The ultimate guide to Illinois sales tax

2024 Overview of Sales Tax in Illinois

Welcome to Kintsugi's rundown on tax rates in the state of Illinois. Illinois's sales tax rates can vary depending on state, county/city, and local tax rates, which include the Illinois sales tax rate the state imposes. The state base rate stands at 6.25%, answering the question of what is Illinois sales tax at its base. Among counties, Chicago's Cook County has one of the highest rates at 10.25%, which includes the city of Chicago sales tax component, while Stark County can be as low as 6.25% due to the differing sales tax Illinois applies. On the district level, some of the highest rates can be found in districts within Cook County, influenced by the high Illinois sales tax rate, reaching up to 11%. Conversely, districts in Stark County maintain the lowest rates at around 6.25%. The following will dive deeper into the many facets of Illinois's tax rate regime.

Navigating the complexities of sales tax in Illinois is crucial for both businesses and consumers. The sales tax in Illinois, often referred to as IL sales tax or IL state sales tax, includes a base rate set by the state along with additional local taxes that vary by location. The Illinois sales tax rates generally start at 6.25% for general merchandise, but this rate can increase depending on local jurisdictions, such as the higher sales tax rate in Chicago. When asking, "What is the sales tax in Illinois?" it's important to note that the rate may differ across different areas within the state. Staying informed about these rates ensures accurate tax calculations and compliance with Illinois tax regulations.

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).

Understanding Use Tax in Illinois

Use tax in Illinois is a tax imposed on the privilege of using, in Illinois, any item of tangible personal property purchased at retail. The tax complements the state’s sales tax and aims to ensure that Illinois residents pay tax on items purchased out-of-state or online, where the Illinois sales tax has not been applied. This tax helps maintain fair competition between local and out-of-state or online retailers.

Understanding use tax begins with identifying situations when it is applicable. If you purchase a product from a different state or country without paying Illinois sales tax, you are responsible for paying the use tax. Common examples include buying items over the internet, through mail-order catalogs, or during trips outside Illinois.

The use tax rate in Illinois is equivalent to the sales tax rate, which, as of 2023, is generally 6.25%, consistent with the sales tax Illinois residents pay on in-state purchases. However, some local jurisdictions may impose additional local use taxes, similar to local sales taxes, potentially raising the total rate.

Individuals and businesses are responsible for reporting and paying use tax. For individuals, use tax can be reported annually when filing state income tax returns with the Illinois Department of Revenue. A dedicated line on the tax return form allows taxpayers to declare the amount of use tax owed. Businesses, on the other hand, must remit use tax through the Illinois Sales and Use Tax Return form, usually filed on a monthly basis, depending on the volume of purchases.

Compliance with use tax regulations is crucial to avoid penalties and interest. Illinois law requires taxpayers to maintain records of all purchases subject to use tax for at least three years. Failure to pay use tax can result in audits and assessments. By understanding and adhering to use tax requirements, individuals and businesses contribute to the state's revenue and uphold fair market practices.

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.

Excise and Discretionary Taxes and Other Sales Tax Considerations in Illinois

In Illinois, various excise and discretionary taxes, as well as additional sales tax considerations, may affect consumers and businesses. Here are some key points regarding these tax categories in Illinois for 2024:

Excise Taxes

Motor Fuel Tax

Illinois imposes a motor fuel tax on gasoline and diesel fuel. As of recent updates, the tax rate has been subject to periodic adjustments. Additional county and municipal motor fuel taxes may apply in specific areas.

Alcohol and Tobacco Taxes

Specific taxes are levied on alcoholic beverages and tobacco products. The rates may vary based on the type and quantity of the product.

Cannabis Tax

Recreational cannabis is subject to excise taxes that vary based on the type of product and THC content.

Vehicle-related Taxes

Excise taxes apply to the rental and leasing of vehicles, as well as to the ownership transfer of boats and aircraft.

Discretionary Taxes

Local Discretionary Sales Taxes

Counties and municipalities in Illinois can impose additional sales taxes on top of the state sales tax, such as the Chicago sales tax. These rates vary by locality. Special district taxes, like those for public transportation or other local services, may also apply in certain areas.

