Does Illinois' manufacturing machinery and equipment sales tax exemption cover cleaning chemicals and detergents used to clean production equipment?

Plain-English summary

This Illinois Department of Revenue General Information Letter answers a question from a company that manufactures industrial cleaning chemicals and detergents used to clean processing and manufacturing equipment at customer facilities (food, beverage, packaging, concrete, asphalt, and other plants). The company asked whether its cleaning chemicals qualify for Illinois' manufacturing and assembling machinery and equipment sales tax exemption, since a July 1, 2019 expansion of that exemption to include "production related tangible personal property" did not specifically mention cleaning compounds.

The Department explained that, beginning July 1, 2019, the manufacturing and assembling machinery and equipment exemption was expanded under 86 Ill. Adm. Code 130.330 to include "production related tangible personal property" — meaning 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), as well as property used or consumed in research and development. The Department's emergency regulations gave examples of qualifying items, including supplies and consumables used in a manufacturing process such as fuels, coolants, solvents, oils, lubricants, and adhesives, along with hand tools, protective apparel, and safety equipment used within a manufacturing facility.

Applying that standard, the Department drew a line based on what the cleaning chemicals actually clean: cleaning chemicals and detergents used to clean the processing and manufacturing equipment that is itself used in a production related process at a manufacturing facility would qualify for the exemption. But cleaning chemicals and detergents used to clean the facility itself — as opposed to the equipment used in production — would not be considered used in a production related process and would not qualify.

Because this is a GIL rather than a Private Letter Ruling, the Department did not make a binding, fact-specific determination about the taxpayer's exact products. Instead, it laid out the general rule so the taxpayer (and its customers) could apply it to their own specific equipment-cleaning versus facility-cleaning uses.

What this means for you

Manufacturers and companies selling cleaning products to manufacturers

If you sell cleaning chemicals, detergents, or similar consumables to manufacturing customers, whether those sales qualify for Illinois' manufacturing machinery and equipment exemption depends on how the customer uses the product. Cleaning production/processing equipment used in a manufacturing process can qualify as "production related tangible personal property." Cleaning the building or facility itself does not qualify. You may need to help customers document or separate these uses for exemption certificate purposes.

Manufacturing facility owners and operators

Since July 1, 2019, your purchases of supplies and consumables used in your manufacturing process — including certain fuels, coolants, solvents, oils, lubricants, adhesives, hand tools, protective apparel, and safety equipment used within the facility — may qualify for the expanded exemption under 86 Ill. Adm. Code 130.330(h), in addition to the machinery and equipment itself. Cleaning chemicals used on your production equipment fall into this same category, but cleaning supplies used on the facility generally (floors, walls, non-production areas) do not.

Accountants and tax professionals

This GIL is not binding on the Department and does not resolve the taxpayer's situation with certainty — it only directs the taxpayer to the applicable regulation and describes how the Department generally applies it. For a binding determination on specific facts, a taxpayer would need to request a Private Letter Ruling under 2 Ill. Adm. Code 1200.110. When advising clients, focus on whether the specific cleaning product is used on production equipment (likely exempt) versus general facility cleaning (likely taxable).

Common questions

Q: Are cleaning chemicals and detergents exempt from Illinois sales tax when sold to manufacturers?
A: Not automatically. They can qualify for the manufacturing and assembling machinery and equipment exemption as "production related tangible personal property" if they are used to clean processing and manufacturing equipment that is used in a production related process at a manufacturing facility.

Q: What if the same chemicals are used to clean the factory floor or walls instead of the equipment?
A: According to the Department, cleaning chemicals and detergents used to clean the facility itself — rather than the manufacturing/processing equipment — are not considered used in a production related process and would not qualify for the exemption.

Q: What changed on July 1, 2019?
A: The manufacturing and assembling machinery and equipment exemption was expanded to include "production related tangible personal property," covering tangible personal property used or consumed in a production related process in a manufacturing facility (or graphic arts production), and property used in research and development, per 86 Ill. Adm. Code 130.330(h).

Q: What other kinds of items does the Department consider "production related"?
A: The Department's emergency regulations gave examples: property incorporated into real estate within a manufacturing facility for a production related process; supplies and consumables used in the manufacturing process (fuels, coolants, solvents, oils, lubricants, adhesives); hand tools, protective apparel, and fire/safety equipment used within the facility; and property used for pre- and post-production material handling, receiving, quality control, inventory control, storage, staging, and packing for shipping.

Q: Is this GIL binding on the Department?
A: No. A General Information Letter merely directs a taxpayer to relevant regulations or other sources of information; it is not a statement of Department policy and is not binding, unlike a Private Letter Ruling, which is binding on the Department for the specific taxpayer and facts presented.

Citations and references

• 86 Ill. Adm. Code 130.330 (manufacturing and assembling machinery and equipment exemption)
• 86 Ill. Adm. Code 130.330(h) (definition of production related tangible personal property)
• 2 Ill. Adm. Code 1200.110 (procedures for Private Letter Rulings)
• 2 Ill. Adm. Code 1200.120 (General Information Letters)

Subject

Manufacturing Machinery & Equipment

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/st19-0033-gil.pdf

Original ruling text

ST 19-0033-GIL 12/09/2019 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 9, 2019
Dear XXX:
This letter is in response to your letter received July 22, 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 am writing on behalf of COMPANY. We manufacture cleaning chemicals
and detergents. Our chemicals are used to clean the processing and
manufacturing equipment in all types of manufacturing facilities (food,
beverage, packaging, concrete, asphalt, etc.). As of July1st the production
related tangible personal property is now included within the
Manufacturing Machinery and Equipment Exemption, however the bulletin
announcement on the Il. Department of Revenue website does not
reference cleaning compounds specifically.
We have had a few
customers reach out, and I was hoping to get a letter from the Department
of Revenue that I could pass along explaining whether or not our cleaning
chemicals are included in the exemption. Please reach out with any
specific questions.
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

ST 19-0033-GIL
December 9, 2019
Page 2
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.
Generally, depending on how the cleaning chemicals and detergents are used,
they could be considered production related tangible personal property and qualify for
the manufacturing and assembling machinery and equipment exemption. For example,
cleaning chemicals and detergents used to clean the processing and manufacturing
equipment that is used in a production related process by a manufacturer in a
manufacturing facility in which a manufacturing process takes place would qualify.
However, cleaning chemicals and detergents used, for example, to clean the facility
itself, would not be considered used in a production related process and would not
qualify for the exemption.
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,

DMB:bkl

Debra M. Boggess
Associate Counsel