Illinois Expands Manufacturing Exemption to Supplies, Fuels, and More

According to an article found on CCH IntelliConnect Tracker News, supplies and consumables used in manufacturing are exempt from Illinois sales and use tax beginning July 1, 2019. Recent tax legislation expands the manufacturing exemption to once again include production related tangible personal property.

Items Qualifying for the Manufacturing Exemption

Illinois gives manufacturers a sales tax exemption for purchases of machinery and equipment used in:

  • manufacturing; or

  • assembling.

The new tax law includes supplies and consumables in the definition of machinery and equipment for the exemption.

For example, in addition to supplies, manufacturers can buy various items exempt from sales tax if the items are related to the production of property:

  • fuels

  • coolants

  • solvents

  • oils

  • lubricants and adhesives

  • hand tools

  • protective apparel

  • fire and safety equipment.

Meeting Exemption Requirements

A manufacturer’s use of the item also must meet existing requirements for its purchase to qualify for the exemption.

For example, the property must be primarily used in manufacturing and assembly.

Further, product or good manufactured or assembled must be for wholesale or retail sale or lease.

Regulations on Exemption for Production-Related Property

The Department of Revenue must issue rules on how to take the exemption and how it will be administered.

P.A. 101-09 (S.B. 689), Laws 2019, effective as noted

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