USE/OCC TX-SPORTING GOODS

Illinois General Assembly - Full Text of HB4037

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HB4037 - 104th General Assembly

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104TH GENERAL ASSEMBLY
State of Illinois
2025 and 2026
HB4037

Introduced 4/7/2025, by Rep. Brandun Schweizer

SYNOPSIS AS INTRODUCED:

35 ILCS 105/2

from Ch. 120, par. 439.2
35 ILCS 105/3

from Ch. 120, par. 439.3
35 ILCS 110/2

from Ch. 120, par. 439.32
35 ILCS 115/2

from Ch. 120, par. 439.102
35 ILCS 120/1
35 ILCS 120/2

Amends the Use Tax Act, the Service Use Tax Act, the Service
Occupation Tax Act, and the Retailers' Occupation Tax Act. Provides that,
on and after January 1, 2026, the inclusion of leases in the tax imposed
under those Acts does not extend to sporting goods that are leased for a
period of less than 10 days. Effective immediately.
LRB104 12740 HLH 24578 b

A BILL FOR

HB4037
LRB104 12740 HLH 24578 b
1

AN ACT concerning revenue.

2

Be it enacted by the People of the State of Illinois,
3
represented in the General Assembly:

4

Section 5.
The Use Tax Act is amended by changing Sections
5
2 and 3 as follows:

6

(35 ILCS 105/2)

(from Ch. 120, par. 439.2)
7

Sec. 2.
Definitions.
As used in this Act:

8

"Use" means the exercise by any person of any right or
9
power over tangible personal property incident to the
10
ownership of that property, or, on and after January 1, 2025,
11
incident to the possession or control of, the right to possess
12
or control, or a license to use that property through a lease,
13
except that it does not include the sale of such property in
14
any form as tangible personal property in the regular course
15
of business to the extent that such property is not first
16
subjected to a use for which it was purchased, and does not
17
include the use of such property by its owner for
18
demonstration purposes: Provided that the property purchased
19
is deemed to be purchased for the purpose of resale, despite
20
first being used, to the extent to which it is resold as an
21
ingredient of an intentionally produced product or by-product
22
of manufacturing. "Use" does not mean the demonstration use or
23
interim use of tangible personal property by a retailer before

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LRB104 12740 HLH 24578 b
1
he sells that tangible personal property. On and after January
2
1, 2025, the lease of tangible personal property to a lessee by
3
a retailer who is subject to tax on lease receipts under
Public
4
Act 103-592

this amendatory Act of the 103rd General Assembly

5
does not qualify as demonstration use or interim use of that
6
property. For watercraft or aircraft, if the period of
7
demonstration use or interim use by the retailer exceeds 18
8
months, the retailer shall pay on the retailers' original cost
9
price the tax imposed by this Act, and no credit for that tax
10
is permitted if the watercraft or aircraft is subsequently
11
sold by the retailer. "Use" does not mean the physical
12
incorporation of tangible personal property, to the extent not
13
first subjected to a use for which it was purchased, as an
14
ingredient or constituent, into other tangible personal
15
property (a) which is sold in the regular course of business or
16
(b) which the person incorporating such ingredient or
17
constituent therein has undertaken at the time of such
18
purchase to cause to be transported in interstate commerce to
19
destinations outside the State of Illinois: Provided that the
20
property purchased is deemed to be purchased for the purpose
21
of resale, despite first being used, to the extent to which it
22
is resold as an ingredient of an intentionally produced
23
product or by-product of manufacturing.
24

"Lease" means a transfer of the possession or control of,
25
the right to possess or control, or a license to use, but not
26
title to, tangible personal property for a fixed or

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1
indeterminate term for consideration, regardless of the name
2
by which the transaction is called. "Lease" does not include a
3
lease entered into merely as a security agreement that does
4
not involve a transfer of possession or control from the
5
lessor to the lessee.
6

On and after January 1, 2025, the term "sale", when used in
7
this Act, includes a lease.
8

Beginning on January 1, 2026, the term "lease" does not
9
include the lease of sporting goods for a period of less than
10
10 days.

11

For the purposes of defining the term "lease", "sporting
12
goods" means tangible personal property that is used for
13
participation in a recreational health, fitness, or sporting
14
activity, including, but not limited to, golf, tennis,
15
basketball, baseball, softball, football, soccer, fishing,
16
pickleball, ice skating, roller skating, hockey, skiing,
17
paddle boating, kayaking, canoeing, or yoga.

18

"Watercraft" means a Class 2, Class 3, or Class 4
19
watercraft as defined in Section 3-2 of the Boat Registration
20
and Safety Act, a personal watercraft, or any boat equipped
21
with an inboard motor.
22

"Purchase at retail" means the acquisition of the
23
ownership of, the title to, the possession or control of, the
24
right to possess or control, or a license to use, tangible
25
personal property through a sale at retail.
26

"Purchaser" means anyone who, through a sale at retail,

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acquires the ownership of, the title to, the possession or
2
control of, the right to possess or control, or a license to
3
use, tangible personal property for a valuable consideration.
4

"Sale at retail" means any transfer of the ownership of or
5
title to tangible personal property to a purchaser, for the
6
purpose of use, and not for the purpose of resale in any form
7
as tangible personal property to the extent not first
8
subjected to a use for which it was purchased, for a valuable
9
consideration: Provided that the property purchased is deemed
10
to be purchased for the purpose of resale, despite first being
11
used, to the extent to which it is resold as an ingredient of
12
an intentionally produced product or by-product of
13
manufacturing. For this purpose, slag produced as an incident
14
to manufacturing pig iron or steel and sold is considered to be
15
an intentionally produced by-product of manufacturing. "Sale
16
at retail" includes any such transfer made for resale unless
17
made in compliance with Section 2c of the Retailers'
18
Occupation Tax Act, as incorporated by reference into Section
19
12 of this Act. Transactions whereby the possession of the
20
property is transferred but the seller retains the title as
21
security for payment of the selling price are sales.
22

"Sale at retail" shall also be construed to include any
23
Illinois florist's sales transaction in which the purchase
24
order is received in Illinois by a florist and the sale is for
25
use or consumption, but the Illinois florist has a florist in
26
another state deliver the property to the purchaser or the

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1
purchaser's donee in such other state.
2

Nonreusable tangible personal property that is used by
3
persons engaged in the business of operating a restaurant,
4
cafeteria, or drive-in is a sale for resale when it is
5
transferred to customers in the ordinary course of business as
6
part of the sale of food or beverages and is used to deliver,
7
package, or consume food or beverages, regardless of where
8
consumption of the food or beverages occurs. Examples of those
9
items include, but are not limited to nonreusable, paper and
10
plastic cups, plates, baskets, boxes, sleeves, buckets or
11
other containers, utensils, straws, placemats, napkins, doggie
12
bags, and wrapping or packaging materials that are transferred
13
to customers as part of the sale of food or beverages in the
14
ordinary course of business.
15

The purchase, employment
,
and transfer of such tangible
16
personal property as newsprint and ink for the primary purpose
17
of conveying news (with or without other information) is not a
18
purchase, use
,
or sale of tangible personal property.
19

"Selling price" means the consideration for a sale valued
20
in money whether received in money or otherwise, including
21
cash, credits, property other than as hereinafter provided,
22
and services, but, prior to January 1, 2020 and beginning
23
again on January 1, 2022, not including the value of or credit
24
given for traded-in tangible personal property where the item
25
that is traded-in is of like kind and character as that which
26
is being sold; beginning January 1, 2020 and until January 1,

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2022, "selling price" includes the portion of the value of or
2
credit given for traded-in motor vehicles of the First
3
Division as defined in Section 1-146 of the Illinois Vehicle
4
Code of like kind and character as that which is being sold
5
that exceeds $10,000. "Selling price" shall be determined
6
without any deduction on account of the cost of the property
7
sold, the cost of materials used, labor or service cost
,
or any
8
other expense whatsoever, but does not include interest or
9
finance charges which appear as separate items on the bill of
10
sale or sales contract nor charges that are added to prices by
11
sellers on account of the seller's tax liability under the
12
Retailers' Occupation Tax Act, or on account of the seller's
13
duty to collect, from the purchaser, the tax that is imposed by
14
this Act, or, except as otherwise provided with respect to any
15
cigarette tax imposed by a home rule unit, on account of the
16
seller's tax liability under any local occupation tax
17
administered by the Department, or, except as otherwise
18
provided with respect to any cigarette tax imposed by a home
19
rule unit on account of the seller's duty to collect, from the
20
purchasers, the tax that is imposed under any local use tax
21
administered by the Department. Effective December 1, 1985,
22
"selling price" shall include charges that are added to prices
23
by sellers on account of the seller's tax liability under the
24
Cigarette Tax Act, on account of the seller's duty to collect,
25
from the purchaser, the tax imposed under the Cigarette Use
26
Tax Act, and on account of the seller's duty to collect, from

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LRB104 12740 HLH 24578 b
1
the purchaser, any cigarette tax imposed by a home rule unit.
2

The provisions of this paragraph, which provides only for
3
an alternative meaning of "selling price" with respect to the
4
sale of certain motor vehicles incident to the contemporaneous
5
lease of those motor vehicles, continue in effect and are not
6
changed by the tax on leases implemented by
Public Act 103-592

7
this amendatory Act of the 103rd General Assembly
.
8
Notwithstanding any law to the contrary, for any motor
9
vehicle, as defined in Section 1-146 of the Vehicle Code, that
10
is sold on or after January 1, 2015 for the purpose of leasing
11
the vehicle for a defined period that is longer than one year
12
and (1) is a motor vehicle of the second division that: (A) is
13
a self-contained motor vehicle designed or permanently
14
converted to provide living quarters for recreational,
15
camping, or travel use, with direct walk through access to the
16
living quarters from the driver's seat; (B) is of the van
17
configuration designed for the transportation of not less than
18
7 nor more than 16 passengers; or (C) has a gross vehicle
19
weight rating of 8,000 pounds or less or (2) is a motor vehicle
20
of the first division, "selling price" or "amount of sale"
21
means the consideration received by the lessor pursuant to the
22
lease contract, including amounts due at lease signing and all
23
monthly or other regular payments charged over the term of the
24
lease. Also included in the selling price is any amount
25
received by the lessor from the lessee for the leased vehicle
26
that is not calculated at the time the lease is executed,

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1
including, but not limited to, excess mileage charges and
2
charges for excess wear and tear. For sales that occur in
3
Illinois, with respect to any amount received by the lessor
4
from the lessee for the leased vehicle that is not calculated
5
at the time the lease is executed, the lessor who purchased the
6
motor vehicle does not incur the tax imposed by the Use Tax Act
7
on those amounts, and the retailer who makes the retail sale of
8
the motor vehicle to the lessor is not required to collect the
9
tax imposed by this Act or to pay the tax imposed by the
10
Retailers' Occupation Tax Act on those amounts. However, the
11
lessor who purchased the motor vehicle assumes the liability
12
for reporting and paying the tax on those amounts directly to
13
the Department in the same form (Illinois Retailers'
14
Occupation Tax, and local retailers' occupation taxes, if
15
applicable) in which the retailer would have reported and paid
16
such tax if the retailer had accounted for the tax to the
17
Department. For amounts received by the lessor from the lessee
18
that are not calculated at the time the lease is executed, the
19
lessor must file the return and pay the tax to the Department
20
by the due date otherwise required by this Act for returns
21
other than transaction returns. If the retailer is entitled
22
under this Act to a discount for collecting and remitting the
23
tax imposed under this Act to the Department with respect to
24
the sale of the motor vehicle to the lessor, then the right to
25
the discount provided in this Act shall be transferred to the
26
lessor with respect to the tax paid by the lessor for any

