Did Illinois confirm that every aircraft spare sold from a manufacturer's Illinois warehouse qualified for the Class IV aircraft exemption?

Plain-English summary

An aircraft manufacturer and spare-parts retailer asked IDOR to confirm that all sales from its Chicago parts warehouse qualified for Illinois's aircraft modification and repair exemption. The company said it held an FAA Air Agency Certificate, operated approved repair stations, had a Class IV-rated facility in another state, and conducted operations under Part 145.

IDOR declined to issue a private letter ruling and did not decide whether the company's warehouse sales qualified. The GIL instead described the rule after Public Act 98-0534: the exemption applies only to sales of qualifying property to persons that modify, refurbish, complete, repair, replace, or maintain aircraft and that satisfy all three requirements—an FAA Air Agency Certificate and authority to operate an approved repair station, a Class IV rating, and Part 145 operations.

The exemption does not cover aircraft operated by scheduled commercial air carriers under Part 121 or Part 129. Because IDOR stopped at these general rules, the company's own eligibility remained unresolved.

Common questions

Did IDOR approve the exemption for all parts sold from the Illinois warehouse? No. It declined the requested PLR and gave general information only.

What conditions did IDOR identify? The purchaser performing the covered aircraft work must hold the specified FAA certificate and repair-station authority, have a Class IV rating, and operate under Part 145.

Citations and references

• 35 ILCS 120/2-5(40)
• 86 Ill. Adm. Code 130.120(aaa)
• 2 Ill. Adm. Code 1200.110(a)(4)
• Public Act 98-0534

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-13-0072.pdf

Original ruling text

ST 13-0072-GIL 11/13/2013 MISCELLANEOUS
The exemption for materials, parts, equipment, components, and furnishings incorporated into or
upon an aircraft as part of the modification, refurbishment, completion, replacement, repair, or
maintenance of the aircraft applies only to the sale of qualifying tangible personal property to
persons who modify, refurbish, complete, repair, replace, or maintain aircraft and who (i) hold an
Air Agency Certificate and are empowered to operate an approved repair station by the Federal
Aviation Administration, (ii) have a Class IV Rating, and (iii) conduct operations in accordance
with Part 145 of the Federal Aviation Regulations. See 86 Ill. Adm. Code 130.120(aaa). (This is
a GIL.)
November 13, 2013

Dear Xxxxx:
This letter is in response to your letter dated May 16, 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.
In your letter you have stated and made inquiry as follows:
Please accept the following as a formal request for a Private Letter Ruling to be
issued by the Department with respect to the below described facts. This issue is
whether the ‘Class IV’ exemption (defined below) applies to all retail sales of
aircraft spares in Illinois from COMPANY’s Illinois spares warehouse. The tax
period at issue is DATE to present (on going exemption under existing law). The
Department recently conceded in audit that the exemption does apply to
COMPANY (audit period was DATE 1 to DATE 2). There is no litigation
currently pending with respect to this issue or period.
ISSUE
Whether the Illinois ‘Class IV’ exemption, pursuant to ILCS 35§120/2-5(40),
applies to COMPANY such that sales from its Chicago spares warehouse are
exempt from Illinois Retailer’s [sic] Occupation Tax and related taxes.

AUDIT RESOLUTION
To the best of taxpayer’s knowledge, the Department has not previously ruled,
other than in audit, on the same or similar issue for the taxpayer or a predecessor,
and such issue has never been submitted by taxpayer for formal ruling and
subsequently withdrawn.
FACTS
1.

COMPANY, a STATE 1 corporation, is a world leading manufacturer of
business jets including aftermarket solutions and services. COMPANY
has owned and operated a US based parts distribution business since the
early 1960s, has its own customer base for COMPANY aircraft and
aftermarket products, preferred relationships with its own suppliers and
well-developed Authorized Services Facility (commonly referred to as
‘ASF’) network for its Lear products within the business aircraft industry;

2.

COMPANY also has several US based service centers located in various
states where customers are conveniently serviced as part of various
programs, including warranty and other programs contracted between
customers and COMPANY.

3.

