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Retail purchases of tangible personal property are subject to a state sales tax or use tax rate of 6.25%. Local sales tax rates vary from zero to 2.5%.
- Illinois has a number of exemptions, including:
- Sales of tangible personal property to interstate carriers for hire used as rolling stock (e.g., semi-tractor trailers, railroad cars)
- Sales of machinery and equipment that will be used primarily in graphic arts production or in manufacturing/assembling of tangible personal property for wholesale or retail sale or lease and production agriculture
- Qualified sales of building materials that will be incorporated into real estate as part of a project for which a Certificate of Eligibility for Sales Tax Exemption has been issued by the enterprise zone administrator
- Qualifying purchases of tangible personal property used in a manufacturing or assembling process by businesses located in an enterprise zone and certified by the Illinois Department of Commerce as qualifying to make these purchases because jobs will be created or retained
- Fuel used for international flights
- Certain second division motor vehicles and trailers if the Commercial Distribution Fee administered by the Secretary of State is paid
A manufacturer may earn a credit when purchasing exempt manufacturing machinery and equipment. The credit is known as the Manufacturer's Purchase Credit (MPC). The amount of the credit is limited to 50% of the 6.25% state tax that would have been incurred if the machinery had been taxable. The credit may be used to satisfy Use Tax or Service Use Tax liability incurred on the purchase of qualifying production related tangible personal property.