HB4037
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LRB104 12740 HLH 24578 b
1
amount received by the lessor from the lessee for the leased
2
vehicle that is not calculated at the time the lease is
3
executed; provided that the discount is only allowed if the
4
return is timely filed and for amounts timely paid. The
5
"selling price" of a motor vehicle that is sold on or after
6
January 1, 2015 for the purpose of leasing for a defined period
7
of longer than one year shall not be reduced by the value of or
8
credit given for traded-in tangible personal property owned by
9
the lessor, nor shall it be reduced by the value of or credit
10
given for traded-in tangible personal property owned by the
11
lessee, regardless of whether the trade-in value thereof is
12
assigned by the lessee to the lessor. In the case of a motor
13
vehicle that is sold for the purpose of leasing for a defined
14
period of longer than one year, the sale occurs at the time of
15
the delivery of the vehicle, regardless of the due date of any
16
lease payments. A lessor who incurs a Retailers' Occupation
17
Tax liability on the sale of a motor vehicle coming off lease
18
may not take a credit against that liability for the Use Tax
19
the lessor paid upon the purchase of the motor vehicle (or for
20
any tax the lessor paid with respect to any amount received by
21
the lessor from the lessee for the leased vehicle that was not
22
calculated at the time the lease was executed) if the selling
23
price of the motor vehicle at the time of purchase was
24
calculated using the definition of "selling price" as defined
25
in this paragraph. Notwithstanding any other provision of this
26
Act to the contrary, lessors shall file all returns and make

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LRB104 12740 HLH 24578 b
1
all payments required under this paragraph to the Department
2
by electronic means in the manner and form as required by the
3
Department. This paragraph does not apply to leases of motor
4
vehicles for which, at the time the lease is entered into, the
5
term of the lease is not a defined period, including leases
6
with a defined initial period with the option to continue the
7
lease on a month-to-month or other basis beyond the initial
8
defined period.
9

The phrase "like kind and character" shall be liberally
10
construed (including
,
but not limited to
,
any form of motor
11
vehicle for any form of motor vehicle, or any kind of farm or
12
agricultural implement for any other kind of farm or
13
agricultural implement), while not including a kind of item
14
which, if sold at retail by that retailer, would be exempt from
15
retailers' occupation tax and use tax as an isolated or
16
occasional sale.
17

"Department" means the Department of Revenue.
18

"Person" means any natural individual, firm, partnership,
19
association, joint stock company, joint adventure, public or
20
private corporation, limited liability company, or a receiver,
21
executor, trustee, guardian
,
or other representative appointed
22
by order of any court.
23

"Retailer" means and includes every person engaged in the
24
business of making sales, including, on and after January 1,
25
2025, leases, at retail as defined in this Section. With
26
respect to leases, a "retailer" also means a "lessor", except

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LRB104 12740 HLH 24578 b
1
as otherwise provided in this Act.
2

A person who holds himself or herself out as being engaged
3
(or who habitually engages) in selling tangible personal
4
property at retail is a retailer hereunder with respect to
5
such sales (and not primarily in a service occupation)
6
notwithstanding the fact that such person designs and produces
7
such tangible personal property on special order for the
8
purchaser and in such a way as to render the property of value
9
only to such purchaser, if such tangible personal property so
10
produced on special order serves substantially the same
11
function as stock or standard items of tangible personal
12
property that are sold at retail.
13

A person whose activities are organized and conducted
14
primarily as a not-for-profit service enterprise, and who
15
engages in selling tangible personal property at retail
16
(whether to the public or merely to members and their guests)
17
is a retailer with respect to such transactions, excepting
18
only a person organized and operated exclusively for
19
charitable, religious or educational purposes either (1)
,
to
20
the extent of sales by such person to its members, students,
21
patients
,
or inmates of tangible personal property to be used
22
primarily for the purposes of such person, or (2)
,
to the
23
extent of sales by such person of tangible personal property
24
which is not sold or offered for sale by persons organized for
25
profit. The selling of school books and school supplies by
26
schools at retail to students is not "primarily for the

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LRB104 12740 HLH 24578 b
1
purposes of" the school which does such selling. This
2
paragraph does not apply to nor subject to taxation occasional
3
dinners, social
,
or similar activities of a person organized
4
and operated exclusively for charitable, religious
,
or
5
educational purposes, whether or not such activities are open
6
to the public.
7

A person who is the recipient of a grant or contract under
8
Title VII of the Older Americans Act of 1965 (P.L. 92-258) and
9
serves meals to participants in the federal Nutrition Program
10
for the Elderly in return for contributions established in
11
amount by the individual participant pursuant to a schedule of
12
suggested fees as provided for in the federal Act is not a
13
retailer under this Act with respect to such transactions.
14

Persons who engage in the business of transferring
15
tangible personal property upon the redemption of trading
16
stamps are retailers hereunder when engaged in such business.
17

The isolated or occasional sale of tangible personal
18
property at retail by a person who does not hold himself out as
19
being engaged (or who does not habitually engage) in selling
20
such tangible personal property at retail or a sale through a
21
bulk vending machine does not make such person a retailer
22
hereunder. However, any person who is engaged in a business
23
which is not subject to the tax imposed by the Retailers'
24
Occupation Tax Act because of involving the sale of or a
25
contract to sell real estate or a construction contract to
26
improve real estate, but who, in the course of conducting such

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LRB104 12740 HLH 24578 b
1
business, transfers tangible personal property to users or
2
consumers in the finished form in which it was purchased, and
3
which does not become real estate, under any provision of a
4
construction contract or real estate sale or real estate sales
5
agreement entered into with some other person arising out of
6
or because of such nontaxable business, is a retailer to the
7
extent of the value of the tangible personal property so
8
transferred. If, in such transaction, a separate charge is
9
made for the tangible personal property so transferred, the
10
value of such property, for the purposes of this Act, is the
11
amount so separately charged, but not less than the cost of
12
such property to the transferor; if no separate charge is
13
made, the value of such property, for the purposes of this Act,
14
is the cost to the transferor of such tangible personal
15
property.
16

"Retailer maintaining a place of business in this State",
17
or any like term, means and includes any of the following
18
retailers:
19

(1) A retailer having or maintaining within this
20

State, directly or by a subsidiary, an office,
21

distribution house, sales house, warehouse
,
or other place
22

of business, or any agent or other representative
23

operating within this State under the authority of the
24

retailer or its subsidiary, irrespective of whether such
25

place of business or agent or other representative is
26

located here permanently or temporarily, or whether such

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LRB104 12740 HLH 24578 b
1

retailer or subsidiary is licensed to do business in this
2

State. However, the ownership of property that is located
3

at the premises of a printer with which the retailer has
4

contracted for printing and that consists of the final
5

printed product, property that becomes a part of the final
6

printed product, or copy from which the printed product is
7

produced shall not result in the retailer being deemed to
8

have or maintain an office, distribution house, sales
9

house, warehouse, or other place of business within this
10

State.
11

(1.1) A retailer having a contract with a person
12

located in this State under which the person, for a
13

commission or other consideration based upon the sale of
14

tangible personal property by the retailer, directly or
15

indirectly refers potential customers to the retailer by
16

providing to the potential customers a promotional code or
17

other mechanism that allows the retailer to track
18

purchases referred by such persons. Examples of mechanisms
19

that allow the retailer to track purchases referred by
20

such persons include
,
but are not limited to
,
the use of a
21

link on the person's Internet website, promotional codes
22

distributed through the person's hand-delivered or mailed
23

material, and promotional codes distributed by the person
24

through radio or other broadcast media. The provisions of
25

this paragraph (1.1) shall apply only if the cumulative
26

gross receipts from sales of tangible personal property by

HB4037
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LRB104 12740 HLH 24578 b
1

the retailer to customers who are referred to the retailer
2

by all persons in this State under such contracts exceed
3

$10,000 during the preceding 4 quarterly periods ending on
4

the last day of March, June, September, and December. A
5

retailer meeting the requirements of this paragraph (1.1)
6

shall be presumed to be maintaining a place of business in
7

this State but may rebut this presumption by submitting
8

proof that the referrals or other activities pursued
9

within this State by such persons were not sufficient to
10

meet the nexus standards of the United States Constitution
11

during the preceding 4 quarterly periods.
12

(1.2) Beginning July 1, 2011, a retailer having a
13

contract with a person located in this State under which:
14

(A) the retailer sells the same or substantially
15

similar line of products as the person located in this
16

State and does so using an identical or substantially
17

similar name, trade name, or trademark as the person
18

located in this State; and
19

(B) the retailer provides a commission or other
20

consideration to the person located in this State
21

based upon the sale of tangible personal property by
22

the retailer.
23

The provisions of this paragraph (1.2) shall apply
24

only if the cumulative gross receipts from sales of
25

tangible personal property by the retailer to customers in
26

this State under all such contracts exceed $10,000 during

HB4037
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LRB104 12740 HLH 24578 b
1

the preceding 4 quarterly periods ending on the last day
2

of March, June, September, and December.
3

(2) (Blank).
4

(3) (Blank).
5

(4) (Blank).
6

(5) (Blank).
7

(6) (Blank).
8

(7) (Blank).
9

(8) (Blank).
10

(9) Beginning October 1, 2018, a retailer making sales
11

of tangible personal property to purchasers in Illinois
12

from outside of Illinois if:
13

(A) the cumulative gross receipts from sales of
14

tangible personal property to purchasers in Illinois
15

are $100,000 or more; or
16

(B) the retailer enters into 200 or more separate
17

transactions for the sale of tangible personal
18

property to purchasers in Illinois.
19

The retailer shall determine on a quarterly basis,
20

ending on the last day of March, June, September, and
21

December, whether he or she meets the criteria of either
22

subparagraph (A) or (B) of this paragraph (9) for the
23

preceding 12-month period. If the retailer meets the
24

threshold of either subparagraph (A) or (B) for a 12-month
25

period, he or she is considered a retailer maintaining a
26

place of business in this State and is required to collect

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and remit the tax imposed under this Act and file returns
2

for one year. At the end of that one-year period, the
3

retailer shall determine whether he or she met the
4

threshold of either subparagraph (A) or (B) during the
5

preceding 12-month period. If the retailer met the
6

criteria in either subparagraph (A) or (B) for the
7

preceding 12-month period, he or she is considered a
8

retailer maintaining a place of business in this State and
9

is required to collect and remit the tax imposed under
10

this Act and file returns for the subsequent year. If at
11

the end of a one-year period a retailer that was required
12

to collect and remit the tax imposed under this Act
13

determines that he or she did not meet the threshold in
14

either subparagraph (A) or (B) during the preceding
15

12-month period, the retailer shall subsequently determine
16

on a quarterly basis, ending on the last day of March,
17

June, September, and December, whether he or she meets the
18

threshold of either subparagraph (A) or (B) for the
19

preceding 12-month period.
20

Beginning January 1, 2020, neither the gross receipts
21

from nor the number of separate transactions for sales of
22

tangible personal property to purchasers in Illinois that
23

a retailer makes through a marketplace facilitator and for
24

which the retailer has received a certification from the
25

marketplace facilitator pursuant to Section 2d of this Act
26

shall be included for purposes of determining whether he

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or she has met the thresholds of this paragraph (9).
2

(10) Beginning January 1, 2020, a marketplace
3

facilitator that meets a threshold set forth in subsection
4

(b) of Section 2d of this Act.
5

"Bulk vending machine" means a vending machine, containing
6
unsorted confections, nuts, toys, or other items designed
7
primarily to be used or played with by children which, when a
8
coin or coins of a denomination not larger than $0.50 are
9
inserted, are dispensed in equal portions, at random and
10
without selection by the customer.
11
(Source: P.A. 102-353, eff. 1-1-22; 103-592, eff. 1-1-25;
12
revised 11-22-24.)

