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Even though a tugboat company passed three out of four prongs of the Commerce Clause test under the U.S. Supreme Court test used in Complete Auto Transit, Inc. v. Brady, 430 U.S. 274 (1977), the tax apportioned by the state was found in violation of interstate commerce laws. The four prong test includes substantial nexus with the state, fair apportionment, non discrimination against interstate commerce, and a fair relationship to the services provided by the state. These criteria must be met so that a state taxing scheme or particular state exemption does not interfere with interstate commerce. Although the tugboats spent more than half of their time pushing barges in Illinois waters, they did not receive any services from the state while using Illinois waterways. The taxation of fuel and supplies loaded onto tugboats outside the state violated the U.S. Constitution Commerce Clause since all four prongs were not met successfully. (American River Transportation Company v. Glen L. Bower, Docket No. 2-02-1290, July 21, 2004)


Purchases of machinery and equipment made on or after that date will earn a credit equal to 50% of the 6.25%, or 3.125%, of the state sales tax rate. Printers and newspaper companies will also be allowed to apply the amount of taxes not paid due to the graphic arts exemption to future machinery and equipment purchases not exempt under the graphics arts or other exemptions. The MPC also applied to machinery and equipment purchased between January 1, 1995 and June 30, 2003. In order for the MPC to be valid it must be dated and include the name, address, registration number (if registered), credit being applied, and purchasers must indicate that the manufacturer’s or graphic arts producer’s purchase credit applies. The certification may be incorporated into the producer’s purchase order. The MPC is nontransferable and the manufacturer or graphic arts producer must report all information required by the annual Report of Manufacturer’s Purchase Credit Used within six months of the end of the calendar year in which a MPC is earned. The report will include the total purchase price of all exempt purchases for which credit was earned, the total State Use Tax or Service Use Tax which would have been due, amount of credit earned, and the percentage used to calculate the amount of credit earned. Failure to file the report will forfeit MPC for that year, unless a reasonable cause for not filing the report can be proven, and MPC on purchases made during the period not reported. Although not yet codified, the new MPC is expected to follow the same requirements as the MPC which ended July 1, 2003. Credits expire on December 31 of the second calendar year after the credits were accrued. For a copy of the Public Act, visit (SB 2207, 2205, July 2004)


The prior exemption was eliminated on July 1, 2003 and the reinstated exemption will be a mirror of the prior exemption. The exemption will apply to machinery and equipment used for graphic arts and will include new and used machinery and replacement and repair parts and will apply to machinery manufactured on special order or purchased for lease. Exempt items will include machinery, computers, cameras, and parts used specifically for the printing process and will also include equipment used to provide power or cooling for the printing process, computers and other equipment used to transfer materials during production and to package it for shipping. In addition, chemicals and chemicals acting as catalysts will be considered equipment under the Act if they have a direct and immediate change upon graphic arts products. In addition, the purchaser must certify that the primary use of the machinery and equipment will be for graphic arts production. For a copy of the Public Act, visit (SB 2207, 2205, July 2004)


Taxpayers who acquire a watercraft by gift, donation, transfer, or non-retail purchase must remit the 6.25% state use tax, and any applicable local taxes, with Form RUT-75 within 30 days of the acquisition or the date the watercraft is brought into Illinois. The purchase price of the watercraft is the fair market value on the date the watercraft is acquired or brought into Illinois and if taxpayers acquire shares of a watercraft they should pay the tax applicable to their share of the watercraft. In addition, taxpayers who rent or lease watercraft are responsible for the Retailers’ Occupation Tax if they sell used watercraft to end users as of September 1, 2004. If selling a used watercraft, taxpayers should remit the 6.25% state tax, along with any applicable local taxes, and Form ST-556 within 20 days of delivering the watercraft. (Informational Bulletin FY 2005-04)


As of June 1, 2004, a resolution has been adopted urging out-of-state retailers to collect (instead of “charge”) sales taxes upon goods and taxable services intended for use within Illinois. The resolution also urges the Department of Revenue to take additional steps to improve upon the collection procedures upon out-of-state goods intended for use within Illinois. In doing so, the resolution urges Governor Blagojevich to allocate sufficient funds and personnel resources to maximize state sales tax revenues, provide the cash flow needed by the state in order to perform its vital duties, and maintain a level playing field between these out-of-state retailers and in-state retailers. (H.R. 854, Laws 2004, adopted June 1, 2004.)



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