Illinois Sales Tax Handbook

RATE OF SALES TAX:

6.25%

LOCAL & COUNTY MAXIMUM RATES:

4.75%

What Are the Taxable Goods and Services?

The first step in sales tax compliance is determining if the items or services your firm offers are taxable in Illinois.

Traditional Products and Services

Physical property, such as furniture, household appliances, and automobiles, is subject to sales tax in Illinois.

Illinois charges a lower price for prescription and non-prescription medications, as well as consumables.

Digital Products and Services

A digital item or service is anything that is supplied electronically, such as a music downloaded from iTunes or a movie bought from Amazon.

Businesses in Illinois are not required to collect sales tax on the sale of digital products or services.

How to Register for Sales Tax in Illinois

If you have concluded that you must charge sales tax on part or all of the products and services that your company sells, the next step is to apply for a seller’s licence.

This enables your company to collect sales tax on behalf of the municipal and state governments.

You will need the following information to register:

Company name
Type of business entity
Date business activities started or will begin Description of business activity
Business and postal addresses
Contact information for businesses
The North American Industry Classification System (NAICS) code that best corresponds to your company (You can do a NAICS Code Lookup and find the NAICS Code for LLC that matches your industry.) To understand more, see our What Is an NAICS Code page.
Employer Identification Number (FEIN) (FEIN)
Your name, Social Security Number (SSN), driver’s license number, personal address, and owner/sole proprietor’s personal contact information
List of company executives, partners, management members, and/or trustees
Employment information (date of hiring, number of workers, payroll amounts, and, if appropriate, the PTIN of the payroll agency)

Even if you don’t have any sales tax to report or pay, Illinois mandates that every seller with a sales tax permit submit a sales tax return on the due date.

A Resale Certificate might help you save money.

When acquiring items for resale, your firm does not have to pay sales tax if you obtain a resale certificate, also known as a reseller’s permit.

Sales Tax Collection

After obtaining your seller’s licence and starting your company, you’ll need to figure out how much sales tax to charge various consumers. It is critical for company owners to collect the right rate of sales tax to avoid penalties and the danger of expensive audits.

When computing sales tax, consider the following types of transactions:

Store Sales Shipping Within-State Sales Outside-State Sales

Retail Sales

For conventional company owners who sell products or services on-site, calculating sales tax is simple: all sales are taxed at the rate determined by the store’s location.

Here’s an illustration of how this situation may look:

In Rockford, Illinois, Mary owns and operates a bookshop. Because books are taxed in the state of Illinois, Mary charges a flat rate of 8.25% on all sales. This includes the 6.25% Illinois sales tax, the 1% Winnebago County sales tax, and the 1.0% Rockford municipal tax.

Sales inside the state

The state of Illinois has a policy known as origin-based sales taxation. This implies that long-distance transactions inside Illinois are taxed based on the buyer’s address. This regulation applies to sales taxes levied by the state, county, and city.

Consider the following scenario:

Steve operates his own eBay electronics company from his home in Chicago, Illinois. A buyer from Urbana, Illinois discovers Steve’s eBay website and buys a $350 set of headphones. Steve adds the Illinois state tax rate of 6.25% on this purchase, plus 1.75% for Cook County, 1.25% for Chicago’s city tax rate, and 1.0% for the district tax rate. The total cost is $385.88 ($35.88 sales tax) at a total sales tax rate of 10.25%.

Out-of-State Purchases

Illinois firms must only pay sales tax on out-of-state sales if they have a presence in other states.

Nexus indicates that the company has a physical presence in another state.

Common nexus types include:

A physical place, such as an office, retail shop, or warehouse.
An employee who works from home or as a roaming sales representative.
An affiliate marketer
Dropshipping from a third-party vendor.
A temporary physical site, such as a festival or fair booth.

Submit Your Sales Tax Return

You’re ready to submit your sales tax return now that you’ve obtained your Illinois seller’s permit and understand how to charge the correct amount of sales tax to all of your customers. You avoid penalties and fines, be sure to meet all filing dates.

How to File a Claim

Businesses in Illinois are required to file sales tax forms and make sales tax payments online.

How Frequently Should You File?

Annual filing: If your company receives less than $50 in sales tax each month, you must submit returns on an annual basis.
Quarterly filing: If your company collects between $50 and $200 in sales tax every month, you need submit quarterly reports.
Monthly filing: If your company receives more than $200 in sales tax every month, you must submit returns on a monthly basis.

Deadlines for Filing

The deadline for all Illinois sales tax returns is the 20th of the month, unless it is a weekend or federal holiday, in which case the deadline is postponed to the following working day. The following are the filing deadlines for this year:

Penalties for Filing Late

If the filing date is within 30 days of the filing deadline, Illinois imposes a late filing penalty of 2% of the original tax. If you do not file a return within 30 days after receiving a notice of non-filing, an additional penalty of $250 or 2% of the tax reported owing on the return will be assessed, regardless of timely payments. The fine cannot be more than $5000.

Illinois also imposes a 2% late payment penalty if payment is made between 1 and 30 days after the deadline. After 30 days, the penalty is 10% of the unpaid tax reported on the initial tax return. If your business is audited for unpaid sales tax, the interest penalty rises to 15% of the total outstanding sales tax, and if your firm continues to wait, the rate might climb to 20% of the entire unpaid sales tax.