Illinois Sales Tax Changes for Manufacturers

IL state flagManufacturer’s Purchase Credit

The long standing Illinois Manufacturer’s Purchase Credit (MPC) expires on August 31, 2014. This credit has been extended multiple times in recent history, with a brief period of expiration from July 1, 2003 to September 1, 2004. The most recent extension of the credit was back on July 31, 2009 when Illinois Governor Pat Quinn signed into law SB 1691, which extended the credit through August 31, 2014.

The MPC is a credit commonly earned by Illinois manufacturers; typically graphic arts producers and publishers that can be used to offset sales tax liability on production related tangible personal property.

The credit is earned when purchasing machinery and equipment that is exempt from Illinois sales tax. The credit amount is 50% of the 6.25% sales tax that would be due on purchases of exempt machinery and equipment if that machinery and equipment had not been exempt. The credit is used to offset the Illinois 6.25% state sales tax incurred on the purchase of non-exempt production related tangible personal property.

While machinery and equipment used in manufacturing will still be exempt from sales tax, the expiration of this credit means that sales tax may be due on tangible property used in production where no sales tax was previously due.

Graphic Arts Machinery and Equipment Exemption

This exemption from Illinois sales tax on certain items also expires on August 31, 2014, so it is likely that graphic arts producers will see their taxes increase if the exemption is not retroactively extended. The exemption applies to new and used machinery and equipment used for graphic arts, including replacement/repair parts, equipment, computers, cameras, printing parts, cooling systems, packaging equipment, and certain chemicals acting as catalysts.

Next Steps

Given an extender bill has already passed in the Illinois House of Representatives, one would think that these provisions are likely to be extended. However, the earlier bill was not even considered by the Illinois Senate, so it is still uncertain whether these provisions will be extended, or will become yet another short term solution to the looming pension deficits. For more information or recent updates to this issue, please contact Ryan Giolitto at 630-285-0215 ext. 8214.

Ryan Giolitto

Ryan Giolitto is a business consultant and advisor helping businesses and individuals focus on growing their business and wealth to fund a successful retirement strategy. Ryan is Manager of U.S. Tax and Financial Consulting Services at CDH, P.C. where he specializes in tax and financial planning for businesses and high net worth individuals. Ryan graduated from the University of Illinois in Champaign with a B.S. degree in Accounting and a M.S. degree in Taxation. Ryan is a licensed Certified Public Accountant (CPA) in the state of Illinois and a Certified Financial Planner (CFP®).
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