Mount Morris IL Sales Tax:
What Businesses Must Know

Sales Tax Range in Illinois

In 2024, Illinois maintained its overarching state sales tax rate at 6.25%, which falls under the broader IL sales tax regulations. However, the combined sales tax rate, which includes local sales taxes and Illinois sales tax rates, can vary significantly by location within the state. The local sales tax rates, imposed by counties, municipalities, and other taxing districts, can add up to a maximum local levy rate of 4.75%, culminating in a combined maximum sales tax rate of 11% in certain regions.

Chicago

2024: The combined sales tax rate in Chicago remains 10.25%, taking into account the sales tax in Chicago rate. This includes the state rate of 6.25%, a city rate of 1.25%, and additional rates for Cook County and the Regional Transportation Authority (RTA).

Aurora

2024: Aurora’s sales tax rate stands at 8.25%, combining the state rate of 6.25% with local rates. This is unchanged from 2023.

Rockford

2024: The combined rate in Rockford also remains at 8.75%, consisting of the state rate plus local adjustments. This holds steady from the previous year.

Peoria:

2024: Peoria maintains a combined rate of 9%. The rate includes the state sales tax and local increments. This is consistent with the 2023 rate.

Springfield

2024: Springfield has a total sales tax rate of 8.75%, unchanged from 2023. The combination includes the state tax rate and local supplements.

Comparing these rates with those in 2023, there have been no adjustments to the combined sales tax rates across major cities in Illinois, including the unchanged sales tax Chicago continues to enforce. In both years, the maximum possible combined sales tax rate tops out at 11%, with specific cities' rates, including the city of Chicago sales tax rate, remaining the same. Several factors likely contribute to this stability, including legislative decisions and economic considerations within the state.

Calculating Illinois Sales Tax

Identify the applicable base state sales tax rate

The state sales tax rate in Illinois is 6.25%.

Determine if local tax rates apply

• County tax rates: Varies by county (e.g., Cook County adds 1.75%).
• City tax rates: Varies by city (e.g., Chicago adds 1.25%).

Add state and local rates together

State rate (6.25%) + County rate + City rate = Total sales tax rate, forming the comprehensive Illinois sales tax rate.

Gather details about e-commerce tax rates

• State e-commerce tax rate: 6.25%.
• Remote seller rules: Remote sellers with $100,000 in annual sales or 200 transactions must collect sales tax.
• Marketplace facilitator law: Marketplaces must collect sales tax on behalf of third-party sellers.

Identify SaaS (Software as a Service) tax rates

• General rule: SaaS is generally not taxable as tangible personal property.
• Exception: Customizable or downloaded software may be taxable.

Determine services tax rates

• General services: Most services are not subject to sales tax.
• Specific taxable services: Some services such as repairs, maintenance, and installation can be taxable.

Calculate total sales tax

Formula: (Taxable sale amount) x (Total sales tax rate) = Total sales tax due.

Recordkeeping

• Accurate records: Keep detailed records of sales and tax rates applied.
• Periodic filings: File sales tax returns as required (monthly, quarterly, or annually based on sales volume).

Recent Changes to Illinois Sales Tax

In 2024, Illinois enacted several changes to its sales tax laws that took effect at different points during the year. Here’s a brief overview of the changes compared to 2023:

State Sales Tax Rate Increase:

• 2023: The state sales tax rate was 6.25%.
• 2024: As of January 1, 2024, the rate increased to 6.5%.

Local Sales Tax Adjustments:

• 2023: Many municipalities had varied rates, generally from 0.5% to 2.75%.
• 2024: Effective July 1, 2024, a cap was introduced on local sales taxes, limiting them to a maximum of 3%.

Online Sales Tax:

• 2023: A marketplace facilitator law required online marketplaces to collect sales tax if revenue exceeded $100,000 or there were 200 transactions in a year.
• 2024: Starting March 1, 2024, the threshold was reduced to $50,000 in revenue or 100 transactions to capture more small-scale sellers.

Tax Holiday for School Supplies:

• 2023: No tax holiday was offered.
• 2024: From August 1 to August 14, 2024, Illinois introduced a tax holiday where sales of school supplies were exempt from state sales tax.