13

(35 ILCS 105/3)

(from Ch. 120, par. 439.3)
14

Sec. 3.
Tax imposed.
A tax is imposed upon the privilege of
15
using in this State tangible personal property purchased,
16
which, on and after January 1, 2025, includes leased, at
17
retail from a retailer, including computer software, and
18
including photographs, negatives, and positives that are the
19
product of photoprocessing, but not including products of
20
photoprocessing produced for use in motion pictures for
21
commercial exhibition. Beginning January 1, 2001, prepaid
22
telephone calling arrangements shall be considered tangible
23
personal property subject to the tax imposed under this Act
24
regardless of the form in which those arrangements may be
25
embodied, transmitted, or fixed by any method now known or

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hereafter developed. Purchases of (1) electricity delivered to
2
customers by wire; (2) natural or artificial gas that is
3
delivered to customers through pipes, pipelines, or mains; and
4
(3) water that is delivered to customers through pipes,
5
pipelines, or mains are not subject to tax under this Act. The
6
provisions of this amendatory Act of the 98th General Assembly
7
are declaratory of existing law as to the meaning and scope of
8
this Act.
9

The imposition of the tax under this Act on the privilege
10
of using tangible personal property leased at retail applies
11
to leases of tangible personal property in effect, entered
12
into, or renewed on or after January 1, 2025. In the case of
13
leases, except as otherwise provided in this Act, the lessor,
14
in collecting the tax, may collect for each tax return period,
15
only the tax applicable to that part of the selling price
16
actually received during such tax return period.
17

The inclusion of leases in the tax imposed under this Act
18
by this amendatory Act of the 103rd General Assembly does not,
19
however, extend to motor vehicles, watercraft, aircraft, and
20
semitrailers, as defined in Section 1-187 of the Illinois
21
Vehicle Code, that are required to be registered with an
22
agency of this State. The taxation of these items shall
23
continue in effect as prior to the effective date of the
24
changes made to this Section by this amendatory Act of the
25
103rd General Assembly (i.e. dealers owe retailers' occupation
26
tax, lessors owe use tax, and lessees are not subject to

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retailers' occupation or use tax).
2

On and after January 1, 2026, the inclusion of leases in
3
the tax imposed under this Act does not extend to sporting
4
goods that are leased for a period of less than 10 days.

5
(Source: P.A. 103-592, eff. 1-1-25
.)

6

Section 10.
The Service Use Tax Act is amended by changing
7
Section 2 as follows:

8

(35 ILCS 110/2)

(from Ch. 120, par. 439.32)
9

Sec. 2.
Definitions.
In this Act:
10

"Use" means the exercise by any person of any right or
11
power over tangible personal property incident to the
12
ownership of that property, or, on and after January 1, 2025,
13
incident to the possession or control of, the right to possess
14
or control, or a license to use that property through a lease,
15
but does not include the sale or use for demonstration by him
16
of that property in any form as tangible personal property in
17
the regular course of business. "Use" does not mean the
18
interim use of tangible personal property. On and after
19
January 1, 2025, the lease of tangible personal property to a
20
lessee by a serviceman who is subject to tax on lease receipts
21
under this amendatory Act of the 103rd General Assembly does
22
not qualify as demonstration use or interim use of that
23
property. "Use" does not mean the physical incorporation of
24
tangible personal property, as an ingredient or constituent,

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into other tangible personal property, (a) which is sold in
2
the regular course of business or (b) which the person
3
incorporating such ingredient or constituent therein has
4
undertaken at the time of such purchase to cause to be
5
transported in interstate commerce to destinations outside the
6
State of Illinois.
7

"Lease" means a transfer of the possession or control of,
8
the right to possess or control, or a license to use, but not
9
title to, tangible personal property for a fixed or
10
indeterminate term for consideration, regardless of the name
11
by which the transaction is called. "Lease" does not include a
12
lease entered into merely as a security agreement that does
13
not involve a transfer of possession from the lessor to the
14
lessee.
15

On and after January 1, 2025, the term "sale", when used in
16
this Act with respect to tangible personal property, includes
17
a lease.
18

Beginning on January 1, 2026, the term "lease" does not
19
include the lease of sporting goods for a period of less than
20
10 days.

21

For the purposes of defining the term "lease", "sporting
22
goods" means tangible personal property that is used for
23
participation in a recreational health, fitness, or sporting
24
activity, including, but not limited to, golf, tennis,
25
basketball, baseball, softball, football, soccer, fishing,
26
pickleball, ice skating, roller skating, hockey, skiing,

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paddle boating, kayaking, canoeing, or yoga.

2

"Purchased from a serviceman" means the acquisition of the
3
ownership of, the title to, the possession or control of, the
4
right to possess or control, or a license to use, tangible
5
personal property through a sale of service.
6

"Purchaser" means any person who, through a sale of
7
service, acquires the ownership of, the title to, the
8
possession or control of, the right to possess or control, or a
9
license to use, any tangible personal property.
10

"Cost price" means the consideration paid by the
11
serviceman for a purchase, including, on and after January 1,
12
2025, a lease, valued in money, whether paid in money or
13
otherwise, including cash, credits and services, and shall be
14
determined without any deduction on account of the supplier's
15
cost of the property sold or on account of any other expense
16
incurred by the supplier. When a serviceman contracts out part
17
or all of the services required in his sale of service, it
18
shall be presumed that the cost price to the serviceman of the
19
property transferred to him or her by his or her subcontractor
20
is equal to 50% of the subcontractor's charges to the
21
serviceman in the absence of proof of the consideration paid
22
by the subcontractor for the purchase of such property.
23

"Selling price" means the consideration for a sale,
24
including, on and after January 1, 2025, a lease, valued in
25
money whether received in money or otherwise, including cash,
26
credits and service, and shall be determined without any

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1
deduction on account of the serviceman's cost of the property
2
sold, the cost of materials used, labor or service cost or any
3
other expense whatsoever, but does not include interest or
4
finance charges which appear as separate items on the bill of
5
sale or sales contract nor charges that are added to prices by
6
sellers on account of the seller's duty to collect, from the
7
purchaser, the tax that is imposed by this Act.
8

"Department" means the Department of Revenue.
9

"Person" means any natural individual, firm, partnership,
10
association, joint stock company, joint venture, public or
11
private corporation, limited liability company, and any
12
receiver, executor, trustee, guardian or other representative
13
appointed by order of any court.
14

"Sale of service" means any transaction except:
15

(1) a retail sale of tangible personal property
16

taxable under the Retailers' Occupation Tax Act or under
17

the Use Tax Act.
18

(2) a sale of tangible personal property for the
19

purpose of resale made in compliance with Section 2c of
20

the Retailers' Occupation Tax Act.
21

(3) except as hereinafter provided, a sale or transfer
22

of tangible personal property as an incident to the
23

rendering of service for or by any governmental body, or
24

for or by any corporation, society, association,
25

foundation or institution organized and operated
26

exclusively for charitable, religious or educational

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purposes or any not-for-profit corporation, society,
2

association, foundation, institution or organization which
3

has no compensated officers or employees and which is
4

organized and operated primarily for the recreation of
5

persons 55 years of age or older. A limited liability
6

company may qualify for the exemption under this paragraph
7

only if the limited liability company is organized and
8

operated exclusively for educational purposes.
9

(4) (blank).
10

(4a) a sale or transfer of tangible personal property
11

as an incident to the rendering of service for owners or
12

lessors, lessees, or shippers of tangible personal
13

property which is utilized by interstate carriers for hire
14

for use as rolling stock moving in interstate commerce so
15

long as so used by interstate carriers for hire, and
16

equipment operated by a telecommunications provider,
17

licensed as a common carrier by the Federal Communications
18

Commission, which is permanently installed in or affixed
19

to aircraft moving in interstate commerce.
20

(4a-5) on and after July 1, 2003 and through June 30,
21

2004, a sale or transfer of a motor vehicle of the second
22

division with a gross vehicle weight in excess of 8,000
23

pounds as an incident to the rendering of service if that
24

motor vehicle is subject to the commercial distribution
25

fee imposed under Section 3-815.1 of the Illinois Vehicle
26

Code. Beginning on July 1, 2004 and through June 30, 2005,

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the use in this State of motor vehicles of the second
2

division: (i) with a gross vehicle weight rating in excess
3

of 8,000 pounds; (ii) that are subject to the commercial
4

distribution fee imposed under Section 3-815.1 of the
5

Illinois Vehicle Code; and (iii) that are primarily used
6

for commercial purposes. Through June 30, 2005, this
7

exemption applies to repair and replacement parts added
8

after the initial purchase of such a motor vehicle if that
9

motor vehicle is used in a manner that would qualify for
10

the rolling stock exemption otherwise provided for in this
11

Act. For purposes of this paragraph, "used for commercial
12

purposes" means the transportation of persons or property
13

in furtherance of any commercial or industrial enterprise
14

whether for-hire or not.
15

(5) a sale or transfer of machinery and equipment used
16

primarily in the process of the manufacturing or
17

assembling, either in an existing, an expanded or a new
18

manufacturing facility, of tangible personal property for
19

wholesale or retail sale or lease, whether such sale or
20

lease is made directly by the manufacturer or by some
21

other person, whether the materials used in the process
22

are owned by the manufacturer or some other person, or
23

whether such sale or lease is made apart from or as an
24

incident to the seller's engaging in a service occupation
25

and the applicable tax is a Service Use Tax or Service
26

Occupation Tax, rather than Use Tax or Retailers'

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Occupation Tax. The exemption provided by this paragraph
2

(5) includes production related tangible personal
3

property, as defined in Section 3-50 of the Use Tax Act,
4

purchased on or after July 1, 2019. The exemption provided
5

by this paragraph (5) does not include machinery and
6

equipment used in (i) the generation of electricity for
7

wholesale or retail sale; (ii) the generation or treatment
8

of natural or artificial gas for wholesale or retail sale
9

that is delivered to customers through pipes, pipelines,
10

or mains; or (iii) the treatment of water for wholesale or
11

retail sale that is delivered to customers through pipes,
12

pipelines, or mains. The provisions of Public Act 98-583
13

are declaratory of existing law as to the meaning and
14

scope of this exemption. The exemption under this
15

paragraph (5) is exempt from the provisions of Section
16

3-75.
17

(5a) the repairing, reconditioning or remodeling, for
18

a common carrier by rail, of tangible personal property
19

which belongs to such carrier for hire, and as to which
20

such carrier receives the physical possession of the
21

repaired, reconditioned or remodeled item of tangible
22

personal property in Illinois, and which such carrier
23

transports, or shares with another common carrier in the
24

transportation of such property, out of Illinois on a
25

standard uniform bill of lading showing the person who
26

repaired, reconditioned or remodeled the property to a

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destination outside Illinois, for use outside Illinois.
2

