Did leasing an aircraft acquired for resale stop or restart Illinois's 18-month interim-use period?

Plain-English summary

An aircraft dealer acquired an aircraft for resale, failed to sell it, and later leased it for the lessee's use. The dealer asked whether the lease ended the original 18-month demonstration or interim-use period and whether a fresh 18-month period would begin when the aircraft returned.

IDOR did not answer those questions. Its entire response directed the dealer to the interim and demonstration-use regulation in Section 150.306.

The GIL's official synopsis states the general rule that if a retailer's demonstration or interim use of aircraft or watercraft exceeds 18 months, the retailer must pay Use Tax on original cost price. If the retailer later sells the aircraft or watercraft, no credit is allowed for that Use Tax.

The letter did not determine whether this dealer's lease stopped, extinguished, paused, or restarted the 18-month period.

What this means for you

This GIL is primarily a documented non-answer. It supplies the regulation and its general 18-month consequence but no resolution for the lease sequence described.

Common questions

Did the lease stop the 18-month period? IDOR did not say.

Did return from the lease start a new period? IDOR did not say.

What general consequence did the synopsis identify? Use Tax on original cost after more than 18 months, without a later-sale credit.

Citations and references

• 86 Ill. Adm. Code 150.306.

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2014.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2014/st-14-0030.pdf

Original ruling text

ST 14-0030-GIL 05/05/2014 USE TAX
For watercraft or aircraft, if the period of demonstration use or interim use by the retailer exceeds 18 months,
the retailer shall pay Use Tax on the original cost price of the aircraft or watercraft, and no credit for that tax is
permitted if the aircraft or watercraft is subsequently sold by the retailer. See 86 Ill. Adm. Code 150.306. (This
is a GIL.)
May 5, 2014
Dear Xxxx:
This letter is in response to your letter dated January 3, 2014, 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:
COMPANY (the “Taxpayer”) is registered with the Federal Aviation Administration and
the Illinois Department of Revenue (“DOR”) as a dealer of aircraft. In the ordinary
course of the Taxpayer’s business, the Taxpayer on 14 April 2011 acquired a
AIRPLANE aircraft bearing manufacture’s serial number ### (the “Aircraft”) for the
purpose of offering the Aircraft for sale (see Attachment A – copy of RUT-60 indicating
the Taxpayer’s acceptance of the Aircraft as trade-in).
On 25 October 2012, because the Taxpayer had not successfully sold the Aircraft, the
Taxpayer entered into an exclusive lease arrangement for the use of the Aircraft (the
“Lease”), and delivered possession of the Aircraft to its lessee in STATE. Possession of
the Aircraft, since the Lease commenced, has remained with the Taxpayer’s lessee for
the purpose of the lessee’s use of (and not for inducing the lessee to purchase) the
Aircraft.
As the result of the Lease, the Taxpayer seeks DOR’s guidance (either in the form of a
Private Letter Ruling or, as determined by DOR, a General Information Letter) to
confirm the Taxpayer’s position that the answer to the following two (2) questions is,
yes:


Does the leasing of the Aircraft by the Taxpayer extinguish the 18-month period
of demonstration use or interim use under Illinois Administrative Code 86 §
150.306(c), such that the Taxpayer will not owe use tax on the purchase of the
Aircraft 18-month following the Taxpayer’s date of original purchase of the
Aircraft?

Page 2
May 5, 2014


When the Lease is terminated and the Aircraft is redelivered to the Taxpayer, will
a “new” 18-month period of demonstration use or interim use under Illinois
Administrative Code 86 § 150.306(c) commence, such that the Taxpayer will
have 18-month from the date of such redelivery to dispose of the Aircraft before
the Taxpayer would be require to remit use tax on the Taxpayer original
purchase price of the Aircraft?

To the best knowledge of the Taxpayer and the Taxpayer’s representative DOR has not
previously ruled on this or a similar issue for the Taxpayer or a predecessor, and neither
the Taxpayer nor the Taxpayer’s representative have previously submitted the same or
similar issue to DOR.
The Taxpayer and the Taxpayer’s representative are not aware of any prior DOR
guidance that specifically applies to the Taxpayer’s facts, but believes the positions
described in DOR’s 02-0073-GIL generally supports the Taxpayer’s position that the
answer to both question should be, in the affirmative (see Attachment B).
Additionally, the Taxpayer and the Taxpayer’s representative are not aware any
authorities that are contrary to the Taxpayer’s view.
Should DOR require additional information to respond to this request, please do not
hesitate to contact the Taxpayer’s representative noted above.
DEPARTMENT’S RESPONSE:
Please consult the Department’s regulations on the interim and demonstration use exemption
at 86 Ill. Adm. Code 150.306.
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:lkm