The Illinois Rolling Stock Exemption: How to Qualify

The Illinois rolling stock exemption provides a sales and use tax benefit for businesses involved in interstate transportation. This exemption is designed to prevent an undue tax burden on commerce that crosses state lines, which could otherwise subject carriers to taxes in multiple jurisdictions for the same equipment. It applies to the purchase of certain vehicles, trailers, and their components when they are used to transport people or property for compensation.

Qualifying for the Exemption

Eligibility for the rolling stock exemption rests on two requirements: the status of the purchaser and the nature of the property being purchased. The purchaser must be an “interstate carrier for hire,” meaning the business is paid to transport people or property across state lines. The Illinois Department of Revenue requires that carriers demonstrate they are recognized as a carrier for hire, which is often proven by holding an active U.S. Department of Transportation (USDOT) number.

The second component relates to the property itself. The exemption applies to motor vehicles with a gross vehicle weight rating exceeding 16,000 pounds, as well as trailers and semi-trailers used with them. The exemption also extends to repair and replacement parts that are attached to qualifying rolling stock.

A primary aspect of qualification is the “use” test. The vehicle or trailer must be used in interstate commerce more than 50% of the time over a 12-month period. At the time of purchase, the carrier must elect to measure this use based on either total trips or total miles. This choice is binding and must be documented, as it forms the basis for justifying the exemption if the business is audited.

Proving Interstate Use

Simply stating an intention to use a vehicle for interstate transport is insufficient to claim the rolling stock exemption. The Illinois Department of Revenue requires tangible proof that the vehicle is predominantly used for carrying persons or property for hire across state lines. The taxpayer must maintain detailed records to substantiate their claim, as failure to produce adequate documentation during an audit can result in the revocation of the exemption and a demand for back taxes, penalties, and interest.

The most direct evidence of interstate use comes from operational records. Documents such as trip sheets, manifests, and bills of lading are important as they show the origin and destination of individual hauls. Driver logbooks also serve as evidence by detailing the routes traveled. For a trip to qualify as interstate, it must either cross state lines or be part of a continuous journey that originates or terminates outside of Illinois.

An International Registration Plan (IRP) license plate is another strong indicator of qualifying activity. The IRP is a multi-jurisdictional agreement that allows commercial carriers to operate in multiple states with a single registration, demonstrating the carrier’s intent to operate on an interstate basis.

Required Documentation and Forms for Claiming the Exemption

To properly claim the rolling stock exemption at the point of sale, a purchaser must provide the seller with a specific, fully completed certification form. The primary document used for this purpose is Form RUT-7, the Rolling Stock Certification. This form acts as a sworn statement from the buyer to the seller, affirming that the purchased vehicle or trailer meets all statutory requirements for the exemption. Providing this certificate relieves the seller of the obligation to collect sales tax.

Completing Form RUT-7 requires the buyer’s legal business name, address, Illinois Account ID or resale number, and an active USDOT number. The form also requires the purchaser to certify that the vehicle’s gross weight exceeds 16,000 pounds and to specify whether the trip or mileage method will be used for the 50% interstate use calculation.

Purchasers can obtain Form RUT-7 from the Illinois Department of Revenue’s website. The completed and signed certificate should be given to the seller at the time of purchase, and a copy must be retained by both parties.

The Exemption Claim Process

The standard procedure for claiming the rolling stock exemption occurs at the time of the transaction. The purchaser provides the seller with a properly executed Form RUT-7. This action certifies the exempt nature of the sale, allowing the seller to complete the transaction without charging sales tax. The seller then reports the exempt sale to the Illinois Department of Revenue on its regular return, such as Form ST-556, Sales Tax Transaction Return.

In situations where sales tax was paid in error on a qualifying purchase, the buyer must pursue a refund directly from the Illinois Department of Revenue. If tax was incorrectly paid on a vehicle, the purchaser would file a claim for credit or refund using Form RUT-7.

If the tax was paid on repair or replacement parts, the process is different. The purchaser would need to file an amended return or another specific claim for credit form to request a refund. This form requires detailed information about the purchase, the amount of tax paid, and the reason for the refund claim.