item without material change (repeat orders). In this
				example, the seller's skill that is involved after the first order is made is
				considered production skill and not specialized engineering and design
				skill.
D) Repeat order by different
				purchaser. For example, on June 1, a purchaser orders 20 identical roof trusses
				that are to be engineered and fabricated by the seller and would otherwise
				qualify for exemption under subsection (b) of this Section. The seller will
				incur Service Occupation Tax liability or Use Tax liability, depending upon the
				seller's activities, rather than Retailers' Occupation Tax liability, in
				relation to those sales. See the Department's Service Occupation Tax rules, 86
				Ill. Adm. Code 140. Later that day on June 1, a different purchaser orders 10
				roof trusses that are identical to the first 20 roof trusses ordered earlier
				that day by the previous purchaser. The seller will incur Retailers' Occupation
				Tax liability on the sales of those 10 roof trusses because those transactions
				are considered subsequent sales by the seller of the same item without material
				change (repeat orders). On June 2 another purchaser orders 30 roof trusses that
				are identical to the roof trusses ordered on June 1 by previous purchasers. The
				seller will incur Retailers' Occupation Tax liability on the sales of those 30
				roof trusses because those transactions are considered subsequent sales by the
				seller of the same item without material change (repeat orders). In this
				example, the seller's skill that is involved after the first order is made is
				considered production skill and not specialized engineering and design skill.
5) In the case of
				special assemblies, such as switchboards, where the completed product is made
				almost entirely of standard parts and materials that can be interchanged in
				other like products and sold to other users, the sale is taxable.