Could permanently installed vehicle-wash components qualify for Illinois's enterprise-zone building-materials sales-tax exemption?

Plain-English summary

Permanently installed vehicle-wash components could qualify for Illinois's enterprise-zone building-materials exemption only when they were building materials physically incorporated into real estate as part of a qualifying project. The requester listed gantries, pumps, tanks, water heaters, a water softener, lights, sensors, a control panel, and related equipment.

The exemption covered qualified sales of building materials incorporated into real estate in an enterprise zone through remodeling, rehabilitation, or new construction. Examples included plumbing components such as water pumps, heaters, softeners, and pipes, as well as electrical, heating, air-conditioning, and ventilation systems and components.

Items not physically incorporated into the real estate did not qualify. The regulation's examples included tools, machinery, equipment, fuel, construction forms, and freestanding appliances that connected to a building system but did not become a component of it.

Documentation required two records:

1. a Certificate of Eligibility for Sales Tax Exemption from the enterprise-zone administrator; and
2. the purchaser's certification identifying the enterprise-zone real estate, zone, building materials, purchase date, and signature.

The retailer had to keep both documents. The exemption applied to qualifying State and local sales taxes. The GIL did not decide the status of each proposed wash-system component.

What this means for you

Analyze the system component by component. A water heater or pump could qualify if it became part of the real property, while removable machinery or equipment could fail even though it was essential to the wash operation. Secure both certificates and give the retailer enough item detail to document the deduction.

Common questions

Q: Did every permanently installed item qualify?
A: Not automatically. The item had to be a building material physically incorporated into the real estate, not merely equipment used at the site.

Q: What documents did the retailer need?
A: The enterprise-zone administrator's Certificate of Eligibility and the purchaser's separate detailed certification.

Q: Did the exemption cover local tax too?
A: Yes. The letter says it applied to both State and local sales taxes on qualifying building materials.

Subject

Enterprise Zones

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2011.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2011/st-11-0031.pdf

Original ruling text

ST 11-0031-GIL 04/15/2011 ENTERPRISE ZONES
The enterprise zone building materials exemption conferred at 35 ILCS 120/5k is explained in
Section 130.1951 of the Department’s regulations. See 86 Ill. Adm. Code 130.1951. (This is a
GIL.)

April 15, 2010

Dear Xxxxx:
This letter is in response to your letter dated December 8, 2010, in which you request
information. The Department issues two types of letter rulings. Private Letter Rulings (“PLRs”) are
issued by the Department in response to specific taxpayer inquiries concerning the application of a
tax statute or rule to a particular fact situation. A PLR is binding on the Department, but only as to the
taxpayer who is the subject of the request for ruling and only to the extent the facts recited in the PLR
are correct and complete. Persons seeking PLRs must comply with the procedures for PLRs found in
the Department’s regulations at 2 Ill. Adm. Code 1200.110. The purpose of a General Information
Letter (“GIL”) is to direct taxpayers to Department regulations or other sources of information
regarding the topic about which they have inquired. A GIL is not a statement of Department policy
and is not binding on the Department. See 2 Ill. Adm. Code 1200.120. You may access our website
at www.tax.illinois.gov to review regulations, letter rulings and other types of information relevant to
your inquiry.
The nature of your inquiry and the information you have provided require that we respond with
a GIL. In your letter you have stated and made inquiry as follows:
One of our facilities is currently located at ADDRESS and is zoned as I-2. We will be
working with the Economic Development Council for Central IL on amending the
existing County Enterprise Zone to include our property.
If the amendment to add this territory to the Enterprise Zone is successful, we intend on
making an investment for an automated washing system for our approximately (50)
vehicles. This equipment will comprise of permanently installed gantries, pumps, water
tanks, hot water heaters, water softener, pace lights, sensors, master control panel and
other equipment which will be installed by the wash company.
The purpose of this letter is to inquiry [sic] if the above washing equipment qualifies for
sales tax exemption pending successful approval of the territory addition to the County
Enterprise Zone. Your written response would be appreciated.
Thank you for your time in answering our inquiry. Please contact me if you have any
questions.

DEPARTMENT’S RESPONSE:

The Department’s regulation governing various enterprise zone exemptions is found at 86 Ill.
Adm. Code 130.1951. Subsection (d) of this regulation explains the current requirements for persons
claiming the enterprise zone building materials exemption. This exemption applies to qualified sales
of building materials to be incorporated into real estate in an enterprise zone established by a county
or municipality under the Illinois Enterprise Zone Act by remodeling, rehabilitation or new
construction. A “qualified sale” means a sale of building materials that will be incorporated into real
estate as part of a building project for which a Certificate of Eligibility for Sales Tax Exemption has
been issued by the administrator of the enterprise zone in which the building project is located. As
you can see from this information, retailers claiming the deduction must obtain two specific
documents from the purchaser in order to properly claim the exemption:
1.

Prior to making a purchase of qualifying building materials, a purchaser must
obtain a Certificate of Eligibility for Sales Tax Exemption from the administrator of
the enterprise zone into which the materials will be incorporated. The Certificate
of Eligibility for Sales Tax Exemption must contain a statement that the building
project identified in the Certificate meets all of the requirements of the enterprise
zone ordinance of the jurisdiction in which the building project is located; the
location or street address of the building project that is the subject of the
Certificate; and the signature of the administrator of the enterprise zone in which
the building project is located.

2.

In addition to the Certificate of Eligibility for Sales Tax Exemption, a purchaser
must prepare a certification that contains the following items:
a.

b.
c.
d.
e.
f.

a statement that the building materials being purchased are being
purchased for incorporation into real estate located in an Illinois enterprise
zone;
the location or address of that real estate;
the name of the enterprise zone in which that real estate is located;
a description of the building materials being purchased for incorporation
into that real estate;
the date of the purchase; and
the purchaser's signature.

A retailer claiming the deduction must have both the Certificate of Eligibility for Sales Tax
Exemption and the purchaser’s certificate among its books and records in order to document the
exemption. Provided that the retailer has properly documented the exemption (and absent any fraud
or collusion), if the Department should discover that the purchaser has improperly claimed the
exemption, it will look to the purchaser for payment of tax.
The enterprise zone building materials exemption from sales tax applies to both state and local
sales taxes on qualifying building materials. Some examples of the kind of building materials that
could qualify include: common building materials such as lumber, bricks, and cement; plumbing
systems and components thereof such as bathtubs, lavatories, sinks, faucets, garbage disposals,
water pumps, water heaters, water softeners, and water pipes; heating systems and components
thereof; electrical systems and components thereof; central air conditioning systems; ventilation
systems and components thereof; built-in cabinets; and built-in appliances.
Items that are not physically incorporated into the real estate cannot qualify for the exemption.
Examples of this include tools, machinery, equipment, fuel, forms and other items that may be used
by a construction contractor at an enterprise zone building site, but are not physically incorporated
into the real estate, and free-standing appliances such as stoves and refrigerators that are connected

to and operate from a building’s electrical or plumbing system but do not become a component of
those systems. See 86 Ill. Adm. Code 130.1951(e).
I hope this information is helpful. If you require additional information, please visit our website
at www.tax.illinois.gov or contact the Department’s Taxpayer Information Division at (217) 782-3336.
Sincerely,

Samuel J. Moore
Associate Counsel
SJM:msk