Illinois – Aircraft and Watercraft Rolling Stock Exemption Enacted

SALT Report 2920 – The Illinois General Assembly passed a Bill that creates a rolling stock exemption for aircraft and watercraft that will be used as rolling stock.  In addition, the Bill makes amendments to the existing rolling stock exemption requirements, tax liability notices, and the collection allowance for tire retailers.

Exemptions for Aircraft and Watercraft

Effective January 1, 2014, aircraft or watercraft will qualify for the rolling stock moving in interstate commerce exemption if, the rolling stock has carried persons or property for hire in interstate commerce for more than 50% of its total trips, or for more than 50% of its total miles during a 12-month period.

The person claiming the exemption must make an election at the time of purchase to use either the trips or mileage method of calculation. The person must also document the election in their books and records. If no election is made, the person is deemed to have chosen the mileage method. Flight hours may be used in lieu of recording miles to determine whether an aircraft meets the mileage test. Nautical miles or trip hours may be used to determine whether the watercraft meets the mileage test.

In addition, property purchased for the purpose of being attached to the aircraft or watercraft qualifies for the exemption regardless of when the aircraft or watercraft was purchased if the property is:

  • Purchased on or after January 1, 2014, and
  • The aircraft or watercraft to which the property will be attached meets the exemption requirements

If the aircraft or watercraft was purchased prior to January 1, 2014, the purchaser must make an election to use either the trips or mileage method of calculation and document that election in their books and records. This will determine whether the property that will be attached to the aircraft or watercraft qualifies as rolling stock.

Rolling Stock Exemption Requirements

Effective July 1, 2013, once an election to use either the trip or mileage method is made, it will remain in effect for the duration of the purchaser’s ownership. Additionally, any provisions that state that a taxpayer’s election to use either the trips or mileage method will remain in effect for any period in which the Department may issue a notice of tax liability have been repealed.

Notice of Tax Liability

If a sales tax return is not filed at the required time, a notice of tax liability may be issued on or after July 1 and January 1.  This applies to returns filed more than 3 years prior to that July 1 or January 1.

Tire Retailers

The legislation states that a tire retailer is entitled to a collection allowance of $0.10 per tire if the retailer timely files and pays its returns.

For Further Information

Illinois General Assembly – Senate Bill 2326, Laws 2013