My manufacturing customers buy PPE items like gloves, hardhats, respirators, and disposable clothing from us -- since Illinois expanded the manufacturing machinery exemption on July 1, 2019 to cover 'production related tangible personal property,' can they buy these items exempt using Form ST-587?

Plain-English summary

A seller of personal protective equipment (PPE) -- gloves, glasses, hardhats, respirators, disposable clothing, earplugs, and similar items -- asked the Department whether its manufacturing customers could buy these items exempt from sales tax by submitting Form ST-587, given a new law that took effect July 1, 2019. The seller explained it had historically treated PPE as taxable when the PPE protects the person wearing it, and had accepted exemption claims only when the PPE instead protects the product being handled or manufactured from the person.

The Department's answer focused on a broader change, not that person-vs-product line. Beginning July 1, 2019, Illinois's existing manufacturing and assembling machinery and equipment exemption (86 Ill. Adm. Code 130.330) was expanded to also cover "production related tangible personal property." That term is defined at 86 Ill. Adm. Code 130.330(h) as all tangible personal property used or consumed in a production-related process by a manufacturer in a manufacturing facility (or by a graphic arts producer in graphic arts production), plus anything used or consumed in research and development regardless of where that R&D happens.

Examples of qualifying "production related" property, per the Department's emergency regulations:

1. Property incorporated into real estate within a manufacturing facility for use in a production-related process -- whether purchased by the manufacturer itself or by a construction contractor working on the facility.
2. Supplies and consumables used in the manufacturing process, including fuels, coolants, solvents, oils, lubricants, and adhesives.
3. Hand tools, protective apparel, and fire and safety equipment used or consumed within a manufacturing facility.
4. Property used or consumed in a manufacturing facility for pre-production and post-production material handling, receiving, quality control, inventory control, storage, staging, and packing for shipping or transportation.

Category 3 -- "protective apparel" used or consumed within a manufacturing facility -- is the one most directly relevant to the PPE items (gloves, glasses, hardhats, respirators, disposable clothing, earplugs) described in the request, though the Department's letter did not itemize each specific product by name.

How to claim it. Form ST-587, Exemption Certificate (for Manufacturing, Production Agriculture, and Coal and Aggregate Mining), is the correct form for a qualifying purchaser to use to claim the manufacturing and assembling machinery and equipment exemption -- including for production related tangible personal property purchased on or after July 1, 2019.

What the Department did not do. As a GIL, this letter did not rule on whether the seller's own historical person-vs-product distinction remains the correct test, and it did not confirm or deny exempt treatment for any specific PPE product line. It directed the taxpayer to the statute and regulation and described the general category and examples of qualifying property.

What this means for you

Sellers of PPE and manufacturing supplies

If your customers are manufacturers, evaluate whether the PPE or supplies you sell them fall within "production related tangible personal property" as defined at 86 Ill. Adm. Code 130.330(h) -- particularly the "hand tools, protective apparel, and fire and safety equipment used or consumed within a manufacturing facility" category. If a customer provides a properly completed Form ST-587 for a purchase made on or after July 1, 2019, that is the correct documentation for claiming the exemption.

Manufacturers buying PPE, supplies, or consumables

Since July 1, 2019, your exemption for manufacturing machinery and equipment can extend beyond machinery itself to a broader set of production-related items -- including certain supplies, consumables, hand tools, protective apparel, and fire/safety equipment used within your manufacturing facility, as well as pre- and post-production materials handling, quality control, storage, and shipping-related property. Use Form ST-587 to document these exempt purchases.

Accountants and tax professionals

Because this is a GIL, it does not resolve fact-specific questions (such as whether a particular PPE item is used to protect the wearer versus the product, or whether a given item is genuinely "used or consumed within a manufacturing facility"). Advise clients to compare their specific products against the statutory definition and the Department's example categories, and consider a Private Letter Ruling request under 2 Ill. Adm. Code 1200.110 if a binding determination is needed for a particular product line.

Common questions

Q: Did the Department confirm that gloves, hardhats, respirators, and similar PPE are now tax-exempt when sold to manufacturers?
A: Not specifically by product name. The Department explained that the manufacturing exemption was expanded, effective July 1, 2019, to include "production related tangible personal property," and that examples of qualifying property include "hand tools, protective apparel, and fire and safety equipment used or consumed within a manufacturing facility." It did not itemize gloves, hardhats, respirators, disposable clothing, or earplugs individually.

