Sales Tax Articles
Sales Tax State Activity Update - September 2006
Illinois Contractors - Working in a Material World
In a Private Letter Ruling, the Illinois Department of Revenue recently determined that a contractor may purchase materials exempt from tax when used in a construction contract for local public improvement if upon the completion of the contract the improvement title transfers exclusively to a governmental unit.
Background
A contractor entered into a development agreement for the construction of public use and mixed use improvements, which, in part, will serve and benefit both public (i.e. exempt) and private (i.e. non-exempt) parties to the agreement.
Ruling
Illinois law indicates an exemption exists for sales of materials to construction contractors if the materials will be physically incorporated into public improvements and the ownership of which is required to be conveyed to a unit of local government pursuant to a pre-development transfer requirement. The Department indicates to properly claim the exemption, the supplier must be provided the active registration number issued by the Department to the governmental unit to which the public improvements will be transferred upon completion, and title must be transferred exclusively to the local government unit.
The full text may be accessed on the Illinois Department of Revenue Website.
(Illinois Department of Revenue, Private Letter Ruling No. ST 06-0006-PLR, 5/31/06)
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