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Illinois Sales Tax Guide

By Cristina Garza

Illinois, the so-called Land of Lincoln, home to the windy city of Chicago, and birthplace of the sundae is a wonderful state in which to run a small business. Many small businesses are delighted to call Illinois home. If you are fortunate to count yourself among them, you’ll need to ensure that your business complies with all of Illinois’ sales tax law. Worry not! We have painstakingly assembled this thorough guide so that you can be better prepared to meet all sales tax requirements for a business in Illinois.

After reading this guide, you will have answers to some common questions:

  • How to be prepared for your call with the Illinois Department of Revenue.
  • How to contact the Illinois Department of Revenue.
  • When to charge sales tax in Illinois.
  • What goods, products, and services are taxable in Illinois.
  • When you establish a sales tax nexus with the state of Illinois, and the nuances of various thresholds.
  • How to register for a sales tax license in Illinois.
  • How to collect sales tax in Illinois.
  • How to file and pay sales tax in Illinois.

If, after reading, you still have any questions to help you determine your tax sales obligations in Illinois and how to fulfill them, we are here for your small business bookkeeping needs!

 

 

Illinois Sales Tax Contacts

 

Illinois Sales Tax Contacts

✅ Do you need to get in touch with the Illinois Department of Revenue?

✅ Are you uncertain about whether to visit, call them, or contact them through their website?

✅ Do you wonder what information you should have ready before you contact them?

 

If you answered “Yes” to any of these questions, read on, as we have just the information you need! :)

The Illinois Department of Revenue is reachable by phone at 217-782-7897.

You can also shoot a message to them via their website, or visit one of their Regional Office Locations. If you are looking for the most prompt response, our suggestion is that you call rather than send a message or wait in line.

When you do call the Illinois Department of Revenue, you will want to have some information on hand. It will save time to have the following information easily accessible before you call:

  • Taxpayer Name
  • EIN
  • Sales & Use Tax ID Number

If you are calling on behalf of an individual or a business, or having a third party call on your behalf, you must have an Illinois Power of Attorney (form IL-2848, PDF) signed before you call or else you will be wasting your time; they can only help if you have a completed form.

If you have any more questions, please feel free to contact us so we can assist you with your sales tax needs.

 

Illinois Sales Tax Registration

 

Illinois Sales Tax Registration

 

Are you a new business selling tangible property in Illinois? If yes, you are going to want to register your business with the Illinois Department of Revenue so that you can pay your sales tax on time.

You need not fret as this is a relatively simple process and one for which you’re about to be fully prepared. We are going to outline the steps below so you are totally ready to register for your sales tax license.

 

Here we go! Remember...

Preparation is key.

Let’s get started!

 

 

How do I register to collect sales tax in Illinois?

You can apply or register for an Illinois sales tax permit by visiting the Illinois Department of Revenue and following the instructions provided.

Technically, you have three options when signing a new business up for an Illinois sales tax permit, though we sincerely recommend going with the online option:

  1. Complete paper form REG-1 (PDF) and mail to the address on the form (6-8 weeks)
  2. Complete the online version of form REG-1 here (1-2 days).
  3. Visit one of their Regional Field Offices.

Not to beat a dead horse, but we do highly recommend that you use the online form, as it will allow your business to get set up faster, and with less potential headache.

 

 

What information do I need to register for an Illinois sales tax permit?

Great question!

Before you sign up for Illinois sales tax permit you’ll want the following information on hand:

  • Business name
  • Business entity type
  • Description of business activities
  • Date business activities began or will begin
  • Business address and mailing address
  • Business contact information
  • Associated business entities
  • NAICS code that best matches the business
  • Federal Employer Identification Number (FEIN)
  • List of business officers, partners, managing members, and/or trustees

Don’t forget! Preparation is key. When you have all this information ready, you can go online and register for your permit at the Illinois Business Tax Application (REG-1) website.

 

 

How much does it cost to register for an Illinois sales tax permit?

Illinois doesn’t charge a penny for a new business to register to pay taxes! Zip, zilch, zero! :)

 

 

Do I need a Federal Tax ID Number or EIN to register for an Illinois sales tax permit?