(5b) a sale or transfer of tangible personal property
3

which is produced by the seller thereof on special order
4

in such a way as to have made the applicable tax the
5

Service Occupation Tax or the Service Use Tax, rather than
6

the Retailers' Occupation Tax or the Use Tax, for an
7

interstate carrier by rail which receives the physical
8

possession of such property in Illinois, and which
9

transports such property, or shares with another common
10

carrier in the transportation of such property, out of
11

Illinois on a standard uniform bill of lading showing the
12

seller of the property as the shipper or consignor of such
13

property to a destination outside Illinois, for use
14

outside Illinois.
15

(6) until July 1, 2003, a sale or transfer of
16

distillation machinery and equipment, sold as a unit or
17

kit and assembled or installed by the retailer, which
18

machinery and equipment is certified by the user to be
19

used only for the production of ethyl alcohol that will be
20

used for consumption as motor fuel or as a component of
21

motor fuel for the personal use of such user and not
22

subject to sale or resale.
23

(7) at the election of any serviceman not required to
24

be otherwise registered as a retailer under Section 2a of
25

the Retailers' Occupation Tax Act, made for each fiscal
26

year sales of service in which the aggregate annual cost

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price of tangible personal property transferred as an
2

incident to the sales of service is less than 35%, or 75%
3

in the case of servicemen transferring prescription drugs
4

or servicemen engaged in graphic arts production, of the
5

aggregate annual total gross receipts from all sales of
6

service. The purchase of such tangible personal property
7

by the serviceman shall be subject to tax under the
8

Retailers' Occupation Tax Act and the Use Tax Act.
9

However, if a primary serviceman who has made the election
10

described in this paragraph subcontracts service work to a
11

secondary serviceman who has also made the election
12

described in this paragraph, the primary serviceman does
13

not incur a Use Tax liability if the secondary serviceman
14

(i) has paid or will pay Use Tax on his or her cost price
15

of any tangible personal property transferred to the
16

primary serviceman and (ii) certifies that fact in writing
17

to the primary serviceman.
18

Tangible personal property transferred incident to the
19
completion of a maintenance agreement is exempt from the tax
20
imposed pursuant to this Act.
21

Exemption (5) also includes machinery and equipment used
22
in the general maintenance or repair of such exempt machinery
23
and equipment or for in-house manufacture of exempt machinery
24
and equipment. On and after July 1, 2017, exemption (5) also
25
includes graphic arts machinery and equipment, as defined in
26
paragraph (5) of Section 3-5. The machinery and equipment

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1
exemption does not include machinery and equipment used in (i)
2
the generation of electricity for wholesale or retail sale;
3
(ii) the generation or treatment of natural or artificial gas
4
for wholesale or retail sale that is delivered to customers
5
through pipes, pipelines, or mains; or (iii) the treatment of
6
water for wholesale or retail sale that is delivered to
7
customers through pipes, pipelines, or mains. The provisions
8
of Public Act 98-583 are declaratory of existing law as to the
9
meaning and scope of this exemption. For the purposes of
10
exemption (5), each of these terms shall have the following
11
meanings: (1) "manufacturing process" shall mean the
12
production of any article of tangible personal property,
13
whether such article is a finished product or an article for
14
use in the process of manufacturing or assembling a different
15
article of tangible personal property, by procedures commonly
16
regarded as manufacturing, processing, fabricating, or
17
refining which changes some existing material or materials
18
into a material with a different form, use or name. In relation
19
to a recognized integrated business composed of a series of
20
operations which collectively constitute manufacturing, or
21
individually constitute manufacturing operations, the
22
manufacturing process shall be deemed to commence with the
23
first operation or stage of production in the series, and
24
shall not be deemed to end until the completion of the final
25
product in the last operation or stage of production in the
26
series; and further, for purposes of exemption (5),

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photoprocessing is deemed to be a manufacturing process of
2
tangible personal property for wholesale or retail sale; (2)
3
"assembling process" shall mean the production of any article
4
of tangible personal property, whether such article is a
5
finished product or an article for use in the process of
6
manufacturing or assembling a different article of tangible
7
personal property, by the combination of existing materials in
8
a manner commonly regarded as assembling which results in a
9
material of a different form, use or name; (3) "machinery"
10
shall mean major mechanical machines or major components of
11
such machines contributing to a manufacturing or assembling
12
process; and (4) "equipment" shall include any independent
13
device or tool separate from any machinery but essential to an
14
integrated manufacturing or assembly process; including
15
computers used primarily in a manufacturer's computer assisted
16
design, computer assisted manufacturing (CAD/CAM) system; or
17
any subunit or assembly comprising a component of any
18
machinery or auxiliary, adjunct or attachment parts of
19
machinery, such as tools, dies, jigs, fixtures, patterns and
20
molds; or any parts which require periodic replacement in the
21
course of normal operation; but shall not include hand tools.
22
Equipment includes chemicals or chemicals acting as catalysts
23
but only if the chemicals or chemicals acting as catalysts
24
effect a direct and immediate change upon a product being
25
manufactured or assembled for wholesale or retail sale or
26
lease. The purchaser of such machinery and equipment who has

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1
an active resale registration number shall furnish such number
2
to the seller at the time of purchase. The purchaser of such
3
machinery and equipment and tools without an active resale
4
registration number shall prepare a certificate of exemption
5
stating facts establishing the exemption, which certificate
6
shall be available to the Department for inspection or audit.
7
The Department shall prescribe the form of the certificate.
8

Any informal rulings, opinions or letters issued by the
9
Department in response to an inquiry or request for any
10
opinion from any person regarding the coverage and
11
applicability of exemption (5) to specific devices shall be
12
published, maintained as a public record, and made available
13
for public inspection and copying. If the informal ruling,
14
opinion or letter contains trade secrets or other confidential
15
information, where possible the Department shall delete such
16
information prior to publication. Whenever such informal
17
rulings, opinions, or letters contain any policy of general
18
applicability, the Department shall formulate and adopt such
19
policy as a rule in accordance with the provisions of the
20
Illinois Administrative Procedure Act.
21

On and after July 1, 1987, no entity otherwise eligible
22
under exemption (3) of this Section shall make tax-free
23
purchases unless it has an active exemption identification
24
number issued by the Department.
25

The purchase, employment and transfer of such tangible
26
personal property as newsprint and ink for the primary purpose

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1
of conveying news (with or without other information) is not a
2
purchase, use or sale of service or of tangible personal
3
property within the meaning of this Act.
4

"Serviceman" means any person who is engaged in the
5
occupation of making sales of service.
6

"Sale at retail" means "sale at retail" as defined in the
7
Retailers' Occupation Tax Act, which, on and after January 1,
8
2025, is defined to include leases.
9

"Supplier" means any person who makes sales of tangible
10
personal property to servicemen for the purpose of resale as
11
an incident to a sale of service.
12

"Serviceman maintaining a place of business in this
13
State", or any like term, means and includes any serviceman:
14

(1) having or maintaining within this State, directly
15

or by a subsidiary, an office, distribution house, sales
16

house, warehouse or other place of business, or any agent
17

or other representative operating within this State under
18

the authority of the serviceman or its subsidiary,
19

irrespective of whether such place of business or agent or
20

other representative is located here permanently or
21

temporarily, or whether such serviceman or subsidiary is
22

licensed to do business in this State;
23

(1.1) having a contract with a person located in this
24

State under which the person, for a commission or other
25

consideration based on the sale of service by the
26

serviceman, directly or indirectly refers potential

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customers to the serviceman by providing to the potential
2

customers a promotional code or other mechanism that
3

allows the serviceman to track purchases referred by such
4

persons. Examples of mechanisms that allow the serviceman
5

to track purchases referred by such persons include but
6

are not limited to the use of a link on the person's
7

Internet website, promotional codes distributed through
8

the person's hand-delivered or mailed material, and
9

promotional codes distributed by the person through radio
10

or other broadcast media. The provisions of this paragraph
11

(1.1) shall apply only if the cumulative gross receipts
12

from sales of service by the serviceman to customers who
13

are referred to the serviceman by all persons in this
14

State under such contracts exceed $10,000 during the
15

preceding 4 quarterly periods ending on the last day of
16

March, June, September, and December; a serviceman meeting
17

the requirements of this paragraph (1.1) shall be presumed
18

to be maintaining a place of business in this State but may
19

rebut this presumption by submitting proof that the
20

referrals or other activities pursued within this State by
21

such persons were not sufficient to meet the nexus
22

standards of the United States Constitution during the
23

preceding 4 quarterly periods;
24

(1.2) beginning July 1, 2011, having a contract with a
25

person located in this State under which:
26

(A) the serviceman sells the same or substantially

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1

similar line of services as the person located in this
2

State and does so using an identical or substantially
3

similar name, trade name, or trademark as the person
4

located in this State; and
5

(B) the serviceman provides a commission or other
6

consideration to the person located in this State
7

based upon the sale of services by the serviceman.
8

The provisions of this paragraph (1.2) shall apply only if
9

the cumulative gross receipts from sales of service by the
10

serviceman to customers in this State under all such
11

contracts exceed $10,000 during the preceding 4 quarterly
12

periods ending on the last day of March, June, September,
13

and December;
14

(2) soliciting orders for tangible personal property
15

by means of a telecommunication or television shopping
16

system (which utilizes toll free numbers) which is
17

intended by the retailer to be broadcast by cable
18

television or other means of broadcasting, to consumers
19

located in this State;
20

(3) pursuant to a contract with a broadcaster or
21

publisher located in this State, soliciting orders for
22

tangible personal property by means of advertising which
23

is disseminated primarily to consumers located in this
24

State and only secondarily to bordering jurisdictions;
25

(4) soliciting orders for tangible personal property
26

by mail if the solicitations are substantial and recurring

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and if the retailer benefits from any banking, financing,
2

debt collection, telecommunication, or marketing
3

activities occurring in this State or benefits from the
4

location in this State of authorized installation,
5

servicing, or repair facilities;
6

(5) being owned or controlled by the same interests
7

which own or control any retailer engaging in business in
8

the same or similar line of business in this State;
9

(6) having a franchisee or licensee operating under
10

its trade name if the franchisee or licensee is required
11

to collect the tax under this Section;
12

(7) pursuant to a contract with a cable television
13

operator located in this State, soliciting orders for
14

tangible personal property by means of advertising which
15

is transmitted or distributed over a cable television
16

system in this State;
17

(8) engaging in activities in Illinois, which
18

activities in the state in which the supply business
19

engaging in such activities is located would constitute
20

maintaining a place of business in that state; or
21

(9) beginning October 1, 2018, making sales of service
22

to purchasers in Illinois from outside of Illinois if:
23

(A) the cumulative gross receipts from sales of
24

service to purchasers in Illinois are $100,000 or
25

more; or
26

(B) the serviceman enters into 200 or more

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separate transactions for sales of service to
2

purchasers in Illinois.
3

The serviceman shall determine on a quarterly basis,
4

ending on the last day of March, June, September, and
5

December, whether he or she meets the criteria of either
6

subparagraph (A) or (B) of this paragraph (9) for the
7

preceding 12-month period. If the serviceman meets the
8

criteria of either subparagraph (A) or (B) for a 12-month
9

period, he or she is considered a serviceman maintaining a
10

place of business in this State and is required to collect
11

and remit the tax imposed under this Act and file returns
12

for one year. At the end of that one-year period, the
13

serviceman shall determine whether the serviceman met the
14

criteria of either subparagraph (A) or (B) during the
15

preceding 12-month period. If the serviceman met the
16

criteria in either subparagraph (A) or (B) for the
17

preceding 12-month period, he or she is considered a
18

serviceman maintaining a place of business in this State
19

and is required to collect and remit the tax imposed under
20

this Act and file returns for the subsequent year. If at
21

the end of a one-year period a serviceman that was
22

required to collect and remit the tax imposed under this
23

Act determines that he or she did not meet the criteria in
24

either subparagraph (A) or (B) during the preceding
25

12-month period, the serviceman subsequently shall
26

determine on a quarterly basis, ending on the last day of

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March, June, September, and December, whether he or she
2

meets the criteria of either subparagraph (A) or (B) for
3

the preceding 12-month period.
4

Beginning January 1, 2020, neither the gross receipts
5

from nor the number of separate transactions for sales of
6

service to purchasers in Illinois that a serviceman makes
7

through a marketplace facilitator and for which the
8

serviceman has received a certification from the
9

marketplace facilitator pursuant to Section 2d of this Act
10

shall be included for purposes of determining whether he
11

or she has met the thresholds of this paragraph (9).
12

(10) Beginning January 1, 2020, a marketplace
13

facilitator, as defined in Section 2d of this Act.
14
(Source: P.A. 103-592, eff. 1-1-25
.)

