G-27 - 08/08/1961 - TAX - Ordinances Supporting Documents W;+k &-- 01 W7
STATE OF ILLINOIS
DEPARTMENT OF REVENUE
SPRINGFIELD
JULY 10, 1961
THEODORE J. ISAACS
DIRECTOR
ALBERT R. IMLE
ASSISTANT DIRECTOR
BULLETIN
RE: SUMMARY OF CHANGES RESULTING FROM RECENT
LEGISLATION AND COURT DECISIONS
RATE INCREASE:
1. Effective July 1, 1961, the retailers' occupation tax and use tax rate increased to 31/2%. The prior 3%a rate will
still apply to deliveries and collections made after June 30, 1961, under binding contracts entered into before July 1, 1961,
subject to the limitations stated in retailers' occupation tax Article 1 with reference to rate changes. The recommended
tax collection brackets at the combined State and local tax rate of 40/,, are: (State R.O.T. 31/2'%, Municipal or County
R.O.T. 1/2'%)
$ .01 through $ .12 — $ .00
.13 through $ .31 — $ .01 -
.32 through $ .54 — $ .02
.55 through $ .81 — $ .03
.82 through $1.08 — $ .04
1.09 through $1.35 — $ .05
1.36 through $1.62 — $ .06
On each further addition of 254 or any part thereof to the selling price, one additional cent.
NOTE: There is no change in the rate of Municipal or County Retailers' Occupation Tax.
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SALES OF BUILDING MATERIALS TO CONTRACTORS:
2. Effective July 16, 1961, sales of building materials to contractors for use in performing real estate construction
contracts for others will become subject to the retailers' occupation tax. This extension of the tax base will not apply if the
sale to the contractor is made before July 16, 1961, or if such sale (though made after that date) is of material which will
be used under a binding construction contract entered into before that date without making provision for the burden of
the tax to be shifted by the contractor, or which will be used to carry out a contract accepted by the owner after that
date pursuant to an irrevocable and binding bid which the contractor made to such owner before July 16, 1961, and under
which the contractor cannot shift the burden of the tax to anyone else. Sales of building materials to real estate developers
and speculative builders are already taxable.
When the purchaser of tangible personal property may use such property by converting it into real estate, but may
resell such property "over-the-counter" apart from acting as a construction contractor, and where it is impracticable, at the
time of purchasing such tangible personal property, for such purchaser to determine in which way he will dispose of the
property, such purchaser may certify to his vendor that he is buying all of such tangible personal property for resale and
thereafter account to the Department for the proper tax on disposing of such property. Such purchaser would account to
the Department for the tax as retailers' occupation tax if he resells the property "over-the-counter" to a user (including a
construction contractor) apart from acting as a construction contractor himself, but would account to the Department for
the tax as use tax if he uses the {property by converting it into real estate in any manner.
A purchaser of this type would have to be registered with this Department under the Retailers' Occupation Tax Act
since he would be incurring some retailers' occupation tax liability, so he would be required to furnish his vendor with
his retailers' occupation tax registration number in the Certificate of Resale referred to hereinabove.
OUT-OF-STATE PURCHASES BY CONTRACTORS:
3. Construction contractors and other users buying materials outside Illinois from unregistered sellers for use in Illi-
nois will be liable to pay use tax directly to this Department on such purchases.
SALES TO STATE OF ILLINOIS AND LOCAL GOVERNMENTAL AGENCIES:
4. Effective t..ugust 1, 1961, retail sales to the State of Illinois and its political subdivisions will become subject to
the retailers' occupation tax.
SALES TO CHARITIES, CHURCHES AND SCHOOLS:
5. Sales to exclusively charitable, religious or educational organizations and institutions will continue to be exempt.
SALES TO THE UNITED STATES GOVERNMENT:
6. While the Injunction in the Olin Mathieson Company case remains in effect, the Department will not attempt
to collect tax on sales to the Federal Government or its contractors. .�
SERVICE OCCUPATION TAX (STATE RATE 3%):
7. Effective August 1, 1961, the new Service Occupation Tax Act taxes servicemen at the rate of 317, on
the cost price of tangible personal property which they purchase and retransfer as an incident to their sales of service.
Servicemen should pay this tax to their suppliers. Servicemen who buy items that come under this Act outside Illinois
from unregistered suppliers should pay this tax directly to the Department. If the serviceman cannot tell when he buys
the property whether he will use the property in rendering service, or whether he will resell the property apart from
rendering service, or whether he will ship the property out of Illinois, he may so certify to his supplier and assume the
responsibility for accounting to this Department for the disposition of such property and for discharging such tax liability
as may arise. In such certification, the serviceman should include his registration number with this Department.
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Cs- �
Unregistered suppliers and servicemen who will have to pay any service occupation tax or service use tax to the
Department should register with the Department as soon as possible. Illinois users buying special printing, tools and
machinery that are special enough to continue to be exempt from the retailers' occupation tax, etc., outside Illinois from
unregistered servicemen, should pay the service use tax on the cost to the servicemen of materials incorporated into such
special items directly to the Department.