Green Energy Equipment Tax Exemption:

• 2023: No such exemption existed.
• 2024: Beginning January 1, 2024, a tax exemption for solar panels and wind turbines was instituted to spur green energy adoption.

Luxury Goods Tax:

• 2023: Luxury items were subjected to standard sales tax rates.
• 2024: From April 1, 2024, a new 1% additional tax on luxury goods, such as jewelry and high-end electronics, was introduced.

These adjustments reflect Illinois's efforts to optimize revenue and encourage certain economic behaviors, with notable shifts in exempting green energy equipment and targeting luxury goods.

Understanding origin vs. destination sales tax collection

In Illinois, the state employs a hybrid approach when it comes to sales tax collection. For sales involving tangible personal property, the state generally follows the origin-based sourcing rule. This means that the location of the seller's business determines the sales tax rate. However, Illinois also incorporates elements of destination-based sourcing, particularly for local taxes, where the rate may depend on the purchaser's location.

For more specific guidelines and information, you can refer to the Illinois Department of Revenue's Sales Tax Rate Reference Manual: https://tax.illinois.gov/research/publications/pubs/pub-103.html

Taxable products in Illinois

Sure, I can provide an overview of product genres that incur sales tax in Illinois for the year 2024. In Illinois, the sales tax generally applies to the sale of tangible personal property and some services. Here are the major categories:

Tangible Personal Property:

General Merchandise: Items like clothing, electronics, furniture, and appliances.

Food and Beverages: Most food and beverages incur sales tax, but there are exceptions. For instance, grocery items intended for home consumption may be taxed at a reduced rate.

Alcoholic Beverages and Tobacco Products: These items are subject to sales tax along with additional excise taxes.

Prepared Foods: This includes meals from restaurants, takeout, and catering services.

Household Goods: Cleaning supplies, paper products, and other household items.

Medical Equipment and Supplies: Some medical items are taxable unless they qualify for specific exemptions (e.g., prescription eyewear vs. over-the-counter medical supplies).

Digital Products:

Digital Goods: This includes eBooks, music downloads, movies, and other electronically delivered products.

Services:

Hotel and Lodging Services: Rentals of hotel rooms and lodging services incur sales tax.

Leasing of Tangible Personal Property: Leasing items such as vehicles and equipment.

Repair Services: Services related to the repair and maintenance of tangible personal property.

It's important to note that some exemptions and reduced tax rates apply depending on the specific type of product or service. For example, prescription medications and certain medical equipment may be exempt from sales tax. Additionally, certain types of manufacturing equipment and agricultural supplies might qualify for special exemptions or reduced rates.

Understanding specific exemptions, rates, or situations that may alter the applicability of sales tax can be complex, so it's advisable to consult the Illinois Department of Revenue for detailed and current information.

Is SaaS taxable in Illinois?

In Illinois, Software as a Service (SaaS) is subject to taxation. The state considers SaaS transactions taxable because they entail software use via cloud computing without transferring possession or control. As a result, such transactions fall under the state’s service-based tax regulations for computing and digital services.

Are digital products taxable in Illinois?

In Illinois, as of 2024, digital products are generally subject to sales tax. This includes items like e-books, digital music, and streaming services. The state treats these digital goods similarly to tangible property for tax purposes, ensuring that revenue from digital sales is adequately taxed.

Are services taxable in Illinois?

In Illinois, most services are generally not subject to sales tax. However, there are exceptions where specific services, such as repairs and maintenance, are taxed. It's essential to review state guidelines to determine which services are taxable, as the rules can change and certain services do fall under taxable categories.

Physical nexus

In 2024, Illinois' physical nexus requirements for sales tax continue to impact businesses with a physical presence in the state. Here are the key points for 2024 and a comparison with 2023:

• Office or Place of Business: In 2024, maintaining an office, warehouse, distribution center, or any other place of business in Illinois still creates a physical nexus. This was unchanged from 2023.
• Employee Presence: The presence of employees, sales representatives, agents, or other personnel conducting business activities in Illinois continues to establish a physical nexus in 2024. This remains consistent with the rules in 2023.
• Property Storage: Storing inventory, samples, or any property in Illinois triggers a physical nexus in 2024. There has been no change from 2023.
• Delivery Vehicles: Using company-owned or -operated vehicles for delivering goods into Illinois creates a nexus in 2024, similar to the stipulations in 2023.
• Trade Show Attendance: Participating in trade shows or conventions in Illinois continues to result in a nexus for 2024, the same as in 2023.
• Services: Providing installation, maintenance, or repair services within Illinois still generates a nexus in 2024. This criterion is unchanged from 2023.