Indeed, yes! You will absolutely need one, but if you don’t already have one and need to get a new EIN, it’s a quick and painless process. You can easily register for a Federal EIN right here :).

 

 

Which agencies in Illinois do I need to additionally register with?

You may need to apply to some of the following agencies:

You’ll want to give this some thought and do a little research or investigating; since every business is unique, and there are such different rules, regulations, and laws that may apply.

We suggest contacting the Illinois Department of Revenue to verify which additional government agencies you may be required to register with.

 

*****

 

KABAM! You’re all set!

You are now prepared to register for your Illinois sales tax permit in Illinois.

Let’s summarize where we reviewed:

  • Have all the required information easily accessible before registering online.
  • Acquire a tax ID or EIN before registering for an Illinois sales tax permit.
  • Register online at the Illinois Department of Revenue website.
  • Look into what other agencies you may have to additionally register with.

Registering for your Illinois sales tax permit will be stress free as long as you are prepared. We recommend organizing all the essential information in a folder, preferably using a system like Box.com or Dropbox (something we’re happy to handle for our customers).

 

 

Illinois Sales Tax FAQ

 

Illinois Sales Tax FAQ

By now, you may have already contacted the Illinois Department of Revenue and applied for an Illinois sales tax permit.

Once you have a license to collect and remit sales taxes in Illinois, you will probably be asking yourself two questions:

  • When do I charge a sales tax in Illinois?
  • What goods and services are subject to sales taxes in Illinois?

We are going to go over some common questions that our clients have asked. We believe these questions will help you appreciate the nuances of taxable goods so you can be confident in fulfilling your tax obligations.

Let’s start with the first question…

 

 

What goods and services are considered taxable in Illinois?

The following items are all taxable in the state of Illinois:

  • Sales of tangible goods at retail.
  • Repairs or alterations of tangible personal property.
  • Property rentals, leases, or licenses [e.g. commercial, mini-warehouse]
  • Selling service warranty contracts.
  • Short-term rentals for living accommodations (e.g. motel/hotel, beach houses, condos, timeshares, vacation homes, or RV homes).
  • Rental/lease of personal goods (e.g.: machinery, vehicles, equipment, or other property).
  • Charges for admission to any place of amusement, sport, or recreation.
  • Manufacturing or producing goods for retail sales.
  • Operating vending machines or amusement rides.
  • Services mostly exempted [except those which produce a tangible good]

 

The bottom line is …

Your business must pay taxes on sales of all non-exempt goods.

*****

 

Let’s now review some of our clients’ frequently asked questions:

  • Is Illinois an Origin or Destination sales tax State?
  • What creates a sales tax nexus in Illinois?
  • What is the economic threshold in Illinois?
  • Does Amazon have fulfillment centers in Illinois?
  • Does Illinois have a Click-Thru Nexus?

To best understand your tax obligations, new businesses need to consider how they are doing business and the type of relationships they have with buyers and any third parties to their transactions.

Let’s discuss some questions that will help you understand the nature of your small business and the subsequent tax implications.

 

 

Is Illinois an origin or destination sales tax state?

Illinois is an Origin-Based sales tax state, with an almost unmatched plurality of potential additional surtaxes based off which locality the buyer lives in. This means you’ll need to have a Point-of-Sales system configured to track tax based off your business location.

 

 

Protip: Charge Illinois Sales Tax based on the location of the buyer.

 

 

What creates a tax nexus with the state of Illinois?

Having nexus, also known as "sufficient business presence,” with Illinois means your business has established a taxing connection with a state. When this happens, you are required to collect and remit sales tax in Illinois because you created a sales tax Nexus.

Even if your business maintains its main headquarters in another state, you may still have to charge and pay sales tax to the Illinois Department of Revenue even if you never step foot in Illinois.

So, how do you create a sales tax Nexus in Illinois?

