WHAT IS THE PURPOSE OF THE ENTERPRISE ZONE?
The Illinois Enterprise Zone Program is designed to stimulate economic growth and neighborhood revitalization in economically depressed areas of the state through state and local tax incentives, regulatory relief and improved governmental services.
WHAT QUALIFIES AS "BUILDING MATERIALS" ELIGIBLE FOR THE SALES TAX DEDUCTION?
Building materials that are eligible for the enterprise zone sales tax deduction include items that are permanently affixed to real property such as lumber, mortar, glued-down carpets, paint, wallpaper and similar affixed items.
EXAMPLES OF BUILDING MATERIALS ELIGIBLE FOR SALES TAX EXEMPTION
All materials MUST be purchased in the State of Illinois. In order to qualify for the deduction, the materials being purchased must be building materials. That is, they must be purchased for physical incorporation into real estate. For example:
- Common building materials such as lumber, bricks, cement, windows, doors, insulation, roofing materials and sheet metal can qualify for the deduction;
- Plumbing systems and components thereof such as bathtubs, lavatories, sinks, faucets, garbage disposals, water pumps, water heaters, water softeners and water pipes can qualify for the deduction;
- Heating systems and components thereof such as furnaces, ductwork, vent stokers, boilers, heating pipes and radiators can qualify for the deduction;
- Electrical systems and components thereof such as wiring, outlets, and light fixtures that are physically incorporated into the real estate can qualify for the deduction;
- Central air conditioning systems, ventilation systems and components thereof that are physically incorporated into the real estate can qualify for the deduction;
- Built-in cabinets and other woodwork that are physically incorporated into the real estate can qualify for the deduction;
- Built-in appliances such as refrigerators, stoves, ovens and trash compactors that are physically incorporated into the real estate can qualify for the deduction;
- Floor coverings such as tile, linoleum and carpeting that are glued or otherwise permanently affixed to the real estate by use of tacks, staples, or wood stripping filled with nails that protrude upward (sometimes referred to as “tacking strips” or “tack-down strips”) can qualify for the deduction.
EXAMPLES OF BUILDING MATERIALS NOT ELIGIBLE FOR SALES TAX EXEMPTION
Items that are NOT physically incorporated into the real estate cannot qualify for the deduction. For example:
- Tools, machinery, equipment, fuel, forms and other items that may be used by a construction contractor at an enterprise zone building site, but are not physically incorporated into real estate, do not qualify for the deduction;
- Free-standing appliances such as stoves, ovens, refrigerators, washing machines, portable ventilation units, window air conditioning units, lamps, clothes washers, clothes dryers, trash compactors and dishwashers that may be connected to and operate from a building’s electrical or plumbing system but which do not become a component of those systems do not qualify for the deduction;
- Floor coverings that are area rugs or that are attached to the structure using only two-sided tape do not qualify for the deduction.
WHAT IS THE SALES TAX DEDUCTION AND WHAT IS THE RETAILERS ROLE?
Each retailer who makes a qualified sale of building materials to be incorporated into real estate in an enterprise zone established by a county or municipality under the Illinois Enterprise Zone Act by remodeling, rehabilitation or new construction, may deduct receipts from such sales when calculating the tax imposed by this Act. For purposes of this Section, “qualified sale” means a sale of building materials that will be incorporated into real estate as part of a building project for which a Certificate of Eligibility for Sales Tax Exemption has been issued by the Illinois Department of Revenue (IDOR). To document the exemption allowed under this Section, the retailer must obtain from the purchaser a copy of the Certificate of Eligibility for Sales Tax Exemption issued by IDOR.
DO ALL RETAILERS OFFER A POINT OF SALE EXEMPTION?
No. Retailers are not required by law to participate. The purchaser must ask the retailer for cooperation on this incentive. However, retailers have demonstrated good cooperation throughout the history of this program, as this incentive permits them to give customers a “break” without cost to themselves.
WHAT IS THE ENTERPRISE ZONE PROPERTY TAX ABATEMENT INCENTIVE?
The Revenue Act 35 ILCS 200/18- 170, as amended provides that any taxing district may order the county clerk to abate (that is, to give up) any portion of its taxes on real property, or on any particular class thereof, located within a zone and upon which new improvements have been constructed or upon which existing improvements have been renovated or rehabilitated.