Could press-packing paper qualify for Illinois's graphic-arts machinery and equipment exemption?

Plain-English summary

Press-packing material appeared capable of qualifying for Illinois's graphic-arts machinery and equipment exemption, but not if it was a one-time expendable supply. The wholesaler described paper or plastic packing placed on press cylinders to establish the proper height and pressure for a print run.

The Department explained that qualifying graphic-arts machinery, equipment, and repair or replacement parts could be exempt. Materials used or consumed in the process generally were not. Its operative answer was conditional: the item described appeared to qualify, but if it was a one-time expendable supply—like a one-time-use printing plate—it would not qualify under 86 Ill. Adm. Code 130.325(c)(2).

That condition matters because the request described the packing paper as made for only one use. The GIL did not resolve that tension with a binding factual determination.

What this means for you

A printer or supplier had to determine whether the packing functioned as exempt machinery or a qualifying part, versus a one-time expendable supply. The purchaser also had to certify the qualifying use to the supplier.

Common questions

Q: Did the Department say press packing was exempt?
A: It said the described item appeared to qualify, but expressly excluded a one-time expendable supply.

Q: Why was the answer not definitive?
A: The request said the product was made for only one use, while the Department's answer made one-time expendability disqualifying. A GIL does not make a binding factual determination.

Q: What fact controlled the conditional answer?
A: Whether the press packing was qualifying machinery or a part, rather than a one-time expendable supply excluded by the regulation.

Subject

Graphic Arts

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-11-0049.pdf

Original ruling text

ST 11-0049-GIL 06/22/2011 GRAPHIC ARTS
The graphic arts machinery and equipment exemption does not include consumable supplies.
See Section 130.325(b)(2). (This is a GIL.)

June 22, 2011

Dear Xxxxx:
This letter is in response to your letter dated February 22, 2011, 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:
We are a graphics art supply / equipment wholesaler. One of the products we sell is
press packing materials. Press packing can be a variety of different material including
paper or plastic. Here is a brief overview of press packing: Press Packing papers are
used in the pressroom to prepare a press for printing. Packing is used to build up the
plate and blanket cylinder to the proper diameters or height and insure the best image
quality. Packing creates the proper ‘balance of pressure’ or ‘squeeze’ between the
inked plate and the surface to which it is applied. Careful attention to the packing
relationship between the plate cylinder and the blanket cylinder will reduce waste,
make-ready time and assist the pressman in delivering a quality-printed project. The
skilled printing craftsman prefers packing paper characteristics, which include a special
fiber and finish recipe for strength, resiliency, durability, smoothness, and caliper
uniformity.
Example: If the plate cylinder is undercut .016 inch, and the plate ‘mics’ out at .010
inch, this indicates a need for .006 inch of packing if the plate is to be packed evenly
with the bearer. More packing will, of course, be needed if the plate is to be packed
higher than the bearer. Similar measurements on the blanket cylinder undercut will
yield the proper caliber requirement for packing that cylinder. Press Packing Papers are
made for only one use – to achieve correct printing pressures on a press run.

Several of our customers are claiming this product is exempt from sales tax because it
is listed on the IL PIA matrix (enclosed). According to our research this is taxable per
86 ILL. Admin. Code 130.325. With the information supplied, what is the taxability if
[sic] press packing materials? If you need additional information please feel free to
contact me.

DEPARTMENT’S RESPONSE:
The Department’s rules regarding the Graphic Arts Machinery and Equipment Exemption are
set forth at 86 Ill. Adm. Code 130.325. Under the graphic arts machinery and equipment exemption,
Retailers’ Occupation Tax does not apply to sales of machinery and equipment, including repair and
replacement parts, both new and used and including that manufactured on special order to be used
primarily in graphic arts production. The exemption extends to purchases by lessors who will lease
the property for use primarily in graphic arts production. Taxpayers must certify the use of the
equipment they are purchasing to their suppliers. On and after July 30, 2009, P.A. 96-116 imposes
the additional requirement that the qualifying graphic arts machinery and equipment be used primarily
in the production of tangible personal property for wholesale or retail sale or lease.
The Department’s regulation at Section 130.325(b)(1)(D) provides that “[t]he exemption
includes printing by methods of engraving, letterpress, lithography, gravure, flexography, screen,
quick, and digital printing.” Graphic arts machinery and equipment used in the prepress preliminary
process generally are included within the exemption. See Section 130.325(b)(4)(A). However,
materials used or consumed in the graphic arts process are not included within the exemption. 86 Ill.
Adm. Code 130.325(b).
In general, the item that you describe appears to qualify for the graphic arts machinery and
equipment exemption; however, if the item is a one-time expendable supply like one-time use printing
plates, for example, the item would not qualify for the exemption. See Section 130.325(c)(2).
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.
Very truly yours,

Richard S. Wolters
Associate Counsel
RSW:msk