COMPANY is a retailer engaged in the business of selling tangible
personal property at retail pursuant to ILCS 35§§120/2 and 105/2 and
distributes aircraft spares throughout the world from its Chicago, Illinois
warehouse and from various other worldwide locations;

4.

COMPANY has gross receipts from the sale of such tangible personal
property in Illinois pursuant to ILCS 35§120/2-5;

5.

COMPANY holds an Air Agency Certificate and is empowered to (and
does) operate its service center repair stations pursuant to approval by the
Federal Aviation Administration (FAA);

6.

COMPANY’s service center/repair facility located in STATE 2 holds an
FAA Class IV rating; and

7.

COMPANY, as the IL retailer, is conducting operations in accordance
with Part 145 of the Federal Aviation Regulations (FAR) pursuant [sic]
ILCS 35§120/2-5(40).

LAW
ILCS 35§102-2 – Tax imposed, commonly referred to as the Retailers [sic]
Occupation Tax, provides “A tax is imposed upon persons engaged in the
business of selling at retail tangible personal property, including computer

software, and including photographs, negatives, and positives that are the product
of photoprocessing, but not including products of photoprocessing produced for
use in motion pictures for public commercial exhibition. Beginning January 1,
2001, prepaid telephone calling arrangements shall be considered tangible
personal property subject to the tax imposed under this Act regardless of the form
in which those arrangements may be embodied, transmitted, or fixed by any now
known or hereafter developed.” [Emphasis added].
ILCS 35§105/2 Definitions provides that a “retailer” means and includes every
person engaged in the business of making sales at retail as defined in this Section.
A person who holds himself or herself out as being engaged (or who habitually
engages) in selling tangible personal property at retail is a retailer hereunder with
respect to such sales ‘...(and not primarily in a service occupation)...’.
[Emphasis added].
ILCS 35§120/2-5 ‘Exemptions provides: ‘Gross receipts from proceeds from the
sale of the following tangible personal property are exempt from the tax imposed
by this Act:...’ [Emphasis added].
ILCS 35§120/2-5(40) provides “Beginning January 1, 2010, materials, parts,
equipment, components and furnishings incorporated into or upon an aircraft as
part of the modification, refurbishment, completion, replacement, repair, or
maintenance of the aircraft. This exemption includes consumable supplies used in
the modification, refurbishment, completion, replacement, repair, and
maintenance of aircraft, but excludes any materials, parts, equipment,
components, and consumable supplies used in the modification, replacement,
repair, and maintenance of aircraft engines or power plants, whether such engines
or power plants are installed or uninstalled upon any such aircraft. ‘Consumable
supplies’ include, but are not limited to, adhesive, tape, sandpaper, general
purpose lubricants, cleaning solution, latex gloves, and protective films. This
exemption applies only to those organizations that (i) hold an Air Agency
Certificate and are empowered to operate an approved repair station by the
Federal Aviation Administration, (ii) have a Class IV Rating, and (iii) conduct
operations in accordance with Part 145 of the Federal Aviation Regulations. The
exemption does not include aircraft operated by a commercial air carrier
providing scheduled passenger air service pursuant to authority issued under Part
121 or Part 129 of the Federal Aviation Regulations.” [Emphasis added].
According to the above cited statutes, the following requirements must be met in
order to qualify for the exemption provided in ILCS 35§120/2-5(40):
1.

Person/Taxpayer must be engaged in the business of selling tangible
personal property at retail (ILCS 35§§120/2 and 105/2);

2.

Person/Taxpayer must have gross receipts from the sale of such tangible
personal property ILCS 35§120/2-5);

3.

Person/Taxpayer which is retailing must hold an Air Agency Certificate
and be empowered to operate an approved repair station by the Federal
Aviation Administration (FAA);

4.

Person/Taxpayer which is retailing must have a Class IV rating; and

5.

Person/Taxpayer which is retailing must conduct operations in accordance
with Part 145 of the Federal Aviation Regulations (FAR) ILCS
35§120/25(40)).

