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On December 16, 2014, President Barack Obama signed the Consolidated and Further Continuing Appropriations Act, 2015, for sales and use tax purposes. The Act includes a provision that extends the Internet Tax Freedom Act (ITFA) until October 1, 2015 with all provisions unchanged.


On January 9, 2015, the House of Representative introduced a bill (un-numbered) that would permanently extend the ITFA, banning states and local jurisdictions from imposing any new tax on internet access. The proposed bill removes the current effective dates of November 1, 2003 through October 1, 2015 and changes the effective date to be effective for new taxes imposed after the date of the enactment.  It is not clear if states that have been grandfathered under the existing provision could retain their current tax on internet access but it appears that may be the case.  No formal legislation has been introduced that would incorporate the Marketplace Fairness Act into this bill. The bill is sponsored by House Judiciary Committee Chairman Bob Goodlatte, among others.


For our previous news item on this topic, see Internet Tax Freedom Act is Extended Through December 11, 2014.


For an update on this news item, see Internet Tax Freedom Act Extended Until December 11, 2015.


(Consolidated and Further Continuing Appropriations Act, 2015; H.R. 235)


Illinois has issued a bulletin to explain changes affecting the basis for determining the "selling price" for certain motor vehicles sold in order to be leased for a period longer than one year, for sales and use tax purposes. Public Act 98-628 amends the Retailers’ Occupation Tax Act and the Use Tax Act to provide for an alternate method of determining the selling price subject to sales and use taxes for certain motor vehicles sold for the purposes of being leased. The changes are effective January 1, 2015. The alternate selling price (i.e., the amount due at lease signing, plus the total amount of payments over the term of the lease) must be used when a qualifying motor vehicle is sold for the purpose of being leased under a fixed-term lease contract for a period of more than one year. This new alternative selling price does not apply if there is a month to month provision. The alternate selling price on motor vehicles that qualify must be used, and the following conditions will apply when the alternate selling price is used:


  • The trade-in credit is not allowed to reduce the selling price;
  • Credit for tax paid on a previously leased motor vehicle cannot be used against the tax liability when it is sold at the end of the lease; and
  • Additional charges at the end of the lease must be reported by the leasing company on a new form using the same taxable location and rate as the original return that reported the transaction.


To accommodate the changes, the Department of Revenue has created new returns to report all lease transactions and revised existing returns to remove their prior applicability for lease transactions. (Information Bulletin FY 15-03, Illinois Department of Revenue, December 2014)


Based on Public Act 98-0628, effective January 1, 2015, lease payments made on certainvehicles that are leased for a period of 12 months plus one day with an option to continue leasing on a monthly basis were not subject to Illinois sales and use tax on the lease receipts because the lease is not for a defined period. In Illinois, the taxable selling price for cars does not include leases where the lease term is not a defined period. This could include leases for a defined initial period with the option to continue the lease on a month-to-month or other basis beyond the initial period. Tax is due on the leasing company’s purchases of the leased cars. (Private Letter Ruling, ST 14-0006-PLR, Illinois Department of Revenue, October 20, 2014)


A glass manufacturer was entitled to a refund of Illinois sales tax under the machinery and equipment exemption because nitrogen and hydrogen purchased by the manufacturer caused a direct and immediate physical change on the glass being produced. The chemicals – which were added to a float bath containing the glass – resulted in the glass undergoing an observable direct and immediate physical change. Under the manufacturing and assembly exemption, “Equipment” includes … chemicals or chemicals acting as catalysts but only if the chemicals or chemicals acting as catalysts effect a direct and immediate change upon a product being manufactured or assembled for wholesale or retail sale or lease. Chemicals are not required to chemically react with the glass to effect a direct and immediate change. As a result, the chemicals qualify for the machinery and equipment exemption. (PPG Industries, Inc. v. Illinois Department of Revenue, Circuit Court, Cook County Judicial Circuit (Illinois), 13 L 050140, September 9, 2014)


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)



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