Entertainment and Amusement Taxes

Certain cities and counties may impose taxes on entertainment, such as tickets for sporting events, concerts, and other live performances.

Sales Tax Considerations

Base State Sales Tax

The base state sales tax rate in Illinois is 6.25%. Groceries, drugs, and medical appliances are taxed at a lower state rate of 1%.

Use Tax

Illinois has a use tax that applies to out-of-state purchases brought into Illinois when no sales tax or local levy was paid at the time of purchase. The use tax rate is the same as the state sales tax rate of 6.25%.

Marketplace Facilitators

Online marketplaces are required to collect and remit sales tax on behalf of third-party sellers for transactions delivered to Illinois addresses.

Special Sales Tax Holidays

Illinois occasionally offers sales tax holidays that provide temporary relief on sales tax for certain categories of goods, such as back-to-school supplies.

Local Add-ons

Local jurisdictions may have additional sales taxes that affect the overall tax rate a consumer pays, leading to variance in sales tax obligations across Illinois.

Compliance and Registration

• Businesses operating in Illinois should ensure they are registered with the Illinois Department of Revenue and remain compliant with all tax collection and remittance requirements.
• Keeping accurate records and staying updated on any tax rate changes or new tax laws is crucial for tax compliance.

It's advisable to consult with a tax professional or the Illinois Department of Revenue for the most current information and personalized advice related to specific tax situations.

Understanding nexus in Illinois for local and out-of-state sellers

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.

Affiliate nexus

As of 2024, Illinois adheres to updated rules regarding affiliate nexus for sales tax purposes, which represent an evolution from 2023’s policies. These changes focus on both broadening and clarifying the criteria that establish a tax collection obligation for out-of-state sellers with affiliate relationships in Illinois.

Definition Expansion: In 2023, Illinois required that out-of-state sellers establishing affiliate nexus had to have in-state affiliates conducting specific promotional activities. For 2024, the scope expands to include affiliate activities such as any form of customer referral and participation in marketing or promotional campaigns tailored for Illinois consumers.

Revenue Threshold Adjustments: The 2023 threshold for creating affiliate nexus was income generated through Illinois affiliates exceeding $10,000 annually. For 2024, this threshold is increased to $20,000 annually, reflecting changes in interstate commerce patterns and inflation.

Click-Through Nexus Criterion: Illinois maintained a $10,000 threshold for the click-through nexus criterion in 2023. In 2024, the click-through nexus criterion's threshold remains $10,000, but with updated regulations specifying that if an affiliate's activities are beyond mere link referrals and involve enhanced website interactivity or analytics use, nexus is established at a lower threshold of $5,000.

Documentation and Compliance: In 2023, sellers had to maintain records of referrals and revenue produced through Illinois affiliates. As of 2024, the burden of proof has increased. Sellers now must provide detailed reporting on the nature and extent of affiliate interactions, including contractual relationships, to justify their nexus status.

Enforcement Intensification: The state’s Department of Revenue conducted periodic audits on affiliate nexus compliance in 2023, focusing on Illinois sales tax rates. For 2024, these audits will be more frequent and may include automated systems designed to flag suspect affiliate relationships swiftly.

These adjustments reflect Illinois’ intention to capture a wider array of economic activities under its sales tax nexus rules, thereby expanding its tax base in an increasingly digital and interconnected marketplace. The changes from 2023 to 2024 demonstrate a clear evolving approach by the state to address complexities in affiliate relationships and better enforce compliance.

Click-through nexus

In 2024, Illinois updated its click-through nexus provisions related to sales tax, impacting how online retailers are taxed. Here’s a comparison with the 2023 rules:

Threshold Updates: In 2023, Illinois required out-of-state sellers to collect sales tax if they had $100,000 in sales or 200 transactions annually. In 2024, this threshold increased to $150,000 in sales but removed the transaction count requirement.

Affiliate Criteria: The 2023 rules mandated that a click-through nexus applies if an out-of-state retailer has affiliates in Illinois who refer customers through a link, generating over $10,000 in sales. In 2024, this sales from affiliate referrals threshold increased to $20,000.

Tax Collection Obligations: Under the 2023 regulations, sellers meeting the nexus criteria had to register, collect, and remit Illinois use tax. In 2024, the obligation extends to included marketplace facilitators who help retailers reach customers, now also responsible for compliance.

