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Tax waived for Indianans who lease in Illinois

November 22, 2010

Residents of Indiana, Michigan and Florida who lease a vehicle in Illinois are exempt from Illinois sales (use and occupation) tax, the Illinois Revenue Department ruled in late March.

The ruling follows a Feb. 1 department change that retracts the "out-of-state buyer" sales tax exemption for residents of those three states and six others. Illinois holds reciprocal exemptions with 41 states.

Revenue department administrators ruled that Illinois lease tax would be forgiven for cars registered in Indiana, Michigan and Florida because those states do not assess a lease tax. To document such a lease transaction as exempt, Form ST-556 should be completed thusly:

• Section 1: Indicate the names of the lessor and the lessee, along with the non-Illinois address. 
• Section 5: Mark Box G, "Other."

On the subsequent line, print the twoletter state abbreviation and "Lease Transaction." For example: "IN Lease Transaction."

The remainder of the form should be completed as usual. Submit the form to Illinois Department of Revenue, P.O. Box 19042, Springfield, IL 62794- 9042.

Effective Feb. 1, "out-of-state buyer" exemptions no longer exist for residents of Arizona, California, Florida, Hawaii, Indiana, Massachusetts, Michigan, South Carolina and Vermont. Sales tax must be charged on vehicles that would be registered in those states, at each state's tax rate, and the tax would be remitted to Springfield.

Those states would credit their residents for any tax paid to Illinois. For a copy of the Revenue Department's informational bulletin on the matter, see