The rate of these service taxes is 3%, but municipalities and counties may also adopt a i of 1'0/. service occupation
tax, collectible by this Department.
Because of the legal incidence of such local tax being on the purchasing serviceman instead of on the seller, as the
retailers' occupation tax is, the local service tax will differ from the local retailers' occupation tax in that the location of
the purchasing serviceman will determine which local government gets the service tax payable by him, whereas the location
of the seller determines which local government gets the local retailers' occupation tax imposed on his sale.
EXAMPLES OF APPLICATION OF SERVICE OCCUPATION TAX:
8. Examples of transactions that are taxable August 1, 1961, because of the new service taxes are: -
(a) Purchases of paper and ink by printers for incorporation into special printed matter produced for users and
delivered in Illinois.
(b) Purchases of metal and other ingredients by special tool, die, pattern and machinery producers who incorpo-
rate such items into products which are special enough to continue to be exempt under the Retailers' Occu-
pation Tax Act, and which are produced for users and delivered in Illinois.
(c) Purchases of bandages, medicine and other tangible personal property by doctors for retransfer to patients as
an incident to furnishing professional services.
(d) Purchases of drugs and medicine by druggists for use in filling prescriptions.
(e) Purchases of tangible personal property for retransfer as an incident to service, such as:
(1) Fillings, medicine, etc., by dentists;
(2) Eyeglasses, etc., by optometrists;
(3) Stock tonics, medicine, etc., by veterinarians;
(4) Arch supports, trusses, braces, etc., by chiropodists, osteopaths and chiropractors;
(5) Hair tonics, lotions, etc., by barbers and beauticians;
(6) Collar supports, coat hangers;-etc., by laundries-and-dry cleaners;----
(7) Sensitized paper by photographers, book bindings by book binders and other items by graphic arts service-
men.
(f) Purchases of tangible personal property for retransfer, as an incident to service, by persons who service tangible
personal property for users (painting, waxing, simonizing, car undercoating, shoe shining, etc.) where such serv-
icing does not make the serviceman liable for retailers' occupation tax as a repairman, and purchases of tan-
gible personal property by other servicemen for retransfer as an incident to service.
REMODELING AND RECONDITIONING PERSONAL PROPERTY:
9. Effective August 1, 1961, the existing retailers' occupation tax on the repairing of tangible personal property for users
is extended to the remodeling and reconditioning of tangible personal property for users. For example, it now will make
no difference whether the installing of a motor on the user's bicycle is a replacement of a motor or the conversion of the
bicycle from an ordinary bicycle into a motor bike. This will be taxable whether it is called repairing or remodeling or re-
conditioning.
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ENFORCEMENT AND COLLECTION:
18. Effective September 1, 1961, amendments to the Retailers' Occupation Tax Act and related Acts enable the De-
partment to use a new enforcement procedure against persons who are about to dissipate or remove assets from the State of
Illinois while indebted to the Department, and to reduce assessments that have become final to judgment without the delays
of a formal law suit.
Other more effective enforcement procedures have also been authorized by the Legislature and will be used by the Depart-
ment against persons not complying with the law. This is necessary in fairness to the vast majority who do try to comply with
the law.
PENALTIES:
20. Also, these laws impose mandatory penalties on persons failing to file returns or to pay tax on time, so your compli-
ance with all requirements is strongly urged.
Apply for application for registration to:
Department of Revenue Department of Revenue
Retailers' Occupation Tax Division Retailers' Occupation Tax Division
Room 303—New State Office Building 160 N. LaSalle Street,
Springfield, Illinois Chicago 1, Illinois
If in doubt as to your liability or the method of preparing your return with the Department of Revenue, please write for
specific information.
Issued by:
Theodore J. Isaacs,
Director of Revenue,
State of Illinois,
Springfield, Illinois
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SALES BY HOTELS, RESTAURANTS AND OTHERS TO MEMBERS OF ORGANIZATIONS:
14. Effective August 1, 1961, the Department, by rule change, considers hotels, restaurants and other vendors of food
and beverages to be liable for retailers' occupation tax when selling such tangible personal property to members of organiza-
tions holding dinners at such hotels, etc.This is true even though the organization may purport to be buying the meals for
resale. The only exception will be sales to exclusively charitable, religious or educational organizations which pay for the
meals from their own funds and do not directly or indirectly charge anyone else for the meals.
Regardless of the kind of organization that may be involved, if the persons actually eating the meals pay for them, but
make payment to the organization which makes payment to the hotel, restaurant, etc., the organization is considered
merely to be acting as agent for the persons actually paying for the meals, and no sale by the hotel, restaurant, etc., for
resale is involved.
TAX ON RENTAL OR LEASING RECEIPTS:
15. Effective September 1, 1961, the renting or leasing of tangible personal property to others is deemed to be selling,
rather than using, so llessors are liable to collect and remit tax monthly on the rental payments as they are received.-by such
lessors. They will be considered retailers and will be required to register, file returns an otherwise comply wit't t e provisions
of the law applicable to retailers.
