How does Illinois tax a manufacturer's sales of window and door frames, including sales to construction contractors?

Plain-English summary

A window- and door-frame manufacturer asked whether its products were tangible personal property or real property in the manufacturer's hands. IDOR said more facts would be needed for specific guidance, then explained the main transaction types.

When the manufacturer sells frames without installation, the frames are tangible personal property and the sale is taxable unless an exemption applies. An over-the-counter buyer pays the corresponding Use Tax; a buyer purchasing for resale should provide a resale certificate.

When a construction contractor buys frames for permanent incorporation into Illinois real estate, the contractor—not its customer—is the end user. The contractor owes Use Tax based on its cost and must self-assess if the supplier did not collect it. Tax properly paid to another state may be credited against Illinois Use Tax.

Because the customer has no Use Tax liability on the contractor's materials, the contractor has no authority to bill the customer for “sales tax.” It may raise its price or separately require reimbursement of its own tax liability, but the invoice must describe that amount as reimbursement rather than sales tax.

Common questions

Are uninstalled window and door frames taxable goods? Generally yes, unless the buyer documents an exemption such as resale.

Who owes tax when a contractor installs the frames into real estate? The contractor owes Use Tax as the end user.

Citations and references

• 86 Ill. Adm. Code 130.1940 and 130.2075
• 86 Ill. Adm. Code 130.1401
• 86 Ill. Adm. Code 150.310

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2013.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2013/st-13-0066.pdf

Original ruling text

ST 13-0066 - GIL 10/07/13 CONTRACTORS
Construction contractors are deemed end users of tangible personal property purchased for
incorporation into real property, and they incur Use Tax liability based upon their cost price of
the tangible personal property. See 86 Ill. Adm. Code 130.1940 and 86 Ill. Adm. Code 130.2075
(This is a GIL.)
October 7, 2013

Dear Xxxxx:
This letter is in response to your letter dated August 23, 2013, 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:
Please advise as to whether the manufacturer of window and door frames is
considered to be tangible personal property or real property in the hands of the
manufacturer.

DEPARTMENT’S RESPONSE:
The Illinois Retailers' Occupation Tax Act imposes a tax upon persons engaged in this
State in the business of selling tangible personal property to purchasers for use or consumption.
See 86 Ill. Adm. Code 130.101. In Illinois, Use Tax is imposed on the privilege of using, in this
State, any kind of tangible personal property that is purchased anywhere at retail from a retailer.
See 86 Ill. Adm. Code 150.101. These taxes comprise what is commonly known as “sales” tax in
Illinois. If the purchases occur in Illinois, the purchasers must pay the Use Tax to the retailer at
the time of purchase. The retailers are then allowed to retain the amount of Use Tax paid to
reimburse themselves for their Retailers' Occupation Tax liability incurred on those sales.
Without further information, we cannot provide you with specific guidance. However,
we assume you are inquiring about the taxability of window and door frames at the time that a
manufacturer sells them. Generally, the taxability of window frames and door frames varies
depending on several factors. If you are only the manufacturer and not the installer of the
window and door frames, the frames are tangible personal property and subject to Retailers’

Occupation Tax when sold unless an exemption applies. If a customer purchases tangible
personal property, or in your case window or door frames, over-the counter without installation,
then the seller owes Retailers' Occupation Tax and must collect the corresponding Use Tax from
the customer. Sellers must also determine whether the purchaser is purchasing the product for
use or consumption or whether the product will be resold. If the property will be resold, then the
seller should obtain a certificate of resale from the purchaser. See 86 Ill. Adm. Code 130.1401.
Different rules apply when a manufacturer sells to a construction contractor. In Illinois,
construction contractors are deemed end users of tangible personal property purchased for
incorporation into real property. As end users of such tangible personal property, these
contractors incur Use Tax liability for such purchases based upon their cost price of the tangible
personal property. See 86 Ill. Adm. Code 130.1940 and 86 Ill. Adm. Code 130.2075. Therefore,
any tangible personal property that a construction contractor purchases that will be permanently
affixed to or incorporated into real property in this State will be subject to Use Tax. If such
contractors did not pay the Use Tax liability to their suppliers, those contractors must self assess
their Use Tax liability and pay it directly to the Department. If the contractors have already paid
a tax in another state regarding the purchase or use of such property, they will be entitled to a
credit against their Illinois Use Tax liability to the extent that they have paid tax that was
properly due to another state. See 86 Ill. Adm. Code 150.310.
It is important to note that since construction contractors are the end users of the
materials that they permanently affix to real estate, their customers incur no Use Tax liability and
the construction contractors have no legal authority to collect the Use Tax from their customers.
However, many construction contractors pass on the amount of their Use Tax liabilities to
customers in the form of higher prices or by including provisions in their contracts that require
customers to “reimburse” the construction contractor for his or her tax liability. Please note that
this reimbursement cannot be billed to a customer as “sales tax,” but can be listed on a bill as a
reimbursement of tax. The choice of whether a construction contractor requires a tax
reimbursement from the customer or merely raises his or her price is a business decision on the
construction contractor’s part.
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,

Cara Bishop
Associate Counsel
CB: