Illinois Sales Tax Guide 2024: Compliance, Rates, and Regulations for Businesses

Sales tax at a glance

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Illinois sales tax rates & calculations in 2023

The Illinois sales tax rate in 2023 is between 6.25% and 10.25%. This comprises a base rate of 6.25% plus a mandatory local rate of 0% to 4.75%. Depending on the local sales tax jurisdiction, the total tax rate can be as high as 11%.

List of local sales tax rates in Illinois

You can look up the full table of sales tax rates in each city and county in Illinois on the Department of Revenue website. Here's a snippet of some sample local rates:

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Recent tax rate changes in Illinois

• Tax rates are generally updated on January 1 and July 1 each year.
• In 2022, Cook County increased its county sales tax rate.

FAQs

How do you calculate Illinois sales tax?

To calculate Illinois sales tax, you can use the following formula:

Sales tax = (6.25% + local rate) * purchase price

For instance, if the local rate is 2%, and the purchase price is $100, the sales tax would be $8.25.

What are the penalties for not paying Illinois sales tax?

Penalties for late payment or filing range from 2% to 10%. There are also penalties for negligence of 5% to 25% of the tax due.

Is the Illinois sales tax destination-based or origin-based?

Illinois is an origin-based sales tax state. This means you must pay the sales tax based on where you’re located instead of where the customer is. 

Is Illinois a streamlined sales tax state?

Illinois is not a Streamlined Sales and Use Tax Agreement (SSUTA) member.

Sales tax nexus and registration

Sales tax nexus table in Illinois

Type of nexus

Threshold

Physical presence

Any physical presence such as an office, employee, inventory, etc.

Economic nexus

$100,000 in sales or 200 transactions

FAQs

Do I need an Illinois seller's permit if I’m only a wholesaler?

No, you do not need an Illinois seller's permit if you only sell wholesale and make no retail sales.

Do I need an Illinois seller's permit if I only sell temporarily in the state?

You must register for a seller's permit if you meet the sales tax nexus thresholds even through temporary sales activity in Illinois.

What's taxable and exempt?

Let’s now look at the products and services that are taxable and exempt in Illinois.

What's taxable in Illinois?

Most retail sales of tangible personal property are taxable in Illinois unless specifically exempt. Some everyday taxable items include:

• Clothing and footwear
• Furniture and home furnishings
• Prepared food
• Soft drinks
• Cleaning supplies
• Pet supplies.

Exemptions from sales tax in Illinois

Some exempt items include:

• Most groceries
• Prescription medicines
• Manufacturing equipment
• Farm equipment and supplies
• Newspapers and magazines
• Government organizations
• Educational organizations 
• Charitable and religious organizations 

See the Illinois Department of Revenue website for a complete list of exemptions.

FAQs

Are groceries taxable in Illinois?

Effective July 1, 2023, Illinois will charge a 1% grocery tax across all low-rate food items. Higher-rate food items will be taxed normally at 6.25% + local sales tax rates. 

Is clothing taxable in Illinois?

Yes, clothing and footwear are generally taxable in Illinois.

Are digital products taxable in Illinois?

Yes, digital products like ebooks, music, movies, and software are taxable in Illinois.

Is software-as-a-service (SaaS) taxable in Illinois?

Yes, software-as-a-service is considered a taxable digital product in Illinois.

Are services taxable in Illinois?

Illinois does not tax most services. However, some services may be taxable if provided with the sale of tangible personal property.

Excise & discretionary taxes

Excise taxes are levied on specific goods or services. Local governments impose discretionary taxes, and the rates vary from city to city.

Excise taxes in Illinois (alcohol, tobacco, gasoline, fuel, marijuana)

Illinois has excise taxes on:

• Alcoholic beverages
• Cigarettes and other tobacco products
• Motor fuel
• Adult use cannabis

Food and beverage tax in Illinois

Illinois does not have a statewide food and beverage tax. However, local jurisdictions like Chicago and Metro East impose taxes on food and beverages.

Remote sellers in Illinois

Remote sellers with no physical presence in Illinois may still be required to collect Illinois sales tax if they meet economic nexus thresholds:

• $100,000 in sales
• 200 transactions

Prepaid sales tax rates for fuel products in Illinois

Motor fuel distributors must collect and remit prepaid sales tax on fuel sold to retailers. See the Illinois Department of Revenue website for prepaid motor fuel tax rates.

Discretionary taxes in Illinois (local sales taxes)

Cities and counties in Illinois can impose local discretionary sales taxes on top of the state sales tax. Rates range from 0-4.75%, depending on jurisdiction.