(a) LESSOR OF MOTOR VEHICLES:
A motor vehicle lessor will be permitted to obtain titles from the Secretary of State for motor vehicles which
will be leased to others without paying the use tax by certifying, with the application for title, that such motor
vehicle will be leased to others and that such lessor is registered with (or has applied for registration to) the
Department as a retailer and by having such representation confirmed to the Secretary of State by the Department.
(6) SALES BY LESSOR:
When a lessor, after having rented tangible personal property for a time, sells such tangible personal property,
his receipts from that sale will also be subject to retailers' occupation tax if the sale is at retail, but such tax will
not apply, where the lessee buys such property, to credit which may be given against the selling price for amounts
paid by such lessee-purchaser as rent.
If the tangible personal property leased or rented after August 31, 1961, is tangible personal property on
which the lessor paid use tax on his purchase price thereof, the lessor may credit such use tax against the retailers'
occupation tax liability which he incurs on his rental receipts.
SALES BY OUT-OF-STATE RETAILERS:
16. Effective July 17, 1961, out-of-State retailers soliciting business in Illinois from users by means of catalogs or any other
form of advertising (though not maintaining or sending any personal representative into Illinois) is required to register
and act as an Illinois use tax collector for this Department. Under other amendatory Acts, notices and legal process may be
served on such out-of-State sellers by serving a copy on the Illinois Secretary of State as agent for such persons and by sending
a copy of the notice or process by registered or certified mail to such out-of-State seller's last known address.
REGISTRATION OF NEW TAXPAYERS:
17. Persons who will begin to incur liability to the Department in any of the above described categories,and who are not
already registered with the Department, should register with the Department as soon as possible. It is the duty of any such
person to contact the Department and ask for an application for Certificate of Registration form. We are encouraging pre
registration in this instance as much as possible in order to make the process more orderly and to spread the work load. Persons
whose liability will be under the Service Occupation Tax Act, rather than under the Retailers' Occupation Tax Act, should
specify this so that they will receive the proper registration application form.
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CUSTOM-MADE ITEMS:
10. Effective August 1, 1961, retail sales of custom-made clothing, drapes, carpeting, monuments and memorial stones,
eyeglasses produced on special order for users by opticians, and other special order items which serve substantially the same
function as standard items, and which have been exempt from the retailers' occupation tax in the past under Rules No.20, 23
and 25, are subject to the retailers' occupation tax. Illinois users buying such items outside Illinois from unregistered sellers
will be liable to the Department for use tax.
The Rule 9 exemption for special job printing will be continued except for types of special order printing which can be
bought through nonservice channels (such as stationery and envelopes that can be bought at or ordered through book stores,
etc.).
The special order exemption for special tools, dies, patterns and machinery to the extent recognized by paragraph 2 of
retailers' occupation tax Rule No. 3,will also be continued.
SALES BY NONPROFIT ORGANIZATIONS OTHER THAN CHARITIES, CHURCHES AND SCHOOLS
SALES BY CHARITIES, CHURCHES AND SCHOOL'S:
11. Effective August 1, 1961, nonprofit country clubs, boat clubs and other nonprofit social, athletic or recreational or-
ganizations, lodges, patriotic organizations, fraternities, sororities, professional and trade associations, civic organizations, labor
unions and other nonprofit persons who are not exclusively charitable, religious or educational organizations are liable for
retailers' occupation tax when selling tangible personal property at retail to members, guests or others. The same is true of`�
exclusively charitable, religious or educational organizations and institutions when they engage in selling tangible personal
property at retail to the public, even though any such selling operation may be short in duration. However, churches, charities-
and schools are not taxable on retail selling activities which are confined to members, students or patients primarily for the
purpose of the seller (such as a school cafeteria conducted on the school's premises for its convenience for use by students and
school employees, but not intended for use by the public; sales of choir robes by a church to its members for use in church
services; the furnishing of food and medicines to patients by a hospital as an incident to hospital service,etc.).Also,churches,
schools and charities will not be taxable when selling items of a noncompetitive nature which cannot be bought from persons
engaged in business.
REPORTING OCCASIONAL TAX LIABILITY:
Organizations which will have only an occasional liability should file a first and final return when reporting the tax
so as not to acquire a continuing registration under which a return would have to be filed every month even if there were no
liability in some months. Return forms may be obtained from the Department on request when needed.A return is due by the
last day of the month following the month in which the liability is incurred.
SALES OF MAGAZINES, BOOKS, PHONOGRAPH RECORDS, NEWSPAPERS, ETC.:
12. Effective August 1, 1961, the retail selling of magazines (except primarily news magazines), books, phonograph rec'�
ords and sheet music are subject to the retailers' occupation tax. Newspapers and news magazines will continue to be
exempt.
SALES BY STATE OF ILLINOIS OR LOCAL GOVERNS ENTAL AGENCIES:
13. Effective August 1, 1961, the Department, by rule change, considers the State of Illinois or any of its political
subdivisions to be liable for retailers' occupation tax when engaging in the selling of tangible personal property at retail to the
public. This would include the selling of fuel to users by airport authorities or other governmental bodies, the operation of
public stands by park districts or other governmental bodies, etc., but will not include the furnishing of utility services to the
public.
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