What does Illinois General Information Letter ST 18-0009-GIL conclude about Manufacturing Machinery & Equipment?

Plain-English summary

An Illinois taxpayer running a large commercial printing operation asked the Department of Revenue four questions modeled on a Minnesota-style program: whether commercial printing counts as "manufacturing" in Illinois, whether there's a sales-tax exemption for electricity used by printing machinery, whether a percentage-based utility-bill sales-tax abatement is available (based on an engineering study of how much electricity goes to manufacturing), and whether a refund of past sales tax paid in error on that electricity is available.

The Department's answer, issued as a General Information Letter rather than a binding Private Letter Ruling, addressed the electricity question directly but did not analyze whether the taxpayer's specific printing operation qualifies as "manufacturing." On electricity: the sale of electricity in Illinois is not taxed under the sales tax acts at all — it's taxed instead under the separate Electricity Excise Tax Law, which the Department states "does not provide a blanket exemption for electricity used in manufacturing." So there is no manufacturer's sales-tax exemption, abatement, or refund mechanism for electricity of the kind the taxpayer described.

On the broader manufacturing machinery and equipment (MM&E) exemption, the Department explained the general rule: machinery and equipment are exempt from Retailers' Occupation (sales) Tax when used more than 50% of the time in manufacturing or assembling tangible personal property for wholesale or retail sale or lease, per 86 Ill. Adm. Code 130.330. That exemption specifically excludes hand tools, supplies, coal, fuel oil, electricity, natural gas, artificial gas, steam, refrigerants, and water — confirming again that electricity itself is carved out even when machinery running on it is exempt.

Notably, the Department flagged that as of July 1, 2017, the MM&E exemption was expanded to cover machinery and equipment used primarily in "graphic arts production," a defined term covering specific printing and publishing NAICS classifications (including ink jet printing), under 35 ILCS 120/2-30. This is directly relevant to a commercial printing business, since it suggests printing machinery — as opposed to the electricity powering it — may itself qualify for the MM&E exemption if the taxpayer's process fits the graphic arts production definition. The Department did not, however, apply this definition to the taxpayer's specific operation or conclude whether it qualifies; that determination would require the taxpayer's specific facts to be evaluated in a binding PLR.

What this means for you

Manufacturers and printers

If you run manufacturing or commercial printing equipment in Illinois, the equipment itself (not the electricity that powers it) may qualify for the sales-tax exemption on purchase, provided it's used more than 50% of the time in manufacturing, assembling, or — since July 1, 2017 — graphic arts production as defined by specific NAICS codes referenced in 35 ILCS 120/2-30. Do not assume electricity consumption gets any special sales-tax break; it is taxed separately under the Electricity Excise Tax Law with no manufacturing carve-out.

Business owners considering a utility-bill abatement or refund strategy

This GIL forecloses the specific strategy the taxpayer asked about: there is no Illinois analog to programs (like the one described in Minnesota) that abate or refund sales tax on electricity based on an engineering study of the percentage used in manufacturing. Illinois simply does not tax electricity sales under the sales/use tax acts, so there is nothing to exempt, abate, or refund in that channel.

Accountants and tax professionals

Note that this letter is a GIL, not a PLR — the Department expressly declined to rule on whether the taxpayer's printing operation meets the "manufacturing" or "graphic arts production" definitions on its specific facts. If a client needs a binding determination on how their own operation is classified, they should pursue a Private Letter Ruling under 2 Ill. Adm. Code 1200.110 rather than rely on this general guidance.

Common questions

Q: Is there a sales-tax exemption for electricity used in manufacturing in Illinois?
A: No. Electricity sales are taxed under the separate Electricity Excise Tax Law, not under the Retailers' Occupation Tax or Use Tax, and that law does not provide a blanket manufacturing exemption. There is no percentage-based abatement or refund mechanism described in this letter.

Q: Does the Manufacturing Machinery & Equipment exemption cover printing equipment?
A: It can. Since July 1, 2017, the exemption under 86 Ill. Adm. Code 130.330 (as expanded by 35 ILCS 120/2-30) covers machinery and equipment used primarily in "graphic arts production," a term tied to specific NAICS printing and publishing classifications, including ink jet printing. It does not cover photocopying or production of final printed products in electronic/audio form.

Q: Did the Department decide whether this taxpayer's commercial printing operation qualifies as "manufacturing"?
A: No. As a GIL, this letter only directs the taxpayer to the relevant regulations and statutes; it does not analyze or conclude whether the taxpayer's specific printing business meets the manufacturing or graphic arts production definitions. A binding answer on those facts would require a Private Letter Ruling request.

Q: What items are excluded from the MM&E exemption even if the machinery itself qualifies?
A: Hand tools, supplies, coal, fuel oil, electricity, natural gas, artificial gas, steam, refrigerants, and water are all excluded from the exemption under 86 Ill. Adm. Code 130.330(c)(3), regardless of how the qualifying machinery is used.

