Ethanol and Biodiesel Sales Tax Exemption

Summary

Proceeds from the sale of certain blends of ethanol and biodiesel are exempt from the Illinois state sales tax. As of July 1, 2003, there is a full tax exemption on proceeds from the sale of ethanol blends ranging from E-70 to E-90 (70-90% ethanol), and biodiesel blends exceeding B-10 (10% biodiesel). In addition, there is a 20% reduction in the tax applied to proceeds from sales of ethanol blends ranging from E-10 to E-70 (10-70% ethanol), and biodiesel blends ranging from B-1 to B-10 (1-10% biodiesel). This incentive, which previously pertained solely to ethanol, was expanded to include biodiesel fuels in June 2003. The incentive will expire July 1, 2013. At the same time, legislation was enacted in 2003 establishing the Illinois Renewable Fuels Development Program, which provides up to $15 million per year in grants for financial assistance for the construction, modification, alteration or retrofitting of plants in Illinois that have an annual production capacity of at least 30 million gallons of renewable fuel. Funding for this grant program comes from a decrease in the state's sales tax exemption on ethanol, from 30% to 20% of the state's 6.25% sales tax.