Illinois Administrative Code › Title 86 - REVENUE › Part 130 - RETAILERS' OCCUPATION TAX › Subpart C - CERTAIN STATUTORY EXEMPTIONS › Section 130.345 - Oil Field Exploration, Drilling and Production Equipment

Current through Register Vol. 48, No. 28, July 12, 2024
a) General
1) Notwithstanding any other provision of
				this Section, the exemption provided in this Section is effective through June
				30, 2003. On and after July 1, 2003, the tax applies to sales of new or used
				oil field exploration, drilling, and production equipment. Prior to June 25,
				1996, notwithstanding the fact that the sales may be at retail, the Retailers'
				Occupation Tax Act does not apply to sales of new or used oil field
				exploration, drilling, and production equipment costing $250 or more, including
				rigs and parts of rigs; rotary rigs; cable tool rigs; workover rigs; pipe and
				tubular goods, including casing and drill strings; pumps and pump-jack units;
				storage tanks and flow lines; any individual replacement part for oil field
				exploration, drilling, and production equipment, if the replacement part costs
				in excess of $250; and machinery and equipment purchased for lease; but
				excluding motor vehicles required to be registered pursuant to the Illinois
				Vehicle Code. On and after June 25, 1996, the exemption is not conditioned upon
				the $250 purchase threshold requirement.
2) Oil field exploration, drilling and
				production
A) This exemption applies only to
				equipment used primarily in oil field exploration, drilling and production. Use
				of the equipment in any other type of exploration, drilling or mineral
				production will not be a qualified use and such equipment will be subject to
				tax. The equipment used in drilling, production or exploration of minerals,
				coal or water is not a qualified use of such equipment and will be subject to
				the full rate of tax. Excluded from this exemption are motor vehicles required
				to be registered pursuant to the Illinois Motor Vehicle Code [625 ILCS 5 ].
				Special mobile equipment other than motor vehicles may qualify for the
				exemption if they are used primarily in oil field exploration, drilling or
				production. The exemption does not include supplies (such as drilling mud, well
				cement, acid, chemicals or explosives), coolants, lubricants, adhesives,
				solvents, items of personal apparel (such as gloves, shoes, glasses, goggles,
				coveralls, aprons, masks, mask air filters, belts, harnesses or holsters),
				coal, fuel oil, electricity, natural gas, artificial gas, steam, gasoline,
				diesel fuel, refrigerants, water or chemical additives to crude oil.
B) "Oil field exploration" means the search
				for oil or natural gas. Exploration includes: Seismic studies, core testing and
				the drilling of test wells (wildcat wells).
C) "Drilling" means the act of boring a hole
				through which oil or gas may be produced if encountered in commercial
				quantities.
D) "Production" means
				the act or process of producing oil or gas.
E) "Drilling rigs" include rotary, cable tool
				and workover rigs and parts thereof.
F) "Production lease" means the land
				described in a lease instrument on which drilling for the production of oil or
				gas occurs.
G) "Pipe and tubular
				goods" include casing, drill strings, rods and wire rope. Prior to June 25,
				1996, "pipe and tubular goods" sold by the linear foot qualify for the
				reduction if the cost of the total length sold in an individual transaction or
				sale exceeds $250. On and after June 25, 1996, there is no such
				limitation.
H) "Production
				equipment" includes gasoline, diesel and electric engines used as a power
				source, pumps and pump-jack units and parts thereof, storage tanks, flow lines
				and parts thereof located on the producing lease.
I) "Kits" means kits comprised of several
				parts which are ordered from a manufacturer, inventoried and sold by a retailer
				as a single item, and items, such as a pump, which are assembled by the
				retailer at the time of sale from components selected by the purchaser and
				which are sold as a unit. Prior to June 25, 1996, kits will be treated as a
				single item for the purposes of the $250 per individual item limitation. On and
				after June 25, 1996, there is no such limitation.