ANALYSIS
ILCS 35§120/2-5(40) is an exemption to the Retailer’s [sic] Occupation Tax,
which is defined, COMPANY is a retailer for purposes of the statute in general as
well as for the specific purpose of the exemption with respect to sales of
“...materials, parts, equipment, components, and furnishings incorporated into or
upon an aircraft as part of the modification, refurbishment, completion,
replacement, repair or maintenance of the aircraft.” Nowhere in the statute does it
say that the retailer of the part has to hold the Class IV and conduct operations
under Part 145 for the purpose of making repairs related to the sold parts. To the
contrary, the definition of retailer provides the retailer “...not [be] primarily in a
service occupation...”. In order to read the statute to say that the exemption does
not apply to the retailer but to the service provider, one must construe the statute
to imply that the repair facility itself is in fact the retailer for purposes of this
statute, for which there is no such requirement.
Further, Illinois statutes do not require that modification, refurbishment,
completion, replacement, repair, or maintenance of the aircraft occur in Illinois,
and further the statutes do not require the facility doing such work be located
within the state of Illinois. No reference, in fact, is made at all with respect to the
location of the repair facility.
COMPANY meets all the requirements outlined in the statutes and, therefore, per
Illinois law qualifies for exemption on all sales of parts to be used in the repair of
aircraft and sold in the state of Illinois.
1.

COMPANY is a retailer engaged in the business of selling tangible
personal property at retail pursuant to ILCS 35§§120/2 and 105/2;

2.

COMPANY has gross receipts from the sale of such tangible personal
property pursuant to ILCS 35§120/2-5;

3.

COMPANY holds an Air Agency Certificate and be empowered to
operate an approved repair station by the Federal Aviation Administration
(FAA);

4.

COMPANY as retailer, has a Class IV rating; and

5.

COMPANY, as retailer, is conducting operations in accordance with Part
145 of the Federal Aviation Regulations (FAR) pursuant to ILCS
35§120/2-5(40).

The Department of Revenue audit team’s previous position was two-fold: (1)
ILCS 35§120/2-5(40) only applies to maintenance facilities located in Illinois,
and (2) based on legislative intent, the exemption applies to the purchase of parts
by such facility for repairs completed in Illinois. COMPANY does not agree with
this position for the following reasons, as affirmed pursuant to the resolution on
audit of this matter.
First, if in fact, the statute did require the facility to be located in Illinois, the
statute providing for the exemption would be at risk of being struck down as
unconstitutional. In Russell Stewart Oil Company 1, the Illinois Supreme Court
ruled that the state failed to sustain its burden in justifying the discrimination
against interstate commerce in terms of the claimed local benefits flowing from
the statute, failed to show the unavailability of nondiscriminatory alternatives and
therefore stuck section 3 of the Use Tax Act which provided a new definition of
“gasohol” providing an exemption to in state producers only as a violation of the
commerce clause. Specifically, the Court found that “Discrimination based on
geographic origin is a kind of activity that the commerce clause serves to prevent.
See also Bacchus Imports, Ltd. V Dias (1984), 468 U.S. 263, 82 L.Ed. 200, 104
S.Ct. 3049.”
In the facts of that case, plaintiff was an Illinois corporation which owned and
operated a retail gas stations [sic] in Illinois, Iowa and Wisconsin, and sold
“gasohol” which is a blend of nine parts gasoline, cellulosic materials or
petroleum products. Effective 9/1/1985, section 2 of the Retailers' Occupation
Tax Act and section 3 of the Use Tax Act were amended to set out new tax rates
for the sale of gasohol produced from ethanol distilled in Illinois or in a State
offering Illinois reciprocal tax benefits relating to gasohol. Both Acts were
amended to provide “With respect to gasohol as defined in the Use Tax Act in
which the ethanol had been distilled in Illinois, such tax shall be imposed at the
rate of 0% up to and including December 31, 1983...” whereas prior to the
amendment, all sales of gasohol were taxed at the same rate without regard to
where the ethanol used to produce the gasohol was distilled.
With respect to such facts, the Illinois Supreme Court wrote “It is clear, however,
that ‘[n]o State may, consistent with the Commerce Clause, ‘impose a tax which
discriminates against interstate commerce*by providing a direct commercial
advantage to local business.’” (Boston Stock Exchange v. State Comm’m (1977),
1

Russell Stewart Oil Company v Illinois (1988), 124 Ill 2d. 116, 529 NE2d. 484.

