Illinois Clarifies Tax Implications for Scaffolding Leases and the Use of Exemption Form ST-587

Effective January 1, 2025, the state of Illinois has implemented a significant change in its tax code to include leases of tangible personal property (TPP), under the Retailers’ Occupation Tax Act. This change impacts businesses engaged in leasing TPP, including equipment such as scaffolding. Under the revised statute, the lease of TPP is now treated as a taxable retail sale. Lessors must collect and remit Retailers’ Occupational Tax (ROT) on leases that are active, renewed or newly initialed on or after January 1, 2025. This introduces new tax obligations for lessors and raises questions regarding the use of exemption certificates, particularly form ST-587.

Customers usually issue form ST-587 to claim an exemption from sales tax on qualifying equipment used in manufacturing or production-related activities. However, the Illinois Department of Revenue (DOR) has clarified that scaffolding does not qualify for this exemption. According to the DOR, the ST-587 exemption applies only to items used primarily in the manufacturing or assembling of TPP. Scaffolding, even when used to access or maintain manufacturing equipment, does not meet the standards for the exemption. This means that the lessor must collect tax when leasing scaffolding, even if the lessee provides a completed ST-587 form.

Illinois’ new lease tax regulations place an increased responsibility on businesses that rent out equipment like scaffolding. Since scaffolding falls outside the scope of manufacturing exemptions, lessors should assume that such leases are taxable unless a qualifying exemption can be documented. For questions, the DOR recommends visiting the Illinois Department of Revenue.

(General Information Letter ST 25-0006-GIL, Illinois Department of Revenue, February 4, 2025)