Enforcement and Penalties: Previously, in 2023, non-compliance penalties included back taxes, interest, and fines. By 2024, Illinois implemented stricter enforcement measures, including higher penalties for non-compliance and increased audits.

Reporting Requirements: In 2023, sellers were required to report detailed sales data to the Illinois Department of Revenue. The 2024 changes streamlined the process to require quarterly, instead of monthly, reporting to reduce administrative burdens.

Exemptions and Exclusions: The list of exemptions in 2023 was narrower, primarily including small sellers who don't meet the threshold. By 2024, exemptions expanded to include certain categories of digital goods and services, reflecting the digital economy's growth.

Marketplace Facilitator Laws: While 2023 saw an initial focus on large online marketplaces, the 2024 update specified clearer rules, holding these platforms accountable for ensuring all third-party sellers comply.

Impact on Local Businesses: In 2023, local businesses were concerned about the competitive disadvantage. By 2024, the updates aimed to level the playing field, treating remote and local sellers more equitably under the taxation rules.

Marketplace nexus

Marketplace nexus refers to the obligation for out-of-state sellers to collect and remit sales tax on sales made to customers in Illinois. Here's a brief overview of the marketplace nexus requirements in Illinois for 2024, along with a comparison to 2023:

Threshold for Remote Sellers: In 2024, remote sellers must comply with Illinois marketplace nexus if they surpass $100,000 in annual gross sales or have 200 or more separate transactions into Illinois. In 2023, the gross sales threshold was the same, but transaction thresholds were also at 200 transactions. There hasn’t been any change in thresholds for 2024.

Economic Nexus: Illinois continues to enforce economic nexus, which applies to both remote sellers and marketplace facilitators. In 2023, marketplace facilitators had to collect and remit sales tax if they met the same threshold as remote sellers. This regulation persists unchanged in 2024.

Marketplace Facilitators: In 2023, marketplace facilitators were required to collect and remit sales tax on behalf of third-party sellers if total taxable sales to Illinois residents exceeded the threshold values. In 2024, marketplace facilitators will still follow these requirements, but there may be enhanced reporting obligations to ensure compliance.

Compliance and Penalties: Illinois has been strict about compliance, imposing penalties for non-compliance. In 2024, these penalties remain stringent, echoing the enforcement practices of 2023, but with potentially higher fines for persistent non-compliance.

Local Taxes: In both 2023 and 2024, remote sellers and marketplace facilitators need to collect not only the state sales tax but also applicable local taxes, which can vary widely across different jurisdictions within Illinois. Compliance with local tax requirements continues to be essential.

Overall, the marketplace nexus requirements for sales tax in Illinois in 2024 closely mirror those of 2023, with no substantive changes to thresholds or the basic framework of obligations for remote sellers and marketplace facilitators.

Trade shows

Tradeshows in Illinois in 2024 attract businesses seeking to showcase products and network. Sales tax obligations for exhibitors and vendors are overseen by the Illinois Department of Revenue.

• All sellers, including out-of-state entities, must register for an Illinois Sales Tax Account.
• Sellers must collect state and local sales taxes on transactions made during the tradeshow.
• They must file regular sales tax returns, even if no sales occur.
• Temporary event permits may be issued for short-term compliance.
• The Base state sales tax rate is 6.25%, but local rates vary.
• Compliance with sales tax rate varying by location within Illinois is essential.
• Items exempt from sales tax must adhere to Illinois tax exemption regulations.
• Failure to comply results in penalties and interest on unpaid taxes.
• Vendors should retain detailed records of sales and tax collected.
• Non-compliant vendors risk exclusion from future Illinois events.

Fulfillment by Amazon and nexus

Fulfillment By Amazon (FBA) is a service offered by Amazon where sellers store their products in Amazon's fulfillment centers. Amazon handles storage, packaging, shipping, customer service, and returns. This allows sellers to scale their business and reach more customers through Amazon's extensive logistics network.

When using FBA, it is crucial to understand the relevant sales tax obligations. For 2024 in Illinois, sellers must be aware of these key points:

Economic Nexus Rule: Illinois requires out-of-state sellers with no physical presence in the state to collect sales tax if they exceed $100,000 in sales or 200 transactions annually in Illinois.

