July 19, 2019

Illinois Expands Manufacturing and Assembly Sales and Use Tax Exemption

By James Westfall, Senior Manager, Tax & Business Services

Related Services State & Local Tax, Tax & Business

Illinois Expands Manufacturing and Assembly Sales and Use Tax Exemption State & Local Tax

On June 5, 2019, Illinois Governor JB Pritzker signed Public Act 101-0009, updating existing language regarding the state’s current manufacturing and assembly sales and use tax exemption.

Analysis

Effective July 1, 2019, the sales and use tax exemption for manufacturers in Illinois, 35 ILCS 105/3-5, was expanded to include tangible personal property used or consumed in the manufacturing process, purchased after the effective date.

In addition to items historically included in the definition of “production related tangible personal property,” the exemption now includes “supplies and consumables used in a manufacturing facility” purchased after July 1, 2019.

Examples of items used in the manufacturing process now eligible for the exemption include:

  • Fuel
  • Coolants
  • Oils
  • Solvents
  • Lubricants
  • Hand tools
  • Protective apparel
  • Fire and safety equipment

Marcum Observation

The updated exemption presents an opportunity for taxpayers to reevaluate the items they are treating as exempt from sales tax in their manufacturing processes and to make sure they are not paying unnecessary taxes for newly exempt items. Staying up-to-date with ever-changing regulatory requirements allows taxpayers to keep costs low to remain competitive.

Please contact your Marcum State and Local Tax professional to address any questions regarding the updated exemption or any other tax matter.