SALT Report 2345 – The Illinois Department of Revenue issued a general information letter that discusses the enterprise zone sales and use tax exemption. Under the Illinois Enterprise Zone Act businesses can deduct the gross receipts from qualified retail sales of building materials that will be incorporated into property located in enterprise zones.
A “qualified sale” is defined as the sale of building materials that will be incorporated into property that is part of a building project for which a Certificate of Eligibility for Sales Tax Exemption has been issued by an enterprise zone administrator.
Retailers who wish to claim the deduction must obtain the following documents:
- A Certificate of Eligibility for Sales Tax Exemption must be obtained by the purchaser from the administrator of the enterprise zone prior to making any purchases. The Certificate must contain a statement indicating that the building project named in the Certificate meets all of the requirements of the enterprise zone ordinance of the jurisdiction in which the building project is located. The Certificate must also provide the location or street address of the building project and the signature of the administrator of the enterprise zone, and
- The purchaser must prepare a separate certificate that contains all of the following:
- A statement that the building materials being purchased are being purchased for incorporation into property located in an enterprise zone,
- The location or address of the property,
- The name of the enterprise zone in which the property is located,
- A description of the building materials being purchased for incorporation into the property,
- The date of purchase, and
- The purchaser’s signature
Additionally, all materials purchased with the exemption must be physically incorporated into the property to qualify. For example, gross receipts from the sales of floor coverings such as tile, linoleum, and carpet that will be glued or permanently affixed to the property by tacks, staples, or tacking strips qualify for the deduction. However, items that will not be physically incorporated into the property do not qualify. For example, gross receipts from sales of floor coverings such as area rugs or those that are attached to the structure using only two-sided tape do not qualify for the deduction.
This GIL is general in nature therefore; if you’d like additional guidance regarding the enterprise zone building materials exemption please refer to Regulation 86 Ill. Adm. Code 130.1951.
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