State Advocacy Update

With 34 state legislatures currently in session as of this writing, your team at ELFA is working to review and where needed address all legislation filed that impacts your interests. ELFA’s efforts are focused on identifying any and all measures that would wrongly infringe on the operations of ELFA members in the commercial sector, addressing those bills that require our attention and conversely promoting legislation that addresses industry needs. Of the 180,000 expected state legislative bills filed across the 46 states in session in 2018, ELFA estimates there will be in excess of 2,000 bills introduced this year that may impact our members’ interests.

Illinois Sales Tax Regulations Published

The Illinois Department of Revenue has posted for public comment new regulations for the sourcing of sales tax on conditional sales as required by the ELFA-backed 2015 enactment of Senate Bill 1548 - Public Act 099-0126. ELFA had formerly commented on preliminary language by identifying three inconsistencies needing modification. The ELFA State Tax Committee reviewed this final regulation for industry comments that focused on whether these three issues were addressed.

Background: Before enactment of Senate Bill 1548, the correct local tax to charge was uncertain because the sourcing of tax was the location of equipment before shipment to the customer, which often was not in Illinois, or the equipment may not even yet be manufactured. The bill addresses that issue.

Text of Senate Bill 1548: A retailer selling tangible personal property to a nominal lessee or bailee pursuant to a lease with a dollar or other nominal option to purchase is engaged in the business of selling at the location where the property is first delivered to the lessee or bailee for its intended use.

There was a lack of symmetry between the text and intent of this enacting legislation in the first draft of regulations provided to ELFA in 2016. It invited differing forms of compliance open to interpretation in the marketplace. Following are three inconsistencies pinpointed by ELFA as needing revision before publication of the final regulation.

1. Requiring an additional “certification” on each transaction that is in addition to and not part of documentation captured in the standard conduct of business.
   1. Use of separate “certification” solely for sales tax sourcing opens the door for error and/or foul play when the standard documentation captures the proper location based on where the property is “first delivered for its intended use.”
2. Requiring the sourced location to be where the property is “actually first used” rather than where the property is “first delivered for its intended use.”
   1. “First use” can be an action less than “first delivered for its intended use.” This is a slippery slope, again opening the door for error and/or foul play.
3. Use of the term “product” rather than tangible personal property or property.
   1. This can be rectified with a change of word.

ELFA sends out email updates on state legislative and regulatory activity as it occurs. You can receive this information by sending complete contact information to Scott Riehl, ELFA Vice President, State Government Relations, at [email protected].