Marketplace Facilitator: Amazon, as a marketplace facilitator, is responsible for collecting and remitting sales tax on behalf of sellers for orders shipped to Illinois customers.

Local Tax Rates: Illinois has state-level sales tax rates, but local jurisdictions may impose additional taxes. Sellers must ensure they collect and remit the correct combined rate.

Tax Liability: While Amazon handles most tax collection for FBA transactions, sellers remain responsible for any errors or compliance issues.

****Tax Exemptions: Some sales may be tax-exempt. Sellers should understand tax exemption certificates and ensure proper documentation for exempt transactions.

Annual Filing: Even if Amazon collects sales tax on your behalf, you may still need to file an annual state sales tax return, detailing your sales and tax collected.

Ensuring compliance with these obligations can prevent potential legal and financial issues. Knowing these essentials can help streamline your business operations and maintain good standing with the Illinois Department of Revenue.

Permits, certificates and sales tax registration in Illinois

To register for sales tax in Illinois in 2024, you'll need to obtain a Certificate of Registration from the Illinois Department of Revenue. This involves completing an application through the MyTax Illinois online portal. Essential information includes your business type, responsible party details, and federal employer identification number (FEIN). Once registered, you'll be authorized to collect state sales tax on taxable goods and services.

Registering for sales tax collection in Illinois

To register for sales tax collection in Illinois in 2024, you'll need to follow these steps:

Determine Your Need to Register: Make sure your business activities require you to collect sales tax. Generally, if you sell tangible personal property or certain services in Illinois, you'll need to register.

Obtain a FEIN: If you don't already have one, obtain a Federal Employer Identification Number (FEIN) from the Internal Revenue Service (IRS). This is required unless you're a sole proprietor with no employees.

Gather Business Information: Collect all relevant information about your business, including your FEIN, business name, address, ownership type, and details about the products or services you offer.

Register with the Illinois Department of Revenue (IDOR):

Online Registration: The most efficient way to register is through the Illinois Department of Revenue's online system, "MyTax Illinois." You'll create a log-in and complete the registration process there.

Paper Registration: If you prefer, you can complete registration by mailing in Form REG-1, the Illinois Business Registration Application. However, online registration is faster and more efficient.

Receive Your Certificate of Registration: Once your application is processed and approved, you will receive a Certificate of Registration (also known as a seller's permit), which authorizes you to collect sales tax in Illinois. Display this certificate prominently at your business location.

Comply with Reporting Requirements: After you're registered, you will need to collect sales tax from your customers and periodically file sales tax returns with the Illinois Department of Revenue. The frequency of filing (monthly, quarterly, or annually) is determined by the volume of your sales.

Maintain Records: Keep detailed records of all transactions involving sales tax, as you will need these for accurate reporting and in case of an audit.

By following these steps, you'll be able to register for sales tax collection in Illinois in 2024 without issues.

Cost of registering for sales tax in Illinois in 2024

As of the most recent information, registering for sales tax in Illinois is free. The process involves applying for a seller's permit through the Illinois Department of Revenue. There are no fees associated with obtaining this permit. However, it is always advisable to check directly with the Illinois Department of Revenue for any updates or changes to the registration process or associated costs, as policies can change.

Federal tax ID requirements for registering

In Illinois, when you're registering for sales tax, you will generally need an Employer Identification Number (EIN). An EIN is a federal tax identification number issued by the Internal Revenue Service (IRS) and is used to identify a business entity.

Here is why you might need an EIN:

• You have employees.
• You operate your business as a corporation or a partnership.
• You file any of these tax returns: Employment, Excise, or Alcohol, Tobacco, and Firearms.
• You withhold taxes on income, other than wages, paid to a non-resident alien.
• You have a Keogh plan.
• You are involved with certain types of organizations (e.g., trusts, estates, or nonprofit organizations).

To register for an EIN, you can apply through the IRS. The process can be done online, by fax, by mail, or over the phone.

Here's the link to apply for an EIN online: IRS EIN Application

For registering for sales tax in Illinois, you need to visit the Illinois Department of Revenue (IDOR) website. You will use the MyTax Illinois online system to register your business and apply for your Illinois Sales Tax Permit.