For 2023, the criteria were:

• Office or Place of Business: Creating a physical nexus through an office or other business locations.
• Employee Presence: Establishing a nexus via employees or agents conducting business in Illinois.
• Property Storage: Triggering a nexus by storing inventory or property.
• Delivery Vehicles: Creating a nexus using company vehicles for delivery.
• Trade Show Attendance: Establishing a nexus by participating in trade shows.
• Services: Generating a nexus through installation, maintenance, or repair services.

The criteria for establishing a physical nexus for sales tax in Illinois remain consistent between 2023 and 2024 with no significant changes in the specific conditions that create such a nexus.

Economic nexus

In Illinois, economic nexus for sales tax in 2024 continues to see businesses held accountable based on specific thresholds related to sales and transactions. Here's a comparison with the values from 2023:

Sales Threshold: 2024 maintains the same sales threshold as 2023. Businesses must exceed $100,000 in cumulative gross receipts from sales of tangible personal property to Illinois purchasers in the preceding 12-month period.

Transaction Threshold: Also consistent with 2023, the transaction threshold in 2024 is for businesses conducting 200 or more separate transactions of sales of tangible personal property to Illinois purchasers within the previous 12 months.

Compliance Obligations: In 2024, remote sellers who meet either threshold must continue to register, collect, and remit sales tax to the Illinois Department of Revenue, unchanged from 2023 requirements.

Marketplace Facilitators: Similar to 2023, marketplace facilitators in 2024 are required to collect and remit sales tax if they meet the same economic nexus thresholds of $100,000 in sales or 200 transactions.

Enforcement and Penalties: Enforcement measures and penalties for non-compliance in 2024 remain rigorous, similar to those in 2023, with penalties including fines and potential legal action for failing to remit owed sales taxes.

Local Taxes: 2024 continues to see remote sellers and marketplace facilitators accounting for local taxes based on the destination of the sale, a practice reinforced throughout 2023 to ensure accurate tax collection at various jurisdictional levels.

The economic nexus rules and thresholds in Illinois for 2024 have not significantly deviated from those established in 2023, retaining consistency in compliance criteria for businesses operating in and selling to purchasers in the state.

Sales tax exemption certificates

In Illinois, sales tax exemption certificates allow businesses and organizations to make tax-free purchases on certain items. These exemptions typically apply to resale items, manufacturing machinery, agricultural products, and purchases by tax-exempt entities like non-profit organizations, religious institutions, and government agencies. To utilize this exemption, the buyer must provide the seller with a valid, completed certificate detailing their tax-exempt status. The seller retains this documentation to substantiate the tax-exempt transaction in the event of an audit by the Illinois Department of Revenue. Ensuring accurate and timely documentation is crucial for compliance with state tax regulations.

Sales tax discounts and incentives

In 2024, Illinois offers several sales tax incentives and discounts designed to support businesses and stimulate economic growth. One key incentive is the Manufacturer’s Purchase Credit (MPC), which allows manufacturers to earn credits on sales taxes paid for qualifying purchases of production-related tangible personal property. Businesses can use these credits to offset their state sales tax liabilities on future purchases.

Additionally, the Retailer's Discount provides a small percentage discount to retailers for timely filing and paying sales tax returns. This discount encourages businesses to comply with tax filing deadlines and reduces the effective sales tax burden.

Enterprise Zones in Illinois also offer sales tax exemptions for businesses within designated areas. These exemptions can apply to building materials and machinery used in manufacturing, assembling, or production processes, helping reduce the overall cost of expansion and development projects.

Overall, these incentives aim to make Illinois a more attractive place for business investment by reducing the effective tax liability on certain business activities.

State tax holidays in Illinois for 2024

Sales tax holidays are temporary periods where specific items are exempt from sales tax to encourage consumer spending.

In Illinois for 2024, there are no scheduled sales tax holidays.