Citations and references

Statutes and rules:

• 86 Ill. Adm. Code 130.330 (Manufacturing Machinery & Equipment exemption; exclusions at 130.330(c)(3); manufacturing process definition at 130.330(b)(2))
• 86 Ill. Adm. Code 130.101 (Retailers' Occupation Tax imposed on retail sales of tangible personal property)
• 86 Ill. Adm. Code 150.101 (Use Tax imposed on tangible personal property purchased at retail)
• 35 ILCS 120/2-30 (graphic arts production added to MM&E exemption effective July 1, 2017)
• 2 Ill. Adm. Code 1200.110 (Private Letter Ruling procedure)
• 2 Ill. Adm. Code 1200.120 (General Information Letter procedure)

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2018.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2018/st-18-0009-gil.pdf

Original ruling text

ST 18-0009-GIL 03/30/2018 MANUFACTURING MACHINERY & EQUIPMENT
Under the Retailers’ Occupation Tax Act, the manufacturing machinery and equipment
exemption is available for machinery and equipment used primarily (over 50% of the time) in
the manufacturing or assembling of tangible personal property for wholesale or retail sale or
lease. See 86 Ill. Adm. Code 130.330. (This is a GIL.)

March 30, 2018

RE:

Sales & Use Tax – Business – Manufacturing

Dear Xxxxx:
This letter is in response to your letter dated January 3, 2018, in which you requested
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:
Here in Minnesota, electricity consumed in manufacturing can be exempted from state
sales tax. That is, the utility company abates some percentage of the sales tax normally
due when paying the monthly electricity bill. Moreover, past tax paid in error can be
refunded.
My question relates to a large printing operation in Illinois.
-

Is commercial printing considered “manufacturing” in Illinois?

-

Is there “manufacturer sales tax exemption” for the electricity consumed by the
printing machinery? (In this case, over 50% of total facility electricity consumption is
used by manufacturing machinery.)

ST 18-0009-GIL
Page 2
-

Is utility bill sales tax abatement available in Illinois? (A percentage sales tax
exemption, based on an engineering study that identifies the portion of the facility’s
electricity that goes into manufacturing?)

-

Is a refund of past sales tax paid in error available? Refund from utility or Illinois
Department of Revenue?

DEPARTMENT’S RESPONSE:
Sales Tax:
The Retailers’ Occupation Tax Act imposes a tax upon persons engaged in this State in the
business of selling tangible personal property at retail to purchasers for use or consumption. See 86
Ill. Adm. Code 130.101. 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. Persons who sell tangible
personal property must either pay tax or document an exemption. The sale of electricity is not taxed
under the sales tax acts. Rather, it is taxed under the Electricity Excise Tax Law, which does not
provide a blanket exemption for electricity used in manufacturing.
Manufacturing Machinery and Equipment Exemption:
The Manufacturing Machinery and Equipment exemption (“MM&E”) from sales tax is available
for sales of machinery and equipment used primarily (over 50% of the time) in the manufacturing or
assembling of tangible personal property for wholesale or retail sale or lease. See 86 Ill. Adm. Code
130.330. The manufacturing process is the production of articles of tangible personal property or
assembling different articles of tangible personal property by procedures commonly regarded as
manufacturing, processing, fabricating, or refining which changes some existing material or materials
into a material with a different form, use or name. These changes must result from the process in
question and be substantial and significant. See Section 130.330(b)(2). The exemption does not
include hand tools, supplies, coal, fuel oil, electricity, natural gas, artificial gas, steam, refrigerants or
water. See 86 Ill. Adm. Code 130.330(c)(3).
Beginning July 1, 2017, the exemption includes machinery and equipment used primarily in
graphic arts production. See 35 ILCS 2-5(14). The Department’s regulation at 86 Ill. Adm. Code
130.330, concerning the MM&E exemption, is in the process of being amended to reflect this change.
“Graphic arts production” means the production of tangible personal property for wholesale or retail
sale or lease by means of printing, including ink jet printing, by one or more of the processes
described in Groups 323110 through 323122 of Subsector 323, Groups 511110 through 511199 of
Subsector 511, and Group 512230 of Subsector 512 of the North American Industry Classification
System (“NAICS”) published by the U.S. Office of Management and Budget, 1997 edition. Graphic
arts production does not include (i) the transfer of images onto paper or other tangible personal
property by means of photocopying or (ii) final printed products in electronic or audio form, including
the production of software or audiobooks. Persons engaged primarily in the business of printing or
publishing newspapers or magazines that qualify as newsprint and ink, by one or more of the
processes described in Groups 511110 through 511199 of subsector 511 of the NAICS published by

ST 18-0009-GIL
Page 3
the U.S. Office of Management and Budget, 1997 edition, are deemed to be engaged in graphic arts
production. See 35 ILCS 120/2-30.
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,

Debra M. Boggess
Associate Counsel
DMB:bkl