Did permanently bolted steel freezer racking qualify for Illinois' enterprise-zone building-materials exemption?

Plain-English summary

A company was constructing a 230,000-square-foot cold-storage building in an Illinois enterprise zone. Its three freezers would contain steel-tube racking with wire shelves, permanently bolted into a four-inch concrete curb. The company asked whether the racking qualified for the enterprise-zone building-materials exemption.

IDOR said yes, based on the submitted description and the company's representation that the racking would be incorporated into real estate in the enterprise zone.

The exemption covered building materials physically incorporated into real estate by remodeling, rehabilitation, or new construction. The letter also said tax-free purchases required an active Department-issued Exemption Certificate at the time of purchase. A retailer could document the exemption with the purchaser's certificate number and required certification, including a completed Form EZ-1.

What this means for you

Permanent attachment and incorporation into real estate were central to the result. Freestanding or movable storage equipment was not addressed. Documentation also mattered: the construction contractor or other purchaser could not buy tax-free without an active Exemption Certificate.

This PLR states that it ceases to bind IDOR ten years after July 18, 2016—July 18, 2026—or earlier if relevant law, rules, case law, or facts change.

Common questions

Why did the racking qualify? It was represented as permanently bolted into concrete and physically incorporated into enterprise-zone real estate.

Was permanent installation alone enough to make a tax-free purchase? No. The letter also required an active Exemption Certificate and supporting certification.

Citations and references

• 35 ILCS 120/5k.
• 86 Ill. Adm. Code 130.1951(d) and (e).
• 2 Ill. Adm. Code 1200.110(e).

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2016.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2016/st-16-0005-plr.pdf

Original ruling text

ST 16-0005 PLR 07/18/2016

ENTERPRISE ZONES

The Enterprise Zone building materials exemption is explained in Section 130.1951 of the
Department’s regulations. See 86 Ill. Adm. Code 130.1951. (This is a PLR.)
July 18, 2016

RE:

Request for Binding Response-Illinois Enterprise Zone
COMPANY, ADDRESS, CITY, IL

Dear Xxxxx:
This letter is in response to your letter dated April 29, 2016, 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.
Review of your request disclosed that all the information described in paragraphs 1 through 8
of Section 1200.110 appears to be contained in your request. This Private Letter Ruling will bind the
Department only with respect to ABC, for the issue or issues presented in this ruling, and is subject to
the provisions of subsection (e) of Admin. Code § 1200.110, governing expiration of Private Letter
Rulings. Issuance of this ruling is conditioned upon the understanding that ABC, nor a related
taxpayer is currently under audit or involved in litigation concerning the issues that are the subject of
this ruling request. In your letter you have stated and made inquiry as follows:
I am writing to get a Binding Response or Letter Ruling from the Legal Department on
whether or not The Cold Storage Racking Material in the Freezer Qualifies as Tax
Exempt under the Illinois Enterprise Zone Exemption.
We are constructing a new 230,000 sf Cold Storage Building at the above noted
address. The (3) Freezers will have permanent bolted down (to concrete floors) steel
racking to store the food product. Product is made out of steel tubing with wire storage
shelves and will be bolted down permanently into a 4” high concrete curb in the
Freezers. We are including the following with this letter:
 COMPANY 2 Racking Drawings Showing:
o Amount of Racking noted in a Plan View
o Elevations of the Racking
Note that the attached drawings are the same drawings which were the basis for the
purchase and future installation of the material.
DEPARTMENT’S RESPONSE:

An exemption from Illinois Retailers’ Occupation Tax is allowed for gross receipts from retail
sales of building materials that will be incorporated, by remodeling, rehabilitation or new construction,
into real estate located in an enterprise zone established by a county or municipality under the Illinois
Enterprise Zone Act. 35 ILCS 120/5k.
The Department recently updated its Enterprise Zone rule regarding the building materials
exemption. See subsection (d) of 86 Ill. Adm. Code 130.1951 Sales of Building Materials
Incorporated into Real Estate within Enterprise Zones. On and after July 1, 2013, to document the
exemption, the retailer must obtain from the purchaser the purchaser's Exemption Certificate number
issued by the Department, along with a copy of the certification required by subsection (d)(2) of the
rule. The retailer may comply with this certification requirement by securing from the purchaser a
completed and signed Form EZ-1. A construction contractor or other entity may not make tax-free
purchases unless it has an active Exemption Certificate issued by the Department at the time of
purchase.
In order to qualify for the building materials exemption, the materials being purchased must be
building materials. That is, they must be purchased for physical incorporation into real estate. For
example, gross receipts from sales of common building materials such as lumber, bricks, cement,
windows, doors, insulation, roofing materials and sheet metal; plumbing systems and components
thereof; heating systems and components thereof; electrical systems and components thereof;
central air conditioning systems; built-in cabinets and appliances; and floor coverings such as tile,
linoleum and carpeting that are glued or otherwise permanently affixed to the real estate can qualify
for the exemption. 86 Ill. Adm. Code 1951(e).
Based on your description of the Cold Storage Racking Material (“Racking Material”), the
information you provided with your letter, and your representation that it will be incorporated into real
estate located in an enterprise zone, it is the Department’s opinion that the Racking Material qualifies
for the Enterprise Zone building materials exemption.
The factual representations upon which this ruling is based are subject to review by the
Department during the course of any audit, investigation, or hearing and this ruling shall bind the
Department only if the factual representations recited in this ruling are correct and complete. This
Private Letter Ruling is revoked and will cease to bind the Department 10 years after the date of this
letter under the provisions of 2 Ill. Adm. Code 1200.110(e) or earlier if there is a pertinent change in
statutory law, case law, rules or in the factual representations recited in this ruling.
I hope this information is helpful. If you have further questions concerning this Private Letter
Ruling, you may contact me at (217) 782-2844. 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) 782-3336.
Very truly yours,

Richard S. Wolters
Chairman, Private Letter Ruling Committee
RSW:DB:bkl