Q: What form do manufacturing customers use to claim this exemption?
A: Form ST-587, Exemption Certificate (for Manufacturing, Production Agriculture, and Coal and Aggregate Mining), is the proper form to claim the manufacturing and assembling machinery and equipment exemption, including for production related tangible personal property purchased on or after July 1, 2019.

Q: What is "production related tangible personal property"?
A: Per 86 Ill. Adm. Code 130.330(h), it means all tangible personal property used or consumed in a production-related process by a manufacturer in a manufacturing facility (or by a graphic arts producer in graphic arts production), plus tangible personal property used or consumed in research and development regardless of where that use occurs.

Q: Does the exemption cover supplies and consumables, not just machinery?
A: Yes -- the Department's examples include supplies and consumables used in the manufacturing process, such as fuels, coolants, solvents, oils, lubricants, and adhesives, along with property used for pre- and post-production material handling, receiving, quality control, inventory control, storage, staging, and packing for shipping.

Q: Is this letter binding on the Department?
A: No. This is a General Information Letter (GIL), which directs taxpayers to relevant regulations and information but is not a statement of Department policy and is not binding on the Department.

Citations and references

Statutes cited:

• 86 Ill. Adm. Code 130.330 (manufacturing and assembling machinery and equipment exemption)
• 86 Ill. Adm. Code 130.330(h) (defines "production related tangible personal property" added to the exemption effective July 1, 2019)

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2019.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2019/st19-0025-gil.pdf

Original ruling text

ST 19-0025-GIL 12/04/2019 MANUFACTURING MACHINERY & EQUIPMENT
Beginning on July 1, 2019, the manufacturing and assembling machinery and
equipment exemption includes production related tangible personal property
purchased on or after July 1, 2019. See 86 Ill. Adm. Code 130.330. (This is a
GIL).
December 4, 2019
Dear XXX:
This letter is in response to your letter dated July 12, 2019, 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:
I have a question regarding the new IL Manufacturers’ Purchase Credit that went
into effect July 1, 2019 and how it relates to the products we sell.
I was advised to send you this information for a ruling after a phone call with the
IL Dept of Revenue earlier this week.
One of our customers submitted the attached information regarding deducting
sales tax on personal protective equipment (PPE) items they have always
remitted sales tax on in the past.
My primary question is if this is OK to accept for this company and other
companies we do business with in the state of Illinois if they submit the ST-587
form?
We have been under the premise that the PPE items we sell (gloves, glasses,
hardhats, respirators, disposable clothing, earplugs, etc) are taxable if they are
protecting the person.
If the PPE is being worn to protect the the [sic] product being handled or
manufacturered [sic] from the person, it can be tax exempt with the proper
customer documentation.

ST 19-0025-GIL
December 4, 2019
Page 2

DEPARTMENT’S RESPONSE:
Beginning on July 1, 2019, the manufacturing and assembling machinery and
equipment exemption includes production related tangible personal property.
Production related tangible personal property means all tangible personal property used
or consumed in a production related process by a manufacturer in a manufacturing
facility in which a manufacturing process takes place or by a graphic arts producer in
graphic arts production. Production related tangible personal property also means all
tangible personal property that is used or consumed in research and development
regardless of use within or without a manufacturing or graphic arts production facility.
86 Ill. Adm. Code 130.330(h).
The Department recently filed emergency regulations that incorporate production
related tangible personal property into the manufacturing and assembling machinery
and equipment exemption which can be found on the Department’s website and
became effective upon filing. The Department included examples of items that the
Department considered to be production related. For example, the Department
provided that the following tangible personal property would be considered production
related: (1) tangible personal property purchased by a manufacturer for incorporation
into real estate within a manufacturing facility for use in a production related process; or
tangible personal property purchased by a construction contractor for incorporation into
real estate within a manufacturing facility for use in a production related process; (2)
supplies and consumables used in a manufacturing process in a manufacturing facility,
including fuels, coolants, solvents, oils, lubricants, and adhesives; (3) hand tools,
protective apparel, and fire and safety equipment used or consumed within a
manufacturing facility; and (4) tangible personal property used or consumed in a
manufacturing facility for purposes of pre-production and post-production material
handling, receiving, quality control, inventory control, storage, staging, and packing for
shipping or transportation.
The Department’s form ST-587, Exemption Certificate (for Manufacturing,
Production Agriculture, and Coal and Aggregate Mining) is the proper form to claim the
manufacturing and assembling machinery and equipment exemption on each qualifying
purchase of production related tangible personal property purchased on or after July 1,
2019.

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.

ST 19-0025-GIL
December 4, 2019
Page 3
Very truly yours,

DMB:rkn

Debra M. Boggess
Associate Counsel