15

Section 15.
The Service Occupation Tax Act is amended by
16
changing Section 2 as follows:

17

(35 ILCS 115/2)

(from Ch. 120, par. 439.102)
18

Sec. 2.
In this Act:
19

"Transfer" means any transfer of the title to property or
20
of the ownership of property whether or not the transferor
21
retains title as security for the payment of amounts due him
22
from the transferee. On and after January 1, 2025, "transfer"
23
also means any transfer of the possession or control of, the
24
right to possess or control, or a license to use, but not title

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to, tangible personal property.
2

"Lease" means a transfer of the possession or control of,
3
the right to possess or control, or a license to use, but not
4
title to, tangible personal property for a fixed or
5
indeterminate term for consideration, regardless of the name
6
by which the transaction is called. "Lease" does not include a
7
lease entered into merely as a security agreement that does
8
not involve a transfer of possession or control from the
9
lessor to the lessee.
10

On and after January 1, 2025, the term "sale", when used in
11
this Act with respect to tangible personal property, includes
12
a lease.
13

Beginning on January 1, 2026, the term "lease" does not
14
include the lease of sporting goods for a period of less than
15
10 days.

16

For the purposes of defining the term "lease", "sporting
17
goods" means tangible personal property that is used for
18
participation in a recreational health, fitness, or sporting
19
activity, including, but not limited to, golf, tennis,
20
basketball, baseball, softball, football, soccer, fishing,
21
pickleball, ice skating, roller skating, hockey, skiing,
22
paddle boating, kayaking, canoeing, or yoga.

23

"Cost Price" means the consideration paid by the
24
serviceman for a purchase, including, on and after January 1,
25
2025, a lease, valued in money, whether paid in money or
26
otherwise, including cash, credits and services, and shall be

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determined without any deduction on account of the supplier's
2
cost of the property sold or on account of any other expense
3
incurred by the supplier. When a serviceman contracts out part
4
or all of the services required in his sale of service, it
5
shall be presumed that the cost price to the serviceman of the
6
property transferred to him by his or her subcontractor is
7
equal to 50% of the subcontractor's charges to the serviceman
8
in the absence of proof of the consideration paid by the
9
subcontractor for the purchase of such property.
10

"Department" means the Department of Revenue.
11

"Person" means any natural individual, firm, partnership,
12
association, joint stock company, joint venture, public or
13
private corporation, limited liability company, and any
14
receiver, executor, trustee, guardian or other representative
15
appointed by order of any court.
16

"Sale of Service" means any transaction except:
17

(a) A retail sale of tangible personal property taxable
18
under the Retailers' Occupation Tax Act or under the Use Tax
19
Act.
20

(b) A sale of tangible personal property for the purpose
21
of resale made in compliance with Section 2c of the Retailers'
22
Occupation Tax Act.
23

(c) Except as hereinafter provided, a sale or transfer of
24
tangible personal property as an incident to the rendering of
25
service for or by any governmental body or for or by any
26
corporation, society, association, foundation or institution

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organized and operated exclusively for charitable, religious
2
or educational purposes or any not-for-profit corporation,
3
society, association, foundation, institution or organization
4
which has no compensated officers or employees and which is
5
organized and operated primarily for the recreation of persons
6
55 years of age or older. A limited liability company may
7
qualify for the exemption under this paragraph only if the
8
limited liability company is organized and operated
9
exclusively for educational purposes.
10

(d) (Blank).
11

(d-1) A sale or transfer of tangible personal property as
12
an incident to the rendering of service for owners or lessors,
13
lessees, or shippers of tangible personal property which is
14
utilized by interstate carriers for hire for use as rolling
15
stock moving in interstate commerce, and equipment operated by
16
a telecommunications provider, licensed as a common carrier by
17
the Federal Communications Commission, which is permanently
18
installed in or affixed to aircraft moving in interstate
19
commerce.
20

(d-1.1) On and after July 1, 2003 and through June 30,
21
2004, a sale or transfer of a motor vehicle of the second
22
division with a gross vehicle weight in excess of 8,000 pounds
23
as an incident to the rendering of service if that motor
24
vehicle is subject to the commercial distribution fee imposed
25
under Section 3-815.1 of the Illinois Vehicle Code. Beginning
26
on July 1, 2004 and through June 30, 2005, the use in this

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State of motor vehicles of the second division: (i) with a
2
gross vehicle weight rating in excess of 8,000 pounds; (ii)
3
that are subject to the commercial distribution fee imposed
4
under Section 3-815.1 of the Illinois Vehicle Code; and (iii)
5
that are primarily used for commercial purposes. Through June
6
30, 2005, this exemption applies to repair and replacement
7
parts added after the initial purchase of such a motor vehicle
8
if that motor vehicle is used in a manner that would qualify
9
for the rolling stock exemption otherwise provided for in this
10
Act. For purposes of this paragraph, "used for commercial
11
purposes" means the transportation of persons or property in
12
furtherance of any commercial or industrial enterprise whether
13
for-hire or not.
14

(d-2) The repairing, reconditioning or remodeling, for a
15
common carrier by rail, of tangible personal property which
16
belongs to such carrier for hire, and as to which such carrier
17
receives the physical possession of the repaired,
18
reconditioned or remodeled item of tangible personal property
19
in Illinois, and which such carrier transports, or shares with
20
another common carrier in the transportation of such property,
21
out of Illinois on a standard uniform bill of lading showing
22
the person who repaired, reconditioned or remodeled the
23
property as the shipper or consignor of such property to a
24
destination outside Illinois, for use outside Illinois.
25

(d-3) A sale or transfer of tangible personal property
26
which is produced by the seller thereof on special order in

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such a way as to have made the applicable tax the Service
2
Occupation Tax or the Service Use Tax, rather than the
3
Retailers' Occupation Tax or the Use Tax, for an interstate
4
carrier by rail which receives the physical possession of such
5
property in Illinois, and which transports such property, or
6
shares with another common carrier in the transportation of
7
such property, out of Illinois on a standard uniform bill of
8
lading showing the seller of the property as the shipper or
9
consignor of such property to a destination outside Illinois,
10
for use outside Illinois.
11

(d-4) Until January 1, 1997, a sale, by a registered
12
serviceman paying tax under this Act to the Department, of
13
special order printed materials delivered outside Illinois and
14
which are not returned to this State, if delivery is made by
15
the seller or agent of the seller, including an agent who
16
causes the product to be delivered outside Illinois by a
17
common carrier or the U.S. postal service.
18

(e) A sale or transfer of machinery and equipment used
19
primarily in the process of the manufacturing or assembling,
20
either in an existing, an expanded or a new manufacturing
21
facility, of tangible personal property for wholesale or
22
retail sale or lease, whether such sale or lease is made
23
directly by the manufacturer or by some other person, whether
24
the materials used in the process are owned by the
25
manufacturer or some other person, or whether such sale or
26
lease is made apart from or as an incident to the seller's

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engaging in a service occupation and the applicable tax is a
2
Service Occupation Tax or Service Use Tax, rather than
3
Retailers' Occupation Tax or Use Tax. The exemption provided
4
by this paragraph (e) includes production related tangible
5
personal property, as defined in Section 3-50 of the Use Tax
6
Act, purchased on or after July 1, 2019. The exemption
7
provided by this paragraph (e) does not include machinery and
8
equipment used in (i) the generation of electricity for
9
wholesale or retail sale; (ii) the generation or treatment of
10
natural or artificial gas for wholesale or retail sale that is
11
delivered to customers through pipes, pipelines, or mains; or
12
(iii) the treatment of water for wholesale or retail sale that
13
is delivered to customers through pipes, pipelines, or mains.
14
The provisions of Public Act 98-583 are declaratory of
15
existing law as to the meaning and scope of this exemption. The
16
exemption under this subsection (e) is exempt from the
17
provisions of Section 3-75.
18

(f) Until July 1, 2003, the sale or transfer of
19
distillation machinery and equipment, sold as a unit or kit
20
and assembled or installed by the retailer, which machinery
21
and equipment is certified by the user to be used only for the
22
production of ethyl alcohol that will be used for consumption
23
as motor fuel or as a component of motor fuel for the personal
24
use of such user and not subject to sale or resale.
25

(g) At the election of any serviceman not required to be
26
otherwise registered as a retailer under Section 2a of the

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Retailers' Occupation Tax Act, made for each fiscal year sales
2
of service in which the aggregate annual cost price of
3
tangible personal property transferred as an incident to the
4
sales of service is less than 35% (75% in the case of
5
servicemen transferring prescription drugs or servicemen
6
engaged in graphic arts production) of the aggregate annual
7
total gross receipts from all sales of service. The purchase
8
of such tangible personal property by the serviceman shall be
9
subject to tax under the Retailers' Occupation Tax Act and the
10
Use Tax Act. However, if a primary serviceman who has made the
11
election described in this paragraph subcontracts service work
12
to a secondary serviceman who has also made the election
13
described in this paragraph, the primary serviceman does not
14
incur a Use Tax liability if the secondary serviceman (i) has
15
paid or will pay Use Tax on his or her cost price of any
16
tangible personal property transferred to the primary
17
serviceman and (ii) certifies that fact in writing to the
18
primary serviceman.
19

Tangible personal property transferred incident to the
20
completion of a maintenance agreement is exempt from the tax
21
imposed pursuant to this Act.
22

Exemption (e) also includes machinery and equipment used
23
in the general maintenance or repair of such exempt machinery
24
and equipment or for in-house manufacture of exempt machinery
25
and equipment. On and after July 1, 2017, exemption (e) also
26
includes graphic arts machinery and equipment, as defined in

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paragraph (5) of Section 3-5. The machinery and equipment
2
exemption does not include machinery and equipment used in (i)
3
the generation of electricity for wholesale or retail sale;
4
(ii) the generation or treatment of natural or artificial gas
5
for wholesale or retail sale that is delivered to customers
6
through pipes, pipelines, or mains; or (iii) the treatment of
7
water for wholesale or retail sale that is delivered to
8
customers through pipes, pipelines, or mains. The provisions
9
of Public Act 98-583 are declaratory of existing law as to the
10
meaning and scope of this exemption. For the purposes of
11
exemption (e), each of these terms shall have the following
12
meanings: (1) "manufacturing process" shall mean the
13
production of any article of tangible personal property,
14
whether such article is a finished product or an article for
15
use in the process of manufacturing or assembling a different
16
article of tangible personal property, by procedures commonly
17
regarded as manufacturing, processing, fabricating, or
18
refining which changes some existing material or materials
19
into a material with a different form, use or name. In relation
20
to a recognized integrated business composed of a series of
21
operations which collectively constitute manufacturing, or
22
individually constitute manufacturing operations, the
23
manufacturing process shall be deemed to commence with the
24
first operation or stage of production in the series, and
25
shall not be deemed to end until the completion of the final
26
product in the last operation or stage of production in the