429 U.S. 318, 329, 50 L.Ed.2d 514, 524, 97 S.Ct. 599,607, quoting Northwestern
States Portland Cement Co. v. Minnesota (1959), 358 U.S. 450, 458, 3 L.Ed.2d
421, 427, 79 S.Ct. 357,362.) Where the purpose of State legislation affecting
interstate commerce amounts to “simple economic protectionism,” a virtual per se
rule of invalidity has been applied by the Court. (Baachus Imports, Ltd);
Minnesota v. Clover Managers, Inc. (1980) 447, U.S. 27,36, 64 L.Ed2d 702,712,
100 S.Ct. 2009,2015; Philadelphia v. New Jersey (1978), 437 U.S. 617,624, 57
L.Ed.2d. 475,481, 98 S.Ct. 2351,2535.) Permitting individual States to enact laws
favoring local businesses at the expense of out-of-State businesses would, in the
language of the Court, “invite a multiplication of preferential trade areas
destructive of the very purpose of the Commerce Clause.” Dean Milk Co. v.
Madison, (1951), 340 U.S. 349,356, 95 IL.Ed.2d 329,334, 71 S.Ct. 295,299. See
also Maryland v. Louisiana (1981), 451 U.S. 725,754, 68 L.Ed.2d. 576,600,
101S.Ct. 2114,2133; Boston Stock Exchange v. State Tax Comm’n (1977) 429
U.S. 318, 329, 50 L.Ed2d 514,525, 97 S.Ct. 599,607.’
Second, the statute itself is clear and not vague on its face, and as such legislative
intent is presumed to be reflected 2. In Exelon, the Illinois Supreme Court stated
“In construing a statute, it is never proper for a court to depart from plain
language by reading into the statute exceptions, limitations, or conditions that
conflict with the clearly expressed legislative intent.” 3
To the best of taxpayer’s knowledge, there is no authority, statutory or otherwise,
directly on point or contrary to the taxpayer’s above stated position.
Your time and consideration of this matter is greatly appreciated. Please advise of
your determination in writing to the person(s) and location indicated below.

DEPARTMENT’S RESPONSE:
The Department’s regulation “Public Information, Rulemaking and Organization”
provides that “[w]hether to issue a private letter ruling in response to a letter ruling request is
within the discretion of the Department. The Department will respond to all requests for private
letter rulings either by issuance of a ruling or by a letter explaining that the request for ruling will
not be honored.” 2 Ill. Adm. Code 1200.110(a)(4). The Department is declining to issue a
private letter ruling in this instance and, instead, is issuing you this General Information Letter.
On August 16, 2013, Public Act 98-0534 was enacted which amended the exemption for
materials, parts, equipment, components, and furnishings incorporated into or upon an aircraft as
part of the modification, refurbishment, completion, replacement, repair, or maintenance of the
2

Exelon Corporation v. DOR, 234 Ill 2d 266; 917 NE2d 899; 334 Ill Dec 824 (2009), where the Supreme Court of
Illinois noted that a court’s analysis of a statute begins with the language of the statute, which is presumed to be the
best indication of legislative intent and further, where statutory language is clear and unambiguous, a court must
give it effect without resorting to other tools of interpretation.
3
Id.

aircraft provided for in the Use Tax Act, Service Occupation Tax Act, Service Use Tax Act and
the Retailers’ Occupation Tax Act. The exemption was amended, in relevant part, to provide
that the exemption applies only to the sale of qualifying tangible personal property to persons
who modify, refurbish, complete, repair, replace, or maintain aircraft and who (i) hold an Air
Agency Certificate and are empowered to operate an approved repair station by the Federal
Aviation Administration, (ii) have a Class IV Rating, and (iii) conduct operations in accordance
with Part 145 of the Federal Aviation Regulations. The exemption does not include aircraft
operated by a commercial air carrier providing scheduled passenger airservice pursuant to
authority issued under Part 121 or Part 129 of the Federal Aviation Regulations.
If you have further questions related to the Illinois sales tax laws, please visit our website
at www.tax.illinois.gov or contact the Department’s Taxpayer Information Division at (217) 7823336.
Very truly yours,

Debra M. Boggess
Associate Counsel