Did the permanent-affixation test for a construction contractor's tank depend on the property being in an enterprise zone?

Plain-English summary

A requester had previously asked whether a tank was permanently affixed to real estate. After learning that the facility was not in an enterprise zone, the requester asked whether IDOR's earlier reliance on an enterprise-zone PLR still mattered.

IDOR said the permanent-affixation analysis still applied. Although ST 08-0003-PLR had addressed permanent attachment for the enterprise-zone building-materials exemption, the same analysis could determine whether property was permanently affixed by a construction contractor for Use Tax purposes outside an enterprise zone.

The governing contractor rule was that a construction contractor permanently affixing tangible personal property to real estate was the property's end user and owed Use Tax on its cost price.

This short follow-up did not reproduce the tank's installation facts or expressly state a final tank classification.

Common questions

Did the property have to be in an enterprise zone for the affixation test to matter? No.

Who owed tax on permanently installed property? The construction contractor, on its cost.

Did this letter definitively classify the tank? Not from the facts reproduced in the published text.

Citations and references

• 86 Ill. Adm. Code 130.1940 and 130.2075
• Related guidance: ST 08-0003-PLR, named in prose without a corpus link

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2012.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2012/st-12-0048.pdf

Original ruling text

ST 12-0048-GIL 08/20/2012 CONSTRUCTION CONTRACTORS
When a construction contractor permanently affixes tangible personal property to real
property, the contractor is deemed the end user of that tangible personal property. As
the end user, the contractor incurs Use Tax on the cost price of that tangible personal
property. See 86 Ill. Adm. Code 130.1940 and 86 Ill. Adm. Code 130.2075. (This is a
GIL.)
August 20, 2012
Dear:
This letter is in response to your letter dated July 25, 2012, 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:
Thank you for the GIL issued on June 15, 2012 (copy attached), we appreciate that
information. The Department’s Response on page 5 referred us to ST 08-0003-PLR.
The language from that PLR was helpful. However, in looking at Section 5K, which was
cited and influenced the outcome of that PLR, I find that Section 5K is titled “Enterprise
Zone Building Materials Exemption”.
My next step was to ascertain whether the business location CITY1, IL which was the
subject matter of this GIL was located in an Enterprise Zone. I contacted the City of
CITY2 and Counties of COUNTY1 and COUNTY2 Enterprise Zone. They went out of
their way to research the specific business location in CITY1, and sent me a map
showing that this location is definitely NOT in an Enterprise Zone. Accordingly, Section
5K will not apply to this transaction.
My reason for writing again, then, is to ask if you could comment on a PLR or prior GIL
which is not dependent on business location (in other words, how would this transaction
be taxed with the same set of facts as before, but with the additional information that the
facility is NOT in an Enterprise Zone)?
DEPARTMENT’S RESPONSE:
In your letter dated May 11, 2012, you inquired whether certain tangible personal property (a tank)
was permanently affixed to real estate. In our response dated June 15, 2012, we referred you to ST
08-0003-PLR and quoted a portion of the language from the private letter ruling. Although the issue
in that letter was whether the tangible personal property was permanently affixed to real estate for the

ST 12-0048-GIL
August 20, 2012
Page 2
purposes of Section 5k of the Retailers’ Occupation Tax Act, the analysis is applicable for determining
whether the tangible personal property is permanently affixed to real estate by a construction
contractor for Use Tax liability purposes.
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