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series; and further for purposes of exemption (e),
2
photoprocessing is deemed to be a manufacturing process of
3
tangible personal property for wholesale or retail sale; (2)
4
"assembling process" shall mean the production of any article
5
of tangible personal property, whether such article is a
6
finished product or an article for use in the process of
7
manufacturing or assembling a different article of tangible
8
personal property, by the combination of existing materials in
9
a manner commonly regarded as assembling which results in a
10
material of a different form, use or name; (3) "machinery"
11
shall mean major mechanical machines or major components of
12
such machines contributing to a manufacturing or assembling
13
process; and (4) "equipment" shall include any independent
14
device or tool separate from any machinery but essential to an
15
integrated manufacturing or assembly process; including
16
computers used primarily in a manufacturer's computer assisted
17
design, computer assisted manufacturing (CAD/CAM) system; or
18
any subunit or assembly comprising a component of any
19
machinery or auxiliary, adjunct or attachment parts of
20
machinery, such as tools, dies, jigs, fixtures, patterns and
21
molds; or any parts which require periodic replacement in the
22
course of normal operation; but shall not include hand tools.
23
Equipment includes chemicals or chemicals acting as catalysts
24
but only if the chemicals or chemicals acting as catalysts
25
effect a direct and immediate change upon a product being
26
manufactured or assembled for wholesale or retail sale or

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lease. The purchaser of such machinery and equipment who has
2
an active resale registration number shall furnish such number
3
to the seller at the time of purchase. The purchaser of such
4
machinery and equipment and tools without an active resale
5
registration number shall furnish to the seller a certificate
6
of exemption stating facts establishing the exemption, which
7
certificate shall be available to the Department for
8
inspection or audit.
9

Except as provided in Section 2d of this Act, the rolling
10
stock exemption applies to rolling stock used by an interstate
11
carrier for hire, even just between points in Illinois, if
12
such rolling stock transports, for hire, persons whose
13
journeys or property whose shipments originate or terminate
14
outside Illinois.
15

Any informal rulings, opinions or letters issued by the
16
Department in response to an inquiry or request for any
17
opinion from any person regarding the coverage and
18
applicability of exemption (e) to specific devices shall be
19
published, maintained as a public record, and made available
20
for public inspection and copying. If the informal ruling,
21
opinion or letter contains trade secrets or other confidential
22
information, where possible the Department shall delete such
23
information prior to publication. Whenever such informal
24
rulings, opinions, or letters contain any policy of general
25
applicability, the Department shall formulate and adopt such
26
policy as a rule in accordance with the provisions of the

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Illinois Administrative Procedure Act.
2

On and after July 1, 1987, no entity otherwise eligible
3
under exemption (c) of this Section shall make tax-free
4
purchases unless it has an active exemption identification
5
number issued by the Department.
6

"Serviceman" means any person who is engaged in the
7
occupation of making sales of service.
8

"Sale at Retail" means "sale at retail" as defined in the
9
Retailers' Occupation Tax Act, which, on and after January 1,
10
2025, is defined to include leases.
11

"Supplier" means any person who makes sales of tangible
12
personal property to servicemen for the purpose of resale as
13
an incident to a sale of service.
14
(Source: P.A. 103-592, eff. 1-1-25
.)

15

Section 20.
The Retailers' Occupation Tax Act is amended
16
by changing Sections 1 and 2 as follows:

17

(35 ILCS 120/1)
18

Sec. 1.
Definitions.
As used in this Act:

19

"Sale at retail" means any transfer of the ownership of,
20
the title to, the possession or control of, the right to
21
possess or control, or a license to use tangible personal
22
property to a purchaser, for the purpose of use or
23
consumption, and not for the purpose of resale in any form as
24
tangible personal property to the extent not first subjected

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to a use for which it was purchased, for a valuable
2
consideration: Provided that the property purchased is deemed
3
to be purchased for the purpose of resale, despite first being
4
used, to the extent to which it is resold as an ingredient of
5
an intentionally produced product or byproduct of
6
manufacturing. For this purpose, slag produced as an incident
7
to manufacturing pig iron or steel and sold is considered to be
8
an intentionally produced byproduct of manufacturing.
9
Transactions whereby the possession of the property is
10
transferred but the seller retains the title as security for
11
payment of the selling price shall be deemed to be sales.
12

"Sale at retail" shall be construed to include any
13
transfer of the ownership of, the title to, the possession or
14
control of, the right to possess or control, or a license to
15
use tangible personal property to a purchaser, for use or
16
consumption by any other person to whom such purchaser may
17
transfer the tangible personal property without a valuable
18
consideration, and to include any transfer, whether made for
19
or without a valuable consideration, for resale in any form as
20
tangible personal property unless made in compliance with
21
Section 2c of this Act.
22

Sales of tangible personal property, which property, to
23
the extent not first subjected to a use for which it was
24
purchased, as an ingredient or constituent, goes into and
25
forms a part of tangible personal property subsequently the
26
subject of a "Sale at retail", are not sales at retail as

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defined in this Act: Provided that the property purchased is
2
deemed to be purchased for the purpose of resale, despite
3
first being used, to the extent to which it is resold as an
4
ingredient of an intentionally produced product or byproduct
5
of manufacturing.
6

"Sale at retail" shall be construed to include any
7
Illinois florist's sales transaction in which the purchase
8
order is received in Illinois by a florist and the sale is for
9
use or consumption, but the Illinois florist has a florist in
10
another state deliver the property to the purchaser or the
11
purchaser's donee in such other state.
12

Nonreusable tangible personal property that is used by
13
persons engaged in the business of operating a restaurant,
14
cafeteria, or drive-in is a sale for resale when it is
15
transferred to customers in the ordinary course of business as
16
part of the sale of food or beverages and is used to deliver,
17
package, or consume food or beverages, regardless of where
18
consumption of the food or beverages occurs. Examples of those
19
items include, but are not limited to nonreusable, paper and
20
plastic cups, plates, baskets, boxes, sleeves, buckets or
21
other containers, utensils, straws, placemats, napkins, doggie
22
bags, and wrapping or packaging materials that are transferred
23
to customers as part of the sale of food or beverages in the
24
ordinary course of business.
25

The purchase, employment and transfer of such tangible
26
personal property as newsprint and ink for the primary purpose

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of conveying news (with or without other information) is not a
2
purchase, use or sale of tangible personal property.
3

A person whose activities are organized and conducted
4
primarily as a not-for-profit service enterprise, and who
5
engages in selling tangible personal property at retail
6
(whether to the public or merely to members and their guests)
7
is engaged in the business of selling tangible personal
8
property at retail with respect to such transactions,
9
excepting only a person organized and operated exclusively for
10
charitable, religious or educational purposes either (1), to
11
the extent of sales by such person to its members, students,
12
patients or inmates of tangible personal property to be used
13
primarily for the purposes of such person, or (2), to the
14
extent of sales by such person of tangible personal property
15
which is not sold or offered for sale by persons organized for
16
profit. The selling of school books and school supplies by
17
schools at retail to students is not "primarily for the
18
purposes of" the school which does such selling. The
19
provisions of this paragraph shall not apply to nor subject to
20
taxation occasional dinners, socials or similar activities of
21
a person organized and operated exclusively for charitable,
22
religious or educational purposes, whether or not such
23
activities are open to the public.
24

A person who is the recipient of a grant or contract under
25
Title VII of the Older Americans Act of 1965 (P.L. 92-258) and
26
serves meals to participants in the federal Nutrition Program

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for the Elderly in return for contributions established in
2
amount by the individual participant pursuant to a schedule of
3
suggested fees as provided for in the federal Act is not
4
engaged in the business of selling tangible personal property
5
at retail with respect to such transactions.
6

"Lease" means a transfer of the possession or control of,
7
the right to possess or control, or a license to use, but not
8
title to, tangible personal property for a fixed or
9
indeterminate term for consideration, regardless of the name
10
by which the transaction is called. "Lease" does not include a
11
lease entered into merely as a security agreement that does
12
not involve a transfer of possession or control from the
13
lessor to the lessee.
14

On and after January 1, 2025, the term "sale", when used in
15
this Act, includes a lease.
16

Beginning on January 1, 2026, the term "lease" does not
17
include the lease of sporting goods for a period of less than
18
10 days.

19

For the purposes of defining the term "lease", "sporting
20
goods" means tangible personal property that is used for
21
participation in a recreational health, fitness, or sporting
22
activity, including, but not limited to, golf, tennis,
23
basketball, baseball, softball, football, soccer, fishing,
24
pickleball, ice skating, roller skating, hockey, skiing,
25
paddle boating, kayaking, canoeing, or yoga.

26

"Purchaser" means anyone who, through a sale at retail,

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acquires the ownership of, the title to, the possession or
2
control of, the right to possess or control, or a license to
3
use tangible personal property for a valuable consideration.
4

"Reseller of motor fuel" means any person engaged in the
5
business of selling or delivering or transferring title of
6
motor fuel to another person other than for use or
7
consumption. No person shall act as a reseller of motor fuel
8
within this State without first being registered as a reseller
9
pursuant to Section 2c or a retailer pursuant to Section 2a.
10

"Selling price" or the "amount of sale" means the
11
consideration for a sale valued in money whether received in
12
money or otherwise, including cash, credits, property, other
13
than as hereinafter provided, and services, but, prior to
14
January 1, 2020 and beginning again on January 1, 2022, not
15
including the value of or credit given for traded-in tangible
16
personal property where the item that is traded-in is of like
17
kind and character as that which is being sold; beginning
18
January 1, 2020 and until January 1, 2022, "selling price"
19
includes the portion of the value of or credit given for
20
traded-in motor vehicles of the First Division as defined in
21
Section 1-146 of the Illinois Vehicle Code of like kind and
22
character as that which is being sold that exceeds $10,000.
23
"Selling price" shall be determined without any deduction on
24
account of the cost of the property sold, the cost of materials
25
used, labor or service cost or any other expense whatsoever,
26
but does not include charges that are added to prices by

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sellers on account of the seller's tax liability under this
2
Act, or on account of the seller's duty to collect, from the
3
purchaser, the tax that is imposed by the Use Tax Act, or,
4
except as otherwise provided with respect to any cigarette tax
5
imposed by a home rule unit, on account of the seller's tax
6
liability under any local occupation tax administered by the
7
Department, or, except as otherwise provided with respect to
8
any cigarette tax imposed by a home rule unit on account of the
9
seller's duty to collect, from the purchasers, the tax that is
10
imposed under any local use tax administered by the
11
Department. Effective December 1, 1985, "selling price" shall
12
include charges that are added to prices by sellers on account
13
of the seller's tax liability under the Cigarette Tax Act, on
14
account of the sellers' duty to collect, from the purchaser,
15
the tax imposed under the Cigarette Use Tax Act, and on account
16
of the seller's duty to collect, from the purchaser, any
17
cigarette tax imposed by a home rule unit.
18

The provisions of this paragraph, which provides only for
19
an alternative meaning of "selling price" with respect to the
20
sale of certain motor vehicles incident to the contemporaneous
21
lease of those motor vehicles, continue in effect and are not
22
changed by the tax on leases implemented by
Public Act 103-592

