This bulletin addresses the Commer-cial Distribution Fee sales tax exemp-tion and changes to the Rolling StockExemption.

“Commercial DistributionFee (CDF)” Sales TaxExemptionBeginning July 1, 2003, certain seconddivision motor vehicle and trailer pur-chases are exempt from sales tax if theCommercial Distribution Fee adminis-tered by the Secretary of State is paid.

This new tax exemption is called theCommercial Distribution Fee (CDF) salestax exemption.

Which purchases qualify forthe CDF sales tax exemption?A purchase qualifies for the CDF salestax exemption if

it is a second division motor vehicleor trailer with a gross vehicleweight of more than 8,000 pounds;andthe Commercial Distribution Feeadministered by the Illinois Secre-tary of State is paid because thepurchaser will pay either the— flat weight tax for a bus, truck,

or truck tractor under Section3-815(a) of the Illinois VehicleCode; or

— mileage weight option tax for abus, truck, truck tractor, or trailerunder Section 3-818(a) of theIllinois Vehicle Code.

Note: To help you identify which seconddivision motor vehicles and trailersqualify, the flat weight class scheduleand mileage weight option class

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Illinois Department of Revenue

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For informationor forms...

To:1) Retailers who file Form ST-556, Sales Tax Transaction Return, and

2) Individuals who file Form RUT-25, Use Tax Transaction Return, orRUT-50, Vehicle Use Tax Transaction Return

Call us at:1 800 732-8866 or217 782-3336

Call our TDD(telecommunications devicefor the deaf) at:1 800 544-5304

Write us at:Illinois Department of RevenueP.O. Box 19044Springfield, IL 62794-9044

Visit our Web site at:www.ILtax.com

Call“Illinois Tax Fax,” ourfax-on-demand service, at:217 785-3400

Callour 24-hourForms Order Line at:1 800 356-6302

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Printed by authority of the State of Illinois

7,000 copies - 6/03 - P.O. Number 2031368

schedule by gross weight and class arelisted on Page 2 of this bulletin.

Must a purchaser who receivesthe CDF sales tax exemptioncontinue to pay the Commer-cial Distribution Fee to con-tinue to qualify for the CDFsales tax exemption?Yes. The purchaser must continue topay the Commercial Distribution Fee insubsequent years. Otherwise, thevehicle no longer qualifies for the CDFsales tax exemption and Illinois UseTax is due on the purchase price.

Does the CDF sales taxexemption also apply to repairand replacement parts?No. Purchases of repair and replace-ment parts do not qualify for the CDFsales tax exemption. However, thesepurchases may qualify for the “rollingstock” exemption, which is also ad-dressed in this bulletin.

How is the CDF sales taxexemption reported anddocumented?The CDF sales tax exemption is re-ported on one of the following forms:

Form ST-556, Sales Tax TransactionReturn (registered dealers only);Form RUT-25, Use Tax TransactionReturn (for purchases made fromout-of-state dealers or retailers); orForm RUT-50, Vehicle Use TaxTransaction Return (for purchasesmade between individuals).

We are currently revising these formsto include the CDF sales tax exemp-

Transaction Return Changes

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tion. Until these new forms areavailable, you must follow theprocedure below that correspondswith the form you are filing.

Note: We will consider your returnunprocessable and will issue anotice if you do not follow theseprocedures.

Form ST-556 filers— Have your customer com-

plete Form CDF-7, Commer-cial Distribution Fee (CDF)Sales Tax Exemption Certifi-cation, and keep a copy ofthis form in your records.

— When you complete FormST-556, you must1 check Part 5, Box G,

“Other,” and write “CDFsales tax exemption” onthe line provided; and

2 complete Part 6, Lines 1and 2.

Form RUT-25 filersWhen you complete FormRUT-25, you must

1 check the box in SectionD, Line 3, “The item isused as rolling stock.”; andwrite “CDF sales taxexemption” on the lineprovided for the Certificateof Authority number; and

2 complete Section E, Lines1 and 2.

Form RUT-50 filersWhen you complete FormRUT-50, you must

1 write the purchase price orfair market value in Step 3,Line 11; and

2 check the box in Step 4,Line c, “the vehicle is usedfor rolling stock.”; and write“CDF sales tax exemption”on the line provided for theCertificate of Authoritynumber.

