The mining equipment exemption applies to purchases of machinery and equipment used primarily for aggregate/industrial minerals exploration, mining, off-highway hauling, processing, maintenance and reclamation.
The IAAP legislative initiative to extend the sales tax exemption on mining equipment, HB 4415, was signed into law by Governor Rauner on June 29.
The exemption, which was scheduled to sunset in August of this year, has now been extended until July 1, 2023. The House previously approved the bill on a vote of 108-1 and the Senate passed the bill 58-0. Senator Don Harmon and Representative Jerry Costello were the lead sponsors of the bill. The legislation is a joint initiative with the Illinois Coal Association. While the IAAP has successfully assured through recent rules adopted in the Illinois Department of Revenue that most mining equipment is also exempt under the Manufacturing Machinery and Equipment Tax Exemption (MM&E), the mining equipment exemption is broader than the MM&E and serves as an insurance policy should the MM&E be eliminated.
Below is a summary on the two exemptions:
Mining Equipment Exemption
This exemption applies to purchases of machinery and equipment used primarily for aggregate/industrial minerals exploration, mining, off-highway hauling, processing, maintenance and reclamation, including replacement parts, as well as explosives and related equipment used in quarrying, which are exempt from paying retailers occupation (sales) tax or use tax in Illinois under this exemption.
To download Illinois Department of Revenue rules implementing the mining equipment tax exemption click here: http://tax.illinois.gov/LegalInformation/regs/part130/130-351.pdf.
When purchasing equipment and machinery, the producer may claim the mining equipment tax exemption by checking the aggregate mining tax exemption box on the IL Department of Revenue's ST-587 Equipment Exemption Certificate http://tax.illinois.gov/taxforms/sales/ST-587.pdf (3rd box on Step 5 of the current form). Given the broad scope of this tax exemption, this is a very straightforward manner to claim your exemption from sales/use taxes.
Manufacturing Machinery and Equipment Exemption (MM&E)
Most equipment used in aggregates/industrial minerals mining is also exempt from sales/use taxes under the Manufacturing Machinery and Equipment Exemption (MM&E). This tax exemption extends to the purchase of all machinery, equipment and explosives used in the aggregates/industrial minerals manufacturing process – after exploration up to stockpiling. The IAAP worked with the Illinois Department of Revenue to develop rules clarifying the types of machinery and equipment exempt under the MM&E. The final rules, which were adopted in August of 2016, are found here: http://www.ilga.gov/commission/jcar/admincode/086/086001300C03300R.html. This exemption may be claimed by checking the 1st box on Step 5 of ST-587. However, this exemption is narrower than the mining equipment tax exemption in that it may not apply to equipment used in pre-mining exploration and drilling, reclamation or stockpiling. The MM&E was made permanent as part of the law passed in 2017 which also included an increase in the state income tax.
Contact the IAAP with any questions you may have regarding the sales tax exemptions for mining equipment. It is also recommended that you consult a tax professional for specific tax advice and questions.
For more information, visit www.iaap-aggregates.org.