Collecting Sales Tax in Illinois

Let’s look at the steps to collect sales tax in Illinois now.

How to collect sales tax in Illinois if you are not based in Illinois (Out-of-State)

Even if you do not have a physical presence in Illinois, you must register to collect tax if you meet the economic nexus thresholds:

• $100,000 in sales
• 200 transactions

You can register online for an Illinois seller's permit. Once registered, you must charge applicable sales tax rates based on the buyer's location in Illinois.

Should you collect sales tax on shipping charges in Illinois?

Yes, if the products being shipped are taxable, the shipping charge is also generally taxable in Illinois.

Filing & paying sales taxes

Filing and paying sales taxes in Illinois

Retailers and service providers must file sales tax returns and remit taxes owed to the Illinois Department of Revenue. This can be done online through MyTax Illinois.

Sales tax return filing schedule and due dates in Illinois

The Department of Revenue assigns a filing frequency - monthly, quarterly, or annually. The filing period is determined based on the business’ tax liability for the previous calendar year. 

Here are the due dates for each period:

Monthly:

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Quarterly:

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Annual:

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Filing penalties in Illinois

Late filing penalties are:

• 2% of the tax due for payments 1-30 days late
• 5% of the tax due for payments 31-60 days late
• 10% of the tax due for payments 60+ days late

When are returns due in Illinois?

Returns are due the 20th day of the month following the end of the filing period.

For example, for the January-March quarterly period ending March 31, the due date is April 20.

FAQs

What are the Illinois sales tax due dates?

Due dates are the 20th of the month following the end of the filing period.

I didn’t collect any Illinois sales tax during this period. Do I still need to file a return?

You must file a zero-tax return even if you did not collect any sales tax.

Can I get an extension on filing my Illinois sales tax return?

Yes, you can request a 30-day extension to file by submitting Form IL-505-B.

Can I amend an Illinois sales tax return?

You can file an amended return using Form ST-1-X within 3 years of the original return's due date.

What is the penalty for filing and/or paying Illinois sales tax late?

Illinois charges 2-10% penalties on late payments, depending on how late the taxes are paid.

Audit & appeals process

The audit & appeals process is a series of steps a business must go through if they are audited by the Illinois Department of Revenue. The process begins with the auditor contacting the business to schedule an audit.

The auditor will then review the business's records and tax returns to determine if any sales tax was not paid. If the auditor finds any discrepancies, they will issue a report with their findings.

The business then has the opportunity to appeal the findings. If the appeal is denied, the business can then appeal to the Illinois Court of Claims.

Illinois sales tax audit process

The Illinois sales tax audit process is as follows:

1. Auditor contacts business to schedule audit
2. Auditor reviews records and tax returns
3. Auditor issues report with findings
4. Business can appeal audit findings
5. If appeal denied, business can appeal to Illinois Court of Claims

What to expect during the audit?

During the audit, the auditor will request to examine your sales tax records, books, returns, and source documents for the audit period. 

This includes sales invoices, purchase invoices, bank statements, and other financial records. You may be asked to provide electronic records as well.

After the audit – Appealing the results

Contesting audit findings with the auditor in Illinois helps you:

• Provide additional documentation to support your position
• Negotiate a settlement or payment plan
• Avoid further penalties and interest

Sales tax registration

Here are the steps for registering for sales tax in Illinois:

How to register for sales tax in Illinois? (detailed steps for registration)

You can register online through MyTax Illinois. You will need details like:

• Business information
• Owner/officer information
• Federal EIN
• Estimated monthly taxable sales
• Bank account information

After submitting the registration, you will receive a confirmation letter with your tax ID.

Registration requirements for online sellers in Illinois

If you are an online seller, you likely need to register in Illinois if:

• You have over $100,000 in Illinois sales
• You have a physical presence in Illinois
• You advertise to Illinois customers
• Your marketplace has Illinois nexus

Cost of registration for an Illinois sales tax license

Illinois sales tax registration is free - there is no fee to obtain a registration number.

Agencies to register within Illinois

You only need to register with the Illinois Department of Revenue for a sales tax permit. No other state agencies handle sales tax registration.

More Information & Contacts

For sales tax filing and appeals in Illinois, contact:

• Illinois Department of Revenue
• Phone number: 1 800 732-8866
• Website: https://www.illinois.gov/

There you have it—the most comprehensive guide on Illinois' sales tax for ecommerce brands. If you'd rather not go through the hassle of managing sales tax yourself, get a demo with Numeral.