Section 815(a) Section 818(a)Bus, Truck or Truck Tractor Bus, Truck or Truck TractorFlat Weight Class Schedule Mileage Weight Option Class ScheduleGross weight in pounds, Gross weight in pounds,including vehicle and including vehicle andmaximum load Class maximum load Class8,000 or less* B 12,000 or less ** MD

8,001 - 12,000 D 12,001 - 16,000 MF12,001 - 16,000 F 16,001 - 20,000 MG16,001 - 26,000 H 20,001 - 24,000 MH26,001 - 28,000 J 24,001 - 28,000 MJ28,001 - 32,000 K 28,001 - 32,000 MK32,001 - 36,000 L 32,001 - 36,000 ML36,001 - 40,000 N 36,001 - 40,000 MN40,001 - 45,000 P 40,001 - 45,000 MP45,001 - 50,000 Q 45,001 - 54,999 MR50,001 - 54,999 R 55,000 - 59,500 MS55,000 - 59,500 S 59,501 - 64,000 MT59,501 - 64,000 T 64,001 - 73,280 MV64,001 - 73,280 V 73,281 - 77,000 MX73,281 - 77,000 X 77,001 - 80,000 MZ77,001 - 80,000 Z

*Does not qualify for the CDF sales tax exemption, Section 818(a)may qualify for the rolling stock exemption Trailer

Mileage Weight Option Class ScheduleGross weight in pounds,including vehicle andmaximum load Class

14,000 or less** ME14,001 - 20,000 MF20,001 - 36,000 ML36,001 - 40,000 MM **Must weigh more than 8,000 pounds to

qualify for CDF sales tax exemption

Transaction Return Changes

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Rolling Stock ExemptionChangesBeginning July 1, 2003, motorvehicles and trailers must meet newrequirements to qualify for the rollingstock exemption. These same newrequirements apply to purchases ofrepair and replacement parts addedafter the initial purchase of a motorvehicle or trailer.

Note: The rolling stock exemptionrequirements for purchases ofaircraft, watercraft, and rail carrieritems (and any subsequent repairand replacement parts) have notchanged.

Motor vehicles

How is “motor vehicle”defined?For purposes of the rolling stockexemption, “motor vehicle” is de-fined in Section 1-146 of the IllinoisVehicle Code.

How is “rolling stock”defined?For purposes of this bulletin, “rollingstock” includes a motor vehicle of aninterstate transportation carrier forhire. The term does not includemotor vehicles that a company usesto transport its own people or its owngoods that it is selling or delivering,even if the motor vehicle crossesstate lines.

What are the new require-ments that must be met forpurchases of motor vehiclesto qualify for the rollingstock exemption?To qualify for the rolling stockexemption, at least 51 percent of amotor vehicle’s total trips in eachconsecutive 12-month period must

carry persons or property forhire; andeither cross the Illinois border oroccur outside Illinois.

This change especially affectsmotor vehicles that generally carrypersons or property in interstatecommerce for hire just betweenpoints in Illinois. Purchases of motorvehicles that will be used to carrypersons or property for hire but thatseldom or never leave Illinois nolonger qualify for the rolling stockexemption.

The situations described below areexamples of trips that no longerqualify.

A truck is hired to deliver grainto a barge docked on the Illinoisside of the Ohio River.A taxicab picks up passengersarriving from Florida at a termi-nal at O’Hare InternationalAirport in Chicago and deliversthem to their final destination inChicago, Illinois.A truck picks up goods as part ofthe second leg of a journey in theQuad Cities and delivers them toanother carrier for hire in Dan-ville, Illinois.

Do the new rolling stockqualifications for motorvehicles also apply to repairand replacement parts?Yes.

Note: Although qualifying purchasesof second division motor vehiclesmay be exempt from tax under the“CDF sales tax exemption” ex-plained earlier in this bulletin, thesemotor vehicles must meet the rollingstock exemption qualifications forpurchases of repair and replace-ment parts to be exempt from tax.

When does the 12-monthperiod for a motor vehiclebegin?The first 12-month qualifying periodfor the use of a motor vehiclebegins on the date of registration ortitling with an Illinois agency, which-ever occurs later. The motor vehiclemust continue to be used in aqualifying manner for each con-secutive 12-month period.