 

A business establishes a nexus in Illinois by:

  • having a business location in Illinois;
  • having property stored in Illinois;
  • employing any person in Illinois;
  • contracting with a salesperson or other agent in Illinois;
  • leasing equipment used in Illinois;
  • performing services in Illinois;
  • licensing the use of intangible property in Illinois, or transporting property in Illinois using the taxpayer’s vehicles.

Let’s talk a bit more specifically about where your goods are stored such as in the instance of an Amazon warehouse.

 

 

Does Amazon have fulfillment centers in Illinois?

Yes, loads of them! The Amazon fulfillment centers in Illinois are at the following addresses:

  • 250 Emerald Dr, Joliet IL 60433
  • 1125 W Remington Blvd, Romeoville IL 60446-6529
  • 6521 W Monee Manhattan Rd, Monee IL 60449-9668
  • 1750 Bridge Dr, Waukegan IL 60085-3004
  • 2865 Duke Parkway, Aurora IL 60502-9551
  • 3050 Gateway Commerce Center DR S, Edwardsville IL 62025-2815
  • 3931 Lakeview Corporate Dr, Edwardsville IL 62025

This is relevant if you sell your products on Amazon or are recognized as an Amazon FBA (Fulfillment by Amazon) seller. When Amazon stores your products in one of its fulfillment centers in any state including Illinois, this triggers a sales tax requirement. If Amazon is storing your products in a warehouse in Illinois, you have created a taxing connection with the state of Illinois.

We can help guide your small business through this. We use tools like A2X and Wherestock to identify where our clients' inventory is currently being held and shipped from so that we can keep them in compliance.

 

 

Does Illinois have economic nexus?

Yes they do, as of October 2018. This means that even businesses without a traditional physical nexus [i.e. out-of-state] may now be required to register and pay sales tax in the state of Illinois.

The thresholds for registering are either:

  • a cumulative gross of $100,000+ to Illinois purchasers or
  • 200 or more separate sales with Illinois purchasers.

For more information see the Illinois DOR’s out-of-state retailer page here.

 

 

Does Illinois have click-through nexus?

At long last, yes. They first tried to pass a law in 2011 which was overturned by the Illinois supreme court for being unconstitutional. Then they passed a new version of the click-through nexus law (PDF) which includes language permitting those presumed to have click-through nexus to rebut their status. The key takeaway is that if you conduct affiliate sales [with a promotional code] to Illinois purchasers in excess of $10,000 a quarter, you may have to pony up for sales tax.

 

 

Is Illinois a streamlined sales tax state?

Nope! At the time of this article’s writing Illinois doesn’t participate in the multi-state program.

Who knows what the future may hold. Fingers crossed they can join in and make the SST sweeter than it already is 🤞!

 

More effectively manage your tax needs by keeping this guide handy.

 

You and your business can be better-equipped to avoid situations like paying fines, paying back taxes that you did know you had to pay in the first place, or facing an audit by the tax authorities in Illinois.

 

 

Collecting Sales Tax In Illinois

Collecting Sales Tax in Illinois

By now you know if you are a business that has established a nexus with Illinois. So you know you are required to collect sales tax. Knowing this is just half the battle! Now, we are going to help you with the next half of the battle: how to navigate the process of collecting taxes.

Let’s review some common questions our clients have asked regarding their Illinois Sales Tax obligations.

  • How do I collect Illinois Sales Tax?
  • Who is eligible for Illinois Sales Tax exemptions?
  • What should I do if my customer is exempt from sales tax in Illinois?
  • What happens if I lose an Illinois nontaxable transaction certificate?

After reading this, you will be better equipped to determine when --and when not-- to collect sales tax in Illinois.

 

How do I collect Illinois Sales Tax?

Remember when we noted that Illinois is an origin-based sales tax state? This means that the ultimate rate to charge will vary in accordance with the various local sales surtaxes for the county/district/township in which the buyer is located.

Any Point-of-Sales software worth its price should have this capability baked in. If the one you’re using does not, we can always recommend a superior solution. That’s the kind of nerding out that we love to do for our clients! 🤓🤩

 

 

What are the current Illinois Sales Tax rates?

Since sales tax rates change frequently