Illinois – Rolling Stock Exemption for Aircraft

SALT Report 1968 – The Illinois Department of Revenue issued a private letter ruling regarding the taxability of a married couple’s fractional ownership interests in two aircraft.  Specifically, the couple sought guidance as to whether the shares qualified for the rolling stock exemption provided in 35 ILCS 105/3-55(b) and if the transfer of the shares to an LLC and the LLC’s subsequent use of the aircraft would be exempt from use tax under the rolling stock exemption.  In their request, the couple provided evidence from the aircraft’s records indicating that each aircraft was authorized to operate as an interstate carrier and did so regularly.

35 ILCS 105/3-55(b) provides an exemption from use tax for tangible personal property used by interstate carriers for hire as rolling stock moving in interstate commerce.  In order to claim the rolling stock exemption, an aircraft must be able to:

  • Document that it has the authority to operate as an interstate carrier for hire, and
  • Show, from its books and records, that it operates as an interstate carrier on a regular and frequent basis

The Department determined that the couple’s fractional ownership interests in the aircraft met the requirements for the rolling stock exemption from use tax under 35 ILCS 105/3-55(b).  Additionally, the Department noted that the transfer of interests in the two aircraft by the couple to an LLC would not be subject to sales or use tax because the transfer would be considered an occasional sale.

Additionally, provided that each aircraft continues to qualify for the rolling stock exemption, any transfers to the LLC would also qualify for the rolling stock exemption.

For Further Information:

Illinois Department of Revenue – ST 12-0010-PLR