How are trips counted?All trips during the 12-month period,including intrastate trips or those thatwere not for hire, must be docu-mented. At least 51 percent of thetotal trips must be for hire and eithercross the Illinois border or occuroutside Illinois for the motor vehicleto qualify for the rolling stock exemp-tion. Although the motor vehicle maybe moving persons or property ininterstate commerce for hire, tripsthat are only between points in Illinoisdo not count as interstate trips. But,these trips must be included in thetotal number of trips taken.

For example, a company hiresan interstate carrier truckingcompany to transport anddeliver its property.

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The truck leaves Springfield,Illinois, and makes its firstdelivery in Decatur, Illinois. Thetruck then continues to India-napolis, Indiana, where it stopsfor another delivery. Finally, thetruck delivers the remainder ofthe load in Gary, Indiana.

In Gary, Indiana, the truck isagain hired to deliver goods ininterstate commerce. The truckmakes its only delivery inSpringfield, Illinois.

In this example, if these were theonly trips that the truck made inthe 12-month period, the truckqualifies for the rolling stockexemption. The truck made 4trips — one intrastate trip (i.e.,Springfield, Illinois to Decatur,Illinois); and three that wereinterstate trips (i.e., Decatur,Illinois, to Indianapolis, Indiana;Indianapolis, Indiana, to Gary,Indiana; and Gary Indiana, toSpringfield, Illinois). Since 75percent of the total trips meet

the rolling stock requirements,the original motor vehiclepurchase, along with any repairand replacement parts neededduring that 12-month period,are exempt from tax.

Trailers

What are the new require-ments that must be met forpurchases of trailers toqualify for the rolling stockexemption?For the purchase to qualify for therolling stock exemption, the trailermust be used by an interstatecarrier for hire to carry property ininterstate commerce on a regularand frequent basis.

How is “trailer” defined?For purposes of the rolling stockexemption, “trailer” is defined inSection 1-209 of the Illinois VehicleCode.

Are trailers required tocross the Illinois border toqualify for the rolling stockexemption?No. Although the trailer does nothave to cross the Illinois border, itmust be used by an interstatecarrier for hire to carry property ininterstate commerce on a regularand frequent basis and the ship-ment must begin or end outsideIllinois on another carrier. Therolling stock exemption does notapply if the interstate carrier usesthe trailer solely between points inIllinois where the shipment does notbegin or end outside Illinois.

Also, trailers do not need to meetthe “51 percent test” explainedearlier in this bulletin.

Do the new rolling stockqualifications for trailersalso apply to repair andreplacement parts?Yes.

Registered dealers

How do I document therolling stock exemption?The rolling stock exemption iscertified on Form RUT-7, RollingStock Certification. We are currentlyrevising this form to accommodatethe new rolling stock qualificationsfor motor vehicles and trailers. Keepthis form in your records to supportthe rolling stock exemption.

CDF sales tax exemption(second division motor vehicle and trailer

purchases only; repair and replacementparts must meet criteria for rolling stock

exemption)

Note: All of the qualifications listed belowmust be met to receive the exemption.

• The second division motor vehicle’s ortrailer’s gross vehicle weight must bemore than 8,000 pounds.

• The purchaser must pay the Commer-cial Distribution Fee administered by theIllinois Secretary of State because thepurchaser will pay either the— flat weight tax for a bus, truck, or

truck tractor (Section 815(a) of theIllinois Vehicle Code), or

— mileage weight option tax for a bus,truck, truck tractor, or trailer (Section818(a) of the Illinois Vehicle Code).

Retailers’ CDF and Rolling Stock Exemption Summary

Rolling stock exemption(purchases of motor vehicles and trailers if

the CDF sales tax exemption does notapply; and purchases of repair and

replacement parts)

First and second division motorvehicles• At least 51 percent of a motor vehicle’s

total trips in each consecutive 12-monthperiod must— carry persons or property for hire;

and— either cross the Illinois border or

occur outside Illinois.Trailer• The trailer is used by an interstate

carrier for hire to carry property ininterstate commerce on a regular andfrequent basis.

Aircraft, watercraft, rail carrier items• The aircraft, watercraft, or rail carrier

item is used by an interstate carrier forhire to carry persons or commodities ininterstate commerce on a regular andfrequent basis.