23
this amendatory Act of the 103rd General Assembly
.
24
Notwithstanding any law to the contrary, for any motor
25
vehicle, as defined in Section 1-146 of the
Illinois
Vehicle
26
Code, that is sold on or after January 1, 2015 for the purpose

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of leasing the vehicle for a defined period that is longer than
2
one year and (1) is a motor vehicle of the second division
3
that: (A) is a self-contained motor vehicle designed or
4
permanently converted to provide living quarters for
5
recreational, camping, or travel use, with direct walk through
6
access to the living quarters from the driver's seat; (B) is of
7
the van configuration designed for the transportation of not
8
less than 7 nor more than 16 passengers; or (C) has a gross
9
vehicle weight rating of 8,000 pounds or less or (2) is a motor
10
vehicle of the first division, "selling price" or "amount of
11
sale" means the consideration received by the lessor pursuant
12
to the lease contract, including amounts due at lease signing
13
and all monthly or other regular payments charged over the
14
term of the lease. Also included in the selling price is any
15
amount received by the lessor from the lessee for the leased
16
vehicle that is not calculated at the time the lease is
17
executed, including, but not limited to, excess mileage
18
charges and charges for excess wear and tear. For sales that
19
occur in Illinois, with respect to any amount received by the
20
lessor from the lessee for the leased vehicle that is not
21
calculated at the time the lease is executed, the lessor who
22
purchased the motor vehicle does not incur the tax imposed by
23
the Use Tax Act on those amounts, and the retailer who makes
24
the retail sale of the motor vehicle to the lessor is not
25
required to collect the tax imposed by the Use Tax Act or to
26
pay the tax imposed by this Act on those amounts. However, the

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lessor who purchased the motor vehicle assumes the liability
2
for reporting and paying the tax on those amounts directly to
3
the Department in the same form (Illinois Retailers'
4
Occupation Tax, and local retailers' occupation taxes, if
5
applicable) in which the retailer would have reported and paid
6
such tax if the retailer had accounted for the tax to the
7
Department. For amounts received by the lessor from the lessee
8
that are not calculated at the time the lease is executed, the
9
lessor must file the return and pay the tax to the Department
10
by the due date otherwise required by this Act for returns
11
other than transaction returns. If the retailer is entitled
12
under this Act to a discount for collecting and remitting the
13
tax imposed under this Act to the Department with respect to
14
the sale of the motor vehicle to the lessor, then the right to
15
the discount provided in this Act shall be transferred to the
16
lessor with respect to the tax paid by the lessor for any
17
amount received by the lessor from the lessee for the leased
18
vehicle that is not calculated at the time the lease is
19
executed; provided that the discount is only allowed if the
20
return is timely filed and for amounts timely paid. The
21
"selling price" of a motor vehicle that is sold on or after
22
January 1, 2015 for the purpose of leasing for a defined period
23
of longer than one year shall not be reduced by the value of or
24
credit given for traded-in tangible personal property owned by
25
the lessor, nor shall it be reduced by the value of or credit
26
given for traded-in tangible personal property owned by the

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lessee, regardless of whether the trade-in value thereof is
2
assigned by the lessee to the lessor. In the case of a motor
3
vehicle that is sold for the purpose of leasing for a defined
4
period of longer than one year, the sale occurs at the time of
5
the delivery of the vehicle, regardless of the due date of any
6
lease payments. A lessor who incurs a Retailers' Occupation
7
Tax liability on the sale of a motor vehicle coming off lease
8
may not take a credit against that liability for the Use Tax
9
the lessor paid upon the purchase of the motor vehicle (or for
10
any tax the lessor paid with respect to any amount received by
11
the lessor from the lessee for the leased vehicle that was not
12
calculated at the time the lease was executed) if the selling
13
price of the motor vehicle at the time of purchase was
14
calculated using the definition of "selling price" as defined
15
in this paragraph. Notwithstanding any other provision of this
16
Act to the contrary, lessors shall file all returns and make
17
all payments required under this paragraph to the Department
18
by electronic means in the manner and form as required by the
19
Department. This paragraph does not apply to leases of motor
20
vehicles for which, at the time the lease is entered into, the
21
term of the lease is not a defined period, including leases
22
with a defined initial period with the option to continue the
23
lease on a month-to-month or other basis beyond the initial
24
defined period.
25

The phrase "like kind and character" shall be liberally
26
construed (including but not limited to any form of motor

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vehicle for any form of motor vehicle, or any kind of farm or
2
agricultural implement for any other kind of farm or
3
agricultural implement), while not including a kind of item
4
which, if sold at retail by that retailer, would be exempt from
5
retailers' occupation tax and use tax as an isolated or
6
occasional sale.
7

"Gross receipts" from the sales of tangible personal
8
property at retail means the total selling price or the amount
9
of such sales, as hereinbefore defined. In the case of charge
10
and time sales, the amount thereof shall be included only as
11
and when payments are received by the seller. In the case of
12
leases, except as otherwise provided in this Act, the amount
13
thereof shall be included only as and when gross receipts are
14
received by the lessor. Receipts or other consideration
15
derived by a seller from the sale, transfer or assignment of
16
accounts receivable to a wholly owned subsidiary will not be
17
deemed payments prior to the time the purchaser makes payment
18
on such accounts.
19

"Department" means the Department of Revenue.
20

"Person" means any natural individual, firm, partnership,
21
association, joint stock company, joint adventure, public or
22
private corporation, limited liability company, or a receiver,
23
executor, trustee, guardian or other representative appointed
24
by order of any court.
25

The isolated or occasional sale of tangible personal
26
property at retail by a person who does not hold himself out as

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being engaged (or who does not habitually engage) in selling
2
such tangible personal property at retail, or a sale through a
3
bulk vending machine, does not constitute engaging in a
4
business of selling such tangible personal property at retail
5
within the meaning of this Act; provided that any person who is
6
engaged in a business which is not subject to the tax imposed
7
by this Act because of involving the sale of or a contract to
8
sell real estate or a construction contract to improve real
9
estate or a construction contract to engineer, install, and
10
maintain an integrated system of products, but who, in the
11
course of conducting such business, transfers tangible
12
personal property to users or consumers in the finished form
13
in which it was purchased, and which does not become real
14
estate or was not engineered and installed, under any
15
provision of a construction contract or real estate sale or
16
real estate sales agreement entered into with some other
17
person arising out of or because of such nontaxable business,
18
is engaged in the business of selling tangible personal
19
property at retail to the extent of the value of the tangible
20
personal property so transferred. If, in such a transaction, a
21
separate charge is made for the tangible personal property so
22
transferred, the value of such property, for the purpose of
23
this Act, shall be the amount so separately charged, but not
24
less than the cost of such property to the transferor; if no
25
separate charge is made, the value of such property, for the
26
purposes of this Act, is the cost to the transferor of such

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tangible personal property. Construction contracts for the
2
improvement of real estate consisting of engineering,
3
installation, and maintenance of voice, data, video, security,
4
and all telecommunication systems do not constitute engaging
5
in a business of selling tangible personal property at retail
6
within the meaning of this Act if they are sold at one
7
specified contract price.
8

A person who holds himself or herself out as being engaged
9
(or who habitually engages) in selling tangible personal
10
property at retail is a person engaged in the business of
11
selling tangible personal property at retail hereunder with
12
respect to such sales (and not primarily in a service
13
occupation) notwithstanding the fact that such person designs
14
and produces such tangible personal property on special order
15
for the purchaser and in such a way as to render the property
16
of value only to such purchaser, if such tangible personal
17
property so produced on special order serves substantially the
18
same function as stock or standard items of tangible personal
19
property that are sold at retail.
20

Persons who engage in the business of transferring
21
tangible personal property upon the redemption of trading
22
stamps are engaged in the business of selling such property at
23
retail and shall be liable for and shall pay the tax imposed by
24
this Act on the basis of the retail value of the property
25
transferred upon redemption of such stamps.
26

"Bulk vending machine" means a vending machine, containing

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unsorted confections, nuts, toys, or other items designed
2
primarily to be used or played with by children which, when a
3
coin or coins of a denomination not larger than $0.50 are
4
inserted, are dispensed in equal portions, at random and
5
without selection by the customer.
6

"Remote retailer" means a retailer that does not maintain
7
within this State, directly or by a subsidiary, an office,
8
distribution house, sales house, warehouse or other place of
9
business, or any agent or other representative operating
10
within this State under the authority of the retailer or its
11
subsidiary, irrespective of whether such place of business or
12
agent is located here permanently or temporarily or whether
13
such retailer or subsidiary is licensed to do business in this
14
State.
15

"Retailer maintaining a place of business in this State"
16
has the meaning given to that term in Section 2 of the Use Tax
17
Act.
18

"Marketplace" means a physical or electronic place, forum,
19
platform, application, or other method by which a marketplace
20
seller sells or offers to sell items.
21

"Marketplace facilitator" means a person who, pursuant to
22
an agreement with an unrelated third-party marketplace seller,
23
directly or indirectly through one or more affiliates
24
facilitates a retail sale by an unrelated
third-party

third
25
party
marketplace seller by:
26

(1) listing or advertising for sale by the marketplace

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1

seller in a marketplace, tangible personal property that
2

is subject to tax under this Act; and
3

(2) either directly or indirectly, through agreements
4

or arrangements with third parties, collecting payment
5

from the customer and transmitting that payment to the
6

marketplace seller regardless of whether the marketplace
7

facilitator receives compensation or other consideration
8

in exchange for its services.
9

A person who provides advertising services, including
10
listing products for sale, is not considered a marketplace
11
facilitator, so long as the advertising service platform or
12
forum does not engage, directly or indirectly through one or
13
more affiliated persons, in the activities described in
14
paragraph (2) of this definition of "marketplace facilitator".
15

"Marketplace facilitator" does not include any person
16
licensed under the Auction License Act. This exemption does
17
not apply to any person who is an Internet auction listing
18
service, as defined by the Auction License Act.
19

"Marketplace seller" means a person
who

that
makes sales
20
through a marketplace operated by an unrelated
third-party

21
third party
marketplace facilitator.
22
(Source: P.A. 102-353, eff. 1-1-22; 102-634, eff. 8-27-21;
23
102-813, eff. 5-13-22; 103-592, eff. 1-1-25; 103-983, eff.
24
1-1-25; revised 11-26-24.)

25

(35 ILCS 120/2)

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1

Sec. 2.
Tax imposed.

2

(a) A tax is imposed upon persons engaged in the business
3
of selling at retail, which, on and after January 1, 2025,
4
includes leasing, tangible personal property, including
5
computer software, and including photographs, negatives, and
6
positives that are the product of photoprocessing, but not
7
including products of photoprocessing produced for use in
8
motion pictures for public commercial exhibition. Beginning
9
January 1, 2001, prepaid telephone calling arrangements shall
10
be considered tangible personal property subject to the tax
11
imposed under this Act regardless of the form in which those
12
arrangements may be embodied, transmitted, or fixed by any
13
method now known or hereafter developed.
14

The imposition of the tax under this Act on persons
15
engaged in the business of leasing tangible personal property
16
applies to leases in effect, entered into, or renewed on or
17
after January 1, 2025. In the case of leases, except as
18
otherwise provided in this Act, the lessor must remit, for
19
each tax return period, only the tax applicable to that part of
20
the selling price actually received during such tax return
21
period.
22

The inclusion of leases in the tax imposed under this Act
23
by
Public Act 103-592

this amendatory Act of the 103rd General
24
Assembly
does not, however, extend to motor vehicles,
25
watercraft, aircraft, and semitrailers, as defined in Section
26
1-187 of the Illinois Vehicle Code, that are required to be

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1
registered with an agency of this State. The taxation of these
2
items shall continue in effect as prior to the effective date
3
of the changes made to this Section by
Public Act 103-592

this
4
amendatory Act of the 103rd General Assembly
(i.e., dealers
5
owe retailers' occupation tax, lessors owe use tax, and
6
lessees are not subject to retailers' occupation or use tax).
7

Sales of (1) electricity delivered to customers by wire;
8
(2) natural or artificial gas that is delivered to customers
9
through pipes, pipelines, or mains; and (3) water that is
10
delivered to customers through pipes, pipelines, or mains are
11
not subject to tax under this Act. The provisions of
Public Act
12
98-583

this amendatory Act of the 98th General Assembly
are
13
declaratory of existing law as to the meaning and scope of this
14
Act.
15

On and after January 1, 2026, the inclusion of leases in
16
the tax imposed under this Act does not extend to sporting
17
goods that are leased for a period of less than 10 days.

