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CDF parameters change; exemption ends next year

November 22, 2010

Second Division vehicles for which the Commercial Distribution Fee is paid can be exempt from state sales tax only if the vehicles are used for commercial purposes, under a revision by the Illinois Revenue Department that took effect July 1.


In addition, the CDF tax exemption faces outright repeal effective July 1, 2005.


Payment of the Commercial Distribution Fee can exempt from Illinois sales tax certain vehicles that weigh at least 8,000 pounds. However, although the CDF may be imposed and paid, that does not mean the vehicle automatically qualifies for the CDF sales tax exemption.


A copy of the revised Form CDF-7 is included in this newsletter. Purchasers must complete the form, and dealers should retain it; do not submit it to the secretary of state’s office.


Through June 30, 2005, the CDF sales tax exemption can be applied to the purchase of a Second Division motor vehicle if:


1. The manufacturer’s gross vehicle weight rating is more than 8,000 pounds;

2. The motor vehicle will be used primarily for commercial purposes; and

3. The CDF administered by the Illinois Secretary of State is paid
a. when the vehicle or trailer is registered at the time of purchase and
b. in subsequent registration years.


The Commercial Distribution Fee adds 36 percent to the price of a Class D (8,001-12,000 pounds) vehicle registration fee. That plate fee is $138 beginning each July 1, then decreases Oct. 1, Jan. 1 and April 1. With rounding, the CDF this quarter is $50. Therefore, the Commercial Distribution Fee this quarter is $188.


According to the Illinois Vehicle Code, a Second Division vehicle is one which is designed to carry more than 10 persons; to be used for living quarters; and to pull or carry freight, cargo or implements of husbandry. Also, a remodeled First Division vehicle can gain a Second Division status.


"Used for commercial purposes" means that persons or property are transported as part of a commercial or industrial enterprise, whether for-hire or not.


Illinois residents who purchase a vehicle from an out-of-state dealer must complete Form RUT-25. Check the box in Section D, Line 3, "This item is used as rolling stock"; write CDF sales tax exemption on the line provided for the certificate of authority number; and complete Section E, Lines 1 and 2.