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President Barack Obama has signed federal legislation extending the Internet Tax Freedom Act (ITFA) through December 11, 2014 as part of the joint resolution which made continuing appropriations for fiscal year 2015. The ITFA was previously set to expire on November 1, 2014. The ITFA bars state and local governments from imposing multiple or discriminatory taxes on electronic commerce and taxes on Internet access.


For an update to this news item, see Internet Tax Freedom Act Extended Until October 1, 2015, Permanent Extension Introduced.


(P.L. 113-164 (H.J. Res. 124), 113th Congress, 2nd Session, Laws 2014)


In response to the Illinois Supreme Court decision in the Performance Marketing Association, Inc. v. Hamer case, Illinois has enacted revised click-through nexus legislation, effective January 1, 2015. Under the legislation, a retailer is presumed to have nexus in Illinois for use tax and service tax purposes if the retailer has a contract with an Illinois person under which the person, for a commission or other consideration based on the sale of property by the retailer, directly or indirectly refers potential customers to the retailer by providing a promotional code or other mechanism that allows the retailer to track purchases referred by the person. Examples of mechanisms that allow the retailer to track purchases include but are not limited to a link on the person’s website, promotional codes distributed through hand delivery or by mail, or promotional codes distributed through radio or other broadcast media.  The click-through nexus provisions apply only if the cumulative gross receipts from sales of tangible personal property by the retailer to customers referred to the retailer by all persons in Illinois under such contracts exceed $10,000 during the preceding four quarterly periods. The presumption can be rebutted by submitting proof that the referrals or other activities pursued in Illinois by such persons did not create nexus pursuant to the U.S. Constitution during the preceding four quarterly periods. The affiliate nexus provisions which were passed in 2011 have continued to apply and have not been amended.  (P.A. 98-1089 (S.B. 352), Laws 2014, effective January 1, 2015)


The Illinois graphic arts machinery and equipment exemption expires on August 30, 2014. The exemption applies to retailer’s occupation (sales) tax, service occupation tax, use tax, and service use tax on purchases of graphic arts machinery and equipment, including repair and replacement parts, used primarily in the production of graphic arts. The accompanying Manufacturer’s Purchase Credit (MPC) earned on purchases of graphic arts and manufacturing machinery and equipment expires on August 30, 2014 as well. For more information, see our previous news items Illinois Extends Graphic Arts Exemption and Manufacturer’s Purchase Credit and Illinois Manufacturer’s Purchase Credit Set to Expire August 30, 2014. We are monitoring activity to renew the exemption that is subject to the Illinois sunset rules. 


The Illinois Department of Revenue has posted information on its website regarding the Illinois Manufacturer’s Purchase Credit (MPC), which is set to expire on August 30, 2014. The MPC applies to both the Manufacturing and Graphic Arts industries. MPC cannot be earned on purchases with an invoice date of August 31, 2014 or later. Taxpayers must file the required earning report (ST-16 MPC, Annual Report of Manufacturer’s Purchase Credit Earned) by June 30, 2015 to report the MPC earned for periods between January 1 and August 30, 2014.  Taxpayers must file the required usage report (ST-17 MPC, Annual Report of Manufacturer’s Purchase Credit Used) to report the MPC used during calendar year 2014 by June 30, 2015.  If the taxpayer has remaining MPC that is used in subsequent years, the taxpayer must file the ST-17 by June 30th of the year following usage. MPC earned by a manufacturer or graphic arts producer expires the last day of the second calendar year following the calendar year in which the credit arose.  Taxpayers are allowed to use any available MPC until it expires and can use available MPC to pay production-related audit liability. All other procedures regarding MPC usage remain the same as prior to August 30, 2014.To see our previous news item on the Illinois MPC, see Illinois Extends Graphic Arts Exemption and Manufacturer's Purchase Credit.


A food storage facility’s purchases of freezer machinery and equipment and racking equipment qualify for the Illinois manufacturing machinery and equipment exemption because the equipment is essential to the manufacturing process. The state’s manufacturing exemption is available for machinery and equipment used primarily in the manufacturing or assembling of tangible personal property for sale or lease. Post-production storage facilities do not generally qualify for the manufacturing exemption. In this instance, the facility’s production process involves receiving meat products from customers and freezing them before shipping for further processing or resale. The freezer machinery and equipment qualify for the exemption because the product would spoil and could not be sold for human consumption without them. The racking equipment used to ensure proper air flow around and temperature of stored products qualify for the exemption since the products would not receive adequate air flow and would be destroyed without the use of the equipment. (Private Letter Ruling, ST 14-0002-PLR, Illinois Department of Revenue, June 26, 2014)



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