Ethanol and Biodiesel Sales Tax Exemption

June 08, 2004


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.

Program Overview

Implementing Sector: State
Category: Financial Incentive
State: Illinois
Incentive Type: Sales Tax Incentive
Web Site:
Administrator: Illinois Department of Revenue
Start Date: 1/1/1990
Eligible Renewable/Other Technologies:
Incentive Amount: 100% for blends exceeding E-70 or B-10
Maximum Incentive: None
Equipment Requirements: See summary


Name: 35 ILCS 105/3-10
Date Enacted: 1989
Effective Date: 1/1/1990
Expiration Date: 7/1/2013


Name: Public Information
Organization: Illinois Department of Revenue
Address: Willard Ice Building
Springfield IL 62702
Phone: (800) 732-8866

This information is sourced from DSIRE; the most comprehensive source of information on incentives and policies that support renewables and energy efficiency in the United States. Established in 1995, DSIRE is operated by the N.C. Clean Energy Technology Center at N.C. State University.