Make sure to have your EIN ready when registering for sales tax, as it will be required information during the registration process.

If you need further assistance, you can contact the Illinois Department of Revenue directly.

Streamlined sales tax program and Illinois

As of my last update, Illinois is not a full member of the Streamlined Sales Tax (SST) Governing Board. The SST is an initiative aimed at simplifying and modernizing sales tax collection and administration for businesses. Illinois has its own set of rules and regulations regarding sales tax, which may differ from those states that are full members of the SST program.

However, the status of state participation in the SST can change, so it would be prudent to check the latest information from the Streamlined Sales Tax Governing Board or the Illinois Department of Revenue to get the most current status for 2024.

Acquiring a business and registering for sales tax in Illinois

Certainly! If you're acquiring a business in Illinois and need to register for sales tax, here are the steps and requirements:

Obtain an FEIN (Federal Employer Identification Number):

Before you register for sales tax, you'll need a Federal Employer Identification Number, which is issued by the IRS. This number is used to identify your business for federal tax purposes.

Register with the Illinois Department of Revenue (IDOR):

You will need to register your business with the Illinois Department of Revenue. This process can be done online through the MyTax Illinois website. Here’s what you’ll typically need:

• Business Name and Address
• FEIN (Federal Employer Identification Number)
• Description of Business Activities: Information on what goods or services your business will be providing
• Responsible Party Information: Details about individuals responsible for the business operations, such as owners, partners, or corporate officers
• Business Structure: Type of business entity (Sole Proprietorship, Partnership, Corporation, LLC, etc.)
• Date of Acquisition: When you are taking over the business
• Previous Owner’s Information: You may need some information about the previous owner, such as their business name and address

Obtain a Sales Tax Permit:

Upon completing your registration with the IDOR, you will be issued a Sales Tax Permit. This permit allows you to collect sales tax on taxable goods and services within Illinois.

Purchase Existing Inventory:

If you're acquiring existing inventory from the previous owner, you'll need documentation of the sale. This could include a bill of sale or inventory list.

Ensure Compliance with Local Regulations:

Check with local city or county governments for any additional permits or registration requirements that may apply to your business.

Set Up Recordkeeping:

Keep accurate records of all your sales transactions, payments received, and sales tax collected. This will be necessary for filing your sales tax returns and complying with state regulations.

File Regular Sales Tax Returns:

You will need to file sales tax returns regularly, which could be on a monthly, quarterly, or annual basis, depending on the volume of your sales. The frequency will be determined by the IDOR.

Review Business Liabilities:

Ensure that there are no outstanding tax liabilities or debts from the previous owner that may affect your registration. It's essential to address any existing obligations before completing the acquisition.

These are the general steps to register for sales tax in Illinois when acquiring a business. It’s advisable to consult with a tax professional or legal advisor to ensure all aspects of the transition and registration are handled correctly.

Other Illinois registrations to consider

In Illinois, besides registering for sales tax, there are several other business registrations and considerations you may need to address depending on the nature of your business. Here are some of the key registrations and considerations:

Employer Identification Number (EIN)

• If your business has employees, or if it is a corporation or partnership, you'll need to obtain an EIN from the IRS. This is also known as a Federal Tax Identification Number.

Illinois Department of Employment Security (IDES) Registration

• If you have employees, you must register with IDES to comply with state unemployment insurance laws.

Withholding Tax Registration

• If you have employees, you are required to withhold state income tax from their wages. You will need to register for a withholding tax account with the Illinois Department of Revenue (IDOR).

Business Licenses

• Certain types of businesses require specific state-level licenses in Illinois. Depending on your industry, you might need professional licensing, environmental permits, health permits, etc.

Local Business Licenses and Permits

• In addition to state requirements, various cities and counties in Illinois may have their own licensing requirements. You should check with the local city or county clerk's office where your business is located to ensure you comply with local regulations.

Illinois Business Registration

• Sole proprietorships or general partnerships using a name other than the owner’s personal name need to register for an Assumed Business Name with the county clerk's office.

Corporate or LLC Registration

• If you are forming a corporation, limited liability company (LLC), or limited partnership, you must register with the Illinois Secretary of State.