18

(b) Beginning on January 1, 2021, a remote retailer is
19
engaged in the occupation of selling at retail in Illinois for
20
purposes of this Act, if:
21

(1) the cumulative gross receipts from sales of
22

tangible personal property to purchasers in Illinois are
23

$100,000 or more; or
24

(2) the retailer enters into 200 or more separate
25

transactions for the sale of tangible personal property to
26

purchasers in Illinois.

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1

Remote retailers that meet or exceed the threshold in
2
either paragraph (1) or (2) above shall be liable for all
3
applicable State retailers' and locally imposed retailers'
4
occupation taxes administered by the Department on all retail
5
sales to Illinois purchasers.
6

The remote retailer shall determine on a quarterly basis,
7
ending on the last day of March, June, September, and
8
December, whether he or she meets the criteria of either
9
paragraph (1) or (2) of this subsection for the preceding
10
12-month period. If the retailer meets the criteria of either
11
paragraph (1) or (2) for a 12-month period, he or she is
12
considered a retailer maintaining a place of business in this
13
State and is required to collect and remit the tax imposed
14
under this Act and all retailers' occupation tax imposed by
15
local taxing jurisdictions in Illinois, provided such local
16
taxes are administered by the Department, and to file all
17
applicable returns for one year. At the end of that one-year
18
period, the retailer shall determine whether the retailer met
19
the criteria of either paragraph (1) or (2) for the preceding
20
12-month period. If the retailer met the criteria in either
21
paragraph (1) or (2) for the preceding 12-month period, he or
22
she is considered a retailer maintaining a place of business
23
in this State and is required to collect and remit all
24
applicable State and local retailers' occupation taxes and
25
file returns for the subsequent year. If, at the end of a
26
one-year period, a retailer that was required to collect and

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1
remit the tax imposed under this Act determines that he or she
2
did not meet the criteria in either paragraph (1) or (2) during
3
the preceding 12-month period, then the retailer shall
4
subsequently determine on a quarterly basis, ending on the
5
last day of March, June, September, and December, whether he
6
or she meets the criteria of either paragraph (1) or (2) for
7
the preceding 12-month period.
8

(b-2) Beginning on January 1, 2025, a retailer maintaining
9
a place of business in this State that makes retail sales of
10
tangible personal property to Illinois customers from a
11
location or locations outside of Illinois is engaged in the
12
occupation of selling at retail in Illinois for the purposes
13
of this Act. Those retailers are liable for all applicable
14
State and locally imposed retailers' occupation taxes
15
administered by the Department on retail sales made by those
16
retailers to Illinois customers from locations outside of
17
Illinois.
18

(b-5) For the purposes of this Section, neither the gross
19
receipts from nor the number of separate transactions for
20
sales of tangible personal property to purchasers in Illinois
21
that a remote retailer makes through a marketplace facilitator
22
shall be included for the purposes of determining whether he
23
or she has met the thresholds of subsection (b) of this Section
24
so long as the remote retailer has received certification from
25
the marketplace facilitator that the marketplace facilitator
26
is legally responsible for payment of tax on such sales.

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1

(b-10) A remote retailer that is required to collect taxes
2
imposed under the Use Tax Act on retail sales made to Illinois
3
purchasers or a retailer maintaining a place of business in
4
this State that is required to collect taxes imposed under the
5
Use Tax Act on retail sales made to Illinois purchasers shall
6
be liable to the Department for such taxes, except when the
7
remote retailer or retailer maintaining a place of business in
8
this State is relieved of the duty to remit such taxes by
9
virtue of having paid to the Department taxes imposed by this
10
Act in accordance with this Section upon his or her gross
11
receipts from such sales.
12

(c) Marketplace facilitators engaged in the business of
13
selling at retail tangible personal property in Illinois.
14
Beginning January 1, 2021, a marketplace facilitator is
15
engaged in the occupation of selling at retail tangible
16
personal property in Illinois for purposes of this Act if,
17
during the previous 12-month period:
18

(1) the cumulative gross receipts from sales of
19

tangible personal property on its own behalf or on behalf
20

of marketplace sellers to purchasers in Illinois equals
21

$100,000 or more; or
22

(2) the marketplace facilitator enters into 200 or
23

more separate transactions on its own behalf or on behalf
24

of marketplace sellers for the sale of tangible personal
25

property to purchasers in Illinois, regardless of whether
26

the marketplace facilitator or marketplace sellers for

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1

whom such sales are facilitated are registered as
2

retailers in this State.
3

A marketplace facilitator who meets either paragraph (1)
4
or (2) of this subsection is required to remit the applicable
5
State retailers' occupation taxes under this Act and local
6
retailers' occupation taxes administered by the Department on
7
all taxable sales of tangible personal property made by the
8
marketplace facilitator or facilitated for marketplace sellers
9
to customers in this State. A marketplace facilitator selling
10
or facilitating the sale of tangible personal property to
11
customers in this State is subject to all applicable
12
procedures and requirements of this Act.
13

The marketplace facilitator shall determine on a quarterly
14
basis, ending on the last day of March, June, September, and
15
December, whether he or she meets the criteria of either
16
paragraph (1) or (2) of this subsection for the preceding
17
12-month period. If the marketplace facilitator meets the
18
criteria of either paragraph (1) or (2) for a 12-month period,
19
he or she is considered a retailer maintaining a place of
20
business in this State and is required to remit the tax imposed
21
under this Act and all retailers' occupation tax imposed by
22
local taxing jurisdictions in Illinois, provided such local
23
taxes are administered by the Department, and to file all
24
applicable returns for one year. At the end of that one-year
25
period, the marketplace facilitator shall determine whether it
26
met the criteria of either paragraph (1) or (2) for the

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1
preceding 12-month period. If the marketplace facilitator met
2
the criteria in either paragraph (1) or (2) for the preceding
3
12-month period, it is considered a retailer maintaining a
4
place of business in this State and is required to collect and
5
remit all applicable State and local retailers' occupation
6
taxes and file returns for the subsequent year. If at the end
7
of a one-year period a marketplace facilitator that was
8
required to collect and remit the tax imposed under this Act
9
determines that he or she did not meet the criteria in either
10
paragraph (1) or (2) during the preceding 12-month period, the
11
marketplace facilitator shall subsequently determine on a
12
quarterly basis, ending on the last day of March, June,
13
September, and December, whether he or she meets the criteria
14
of either paragraph (1) or (2) for the preceding 12-month
15
period.
16

A marketplace facilitator shall be entitled to any
17
credits, deductions, or adjustments to the sales price
18
otherwise provided to the marketplace seller, in addition to
19
any such adjustments provided directly to the marketplace
20
facilitator. This Section pertains to, but is not limited to,
21
adjustments such as discounts, coupons, and rebates. In
22
addition, a marketplace facilitator shall be entitled to the
23
retailers' discount provided in Section 3 of the Retailers'
24
Occupation Tax Act on all marketplace sales, and the
25
marketplace seller shall not include sales made through a
26
marketplace facilitator when computing any retailers' discount

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1
on remaining sales. Marketplace facilitators shall report and
2
remit the applicable State and local retailers' occupation
3
taxes on sales facilitated for marketplace sellers separately
4
from any sales or use tax collected on taxable retail sales
5
made directly by the marketplace facilitator or its
6
affiliates.
7

The marketplace facilitator is liable for the remittance
8
of all applicable State retailers' occupation taxes under this
9
Act and local retailers' occupation taxes administered by the
10
Department on sales through the marketplace and is subject to
11
audit on all such sales. The Department shall not audit
12
marketplace sellers for their marketplace sales where a
13
marketplace facilitator remitted the applicable State and
14
local retailers' occupation taxes unless the marketplace
15
facilitator seeks relief as a result of incorrect information
16
provided to the marketplace facilitator by a marketplace
17
seller as set forth in this Section. The marketplace
18
facilitator shall not be held liable for tax on any sales made
19
by a marketplace seller that take place outside of the
20
marketplace and which are not a part of any agreement between a
21
marketplace facilitator and a marketplace seller. In addition,
22
marketplace facilitators shall not be held liable to State and
23
local governments of Illinois for having charged and remitted
24
an incorrect amount of State and local retailers' occupation
25
tax if, at the time of the sale, the tax is computed based on
26
erroneous data provided by the State in database files on tax

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1
rates, boundaries, or taxing jurisdictions or incorrect
2
information provided to the marketplace facilitator by the
3
marketplace seller.
4

(d) A marketplace facilitator shall:
5

(1) certify to each marketplace seller that the
6

marketplace facilitator assumes the rights and duties of a
7

retailer under this Act with respect to sales made by the
8

marketplace seller through the marketplace; and
9

(2) remit taxes imposed by this Act as required by
10

this Act for sales made through the marketplace.
11

(e) A marketplace seller shall retain books and records
12
for all sales made through a marketplace in accordance with
13
the requirements of this Act.
14

(f) A marketplace facilitator is subject to audit on all
15
marketplace sales for which it is considered to be the
16
retailer, but shall not be liable for tax or subject to audit
17
on sales made by marketplace sellers outside of the
18
marketplace.
19

(g) A marketplace facilitator required to collect taxes
20
imposed under the Use Tax Act on marketplace sales made to
21
Illinois purchasers shall be liable to the Department for such
22
taxes, except when the marketplace facilitator is relieved of
23
the duty to remit such taxes by virtue of having paid to the
24
Department taxes imposed by this Act in accordance with this
25
Section upon his or her gross receipts from such sales.
26

(h) Nothing in this Section shall allow the Department to

HB4037
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1
collect retailers' occupation taxes from both the marketplace
2
facilitator and marketplace seller on the same transaction.
3

(i) If, for any reason, the Department is prohibited from
4
enforcing the marketplace facilitator's duty under this Act to
5
remit taxes pursuant to this Section, the duty to remit such
6
taxes remains with the marketplace seller.
7

(j) Nothing in this Section affects the obligation of any
8
consumer to remit use tax for any taxable transaction for
9
which a certified service provider acting on behalf of a
10
remote retailer or a marketplace facilitator does not collect
11
and remit the appropriate tax.
12

(k) Nothing in this Section shall allow the Department to
13
collect the retailers' occupation tax from both the
14
marketplace facilitator and the marketplace seller.
15
(Source: P.A. 103-592, eff. 1-1-25; 103-983, eff. 1-1-25;
16
revised 11-26-24.)

17

Section 99.
Effective date.
This Act takes effect upon
18
becoming law.

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