Occupational Safety and Health Administration (OSHA) Compliance

• Depending on your business, you might need to comply with OSHA regulations regarding workplace safety.

Illinois Environmental Protection Agency (IEPA)

• Certain businesses may need permits or be subject to regulations by the IEPA, particularly if they impact the environment.

Professional Licensing

• Professions such as doctors, lawyers, accountants, real estate agents, etc., require specific state licenses.

Trademark Registration

• If you wish to protect your business name or logo, consider registering it as a trademark with the United States Patent and Trademark Office (USPTO) and possibly with the state of Illinois.

Health Permits

• If you are in the food service or hospitality industry, you may need health permits from the local health department.

These are just a few examples of the registrations and considerations for operating a business in Illinois. It's crucial to identify specific requirements based on your business activities and industry. Seeking advice from a legal or business advisor can also be beneficial to ensure full compliance with all applicable laws and regulations.

Requirements for online sellers in Illinois

In Illinois, online sellers in 2024 are required to collect and remit sales tax if they meet certain thresholds related to economic nexus. This means that if an online seller's business exceeds $100,000 in sales or 200 separate transactions within the state over the preceding 12-month period, they are obligated to register with the Illinois Department of Revenue and collect state sales tax from their customers in Illinois.

Additionally, Illinois follows a destination-based sales tax policy. This means that online sellers must calculate the sales tax rate based on the delivery address of the customer rather than their business location.

There are also certain administrative requirements that online sellers need to follow, including filing periodic tax returns and maintaining proper records of all transactions subject to Illinois sales tax.

It is recommended for online sellers to periodically review their sales volume and ensure compliance with Illinois sales tax laws, as tax regulations can evolve.

Collecting sales tax in Illinois

In 2024, collecting sales tax in Illinois requires businesses to adhere to state regulations, including registration, rate application, and timely remittance. Understanding local tax rates and keeping accurate records are essential for compliance, ensuring businesses meet their obligations while contributing to state revenue responsibly.

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.

Non-taxable products in Illinois

Certainly! In the state of Illinois, certain product genres may be exempt from sales tax. As of the most recent guidelines, these typically include:

Food and Groceries: Basic food items intended for human consumption, excluding prepared foods, soft drinks, and candy.

Prescription and Non-prescription Medicines: This includes both over-the-counter medications and those prescribed by a healthcare professional.

Medical Devices and Supplies: Items like insulin, hearing aids, and mobility aids.

Agricultural Products: Seeds, fertilizers, and feed for livestock.

Manufacturing and Machinery Equipment: Equipment used primarily in manufacturing or assembling tangible personal property for wholesale or retail sale or lease.

For the most current information regarding sales tax exemptions and taxable items in Illinois, please refer to the Illinois Department of Revenue. Things are changing all the time, so please consult with the Illinois Department of Revenue for up-to-date information.

Reference: Illinois Department of Revenue

Remember to always verify as tax laws are subject to change.

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.

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.

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.

Filing sales tax returns in Illinois

To file sales taxes in Illinois for the year 2024, follow these steps:

Register for an Account:

Sign up with the Illinois Department of Revenue (IDOR) through MyTax Illinois to create an account.

Collect Sales Tax:

Charge customers the appropriate sales tax rate based on the location where the transaction occurs.

Keep Detailed Records:

Maintain comprehensive sales and tax records to ensure accurate reporting and filing.

Determine Your Filing Frequency:

IDOR will assign you a filing frequency (monthly, quarterly, or annually) based on your estimated tax liability.

Complete Form ST-1:

Fill out Form ST-1, the Sales and Use Tax and E911 Surcharge Return, with required details about collected sales tax.

Report & Pay Use Tax:

If applicable, report and remit any use tax due on purchases where sales tax was not collected by the seller.

Submit Online:

Submit your sales tax return and payment through MyTax Illinois before the deadline for your filing period.

Review and Correct Errors:

Double-check for errors before submitting, and amend returns using the same online system if needed.

Stay Updated:

Regularly check IDOR notices or updates for any changes in tax rates, rules, or filing processes.

For further guidance and resources, visit the Illinois Department of Revenue.

Sales tax filing frequency

In Illinois, the frequency of sales tax filing depends largely on the amount of tax liability a business incurs. For the year 2024, businesses with significant sales tax obligations are required to file more frequently than those with smaller obligations. Specifically, if a business's average monthly tax liability is greater than $200, it must file and remit sales taxes on a monthly basis. These monthly returns are generally due by the 20th day of the following month.

For businesses with an average monthly liability between $50 and $200, the state mandates quarterly filing. The quarterly due dates fall on the 20th day of the month following the end of each calendar quarter, i.e., April 20, July 20, October 20, and January 20.

For those with an average monthly liability below $50, Illinois allows for annual filing. The annual returns are due by January 20 of the following year. However, businesses that operate on a seasonal basis or have fluctuating sales throughout the year may have different filing requirements, depending on their specific circumstances.

Additionally, Illinois allows for electronic filing and payment of sales taxes, which can streamline compliance for businesses of all sizes. The state also provides periodic assessments to ensure businesses are adhering to the correct filing schedule based on their sales activity. Penalties and interest can apply if filing deadlines are missed, so it's crucial for businesses to stay vigilant about their specific filing requirements.

Understanding and adhering to these filing frequencies helps businesses remain compliant with Illinois sales tax laws and avoid unnecessary penalties. As such, businesses must regularly review their sales figures and adjust their filing frequency as appropriate.

Filing when no sales tax has been collected

When a business registered for sales tax in Illinois fails to collect sales tax, it remains liable for the uncollected tax. The Illinois Department of Revenue may audit the business, impose fines, and calculate the owed tax based on estimated sales. If discrepancies are found, penalties and interest accrue on the unreported amount. Businesses must maintain accurate records of all transactions to avoid legal and financial repercussions. Non-compliance can result in revoked sales tax registration and potential legal action, affecting the business's operational and financial stability.

Penalties for late filing and non-payment of sales taxes

Late Sales Tax Filing: In Illinois, sales tax filing deadlines are critical for businesses. If a business files its sales tax return past the due date, the state imposes penalties. For each month or part of a month the return is late, there is a penalty fee which can be substantial, accumulating quickly if not promptly addressed. Additionally, interest charges accrue on any unpaid tax balance, compounding daily. This creates a significant financial burden, underscoring the necessity for timely compliance with filing requirements to avoid punitive measures.

Non-Payment of Sales Taxes: Non-payment of sales taxes in Illinois carries severe consequences. The Illinois Department of Revenue actively pursues businesses that fail to remit collected sales taxes. Initial penalties include monetary fines and interest on the unpaid amount. Persistent non-payment can lead to more drastic actions, such as revocation of business licenses, liens on property, and court actions. These enforcement measures not only disrupt business operations but can also lead to personal liability for business owners under certain conditions. Ensuring the prompt payment of collected sales taxes is essential to avoid these severe repercussions and to remain in good standing with state tax authorities.

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.

2024 sales tax filing due dates for Illinois

Monthly: 20th of the following month

Quarterly: Last day of the month following the quarter

Annually: January 31, 2025

Shipping and sales tax in Illinois

When to pay tax on shipping in Illinois

In Illinois, the treatment of sales tax on shipping charges can depend on several factors, including the nature of the sale and how the shipping charges are presented on the invoice. Here are some general guidelines:

Shipping Charges as Part of the Sale Price: If shipping charges are included in the sale price of the item (i.e., "shipping included"), they are generally considered part of the taxable sale and subject to sales tax.

Separately Stated Shipping Charges: If shipping charges are separately stated on the invoice during a taxable sale of tangible personal property, these charges are generally not subject to sales tax.

Delivery Charges in Conjunction with a Taxable Sale: If a business sells tangible personal property and separately states the delivery charge on the invoice, those charges are generally exempt from tax. However, if the buyer has the option to pick up the item and chooses delivery instead, the delivery charges are subject to sales tax.

It’s important for businesses to keep detailed records and clearly separate the cost of goods sold from delivery charges on invoices if they want to ensure that shipping charges remain non-taxable.

Given the potential for complexities and changes in tax law, businesses should also consider consulting with a tax professional or referring directly to Illinois Department of Revenue resources to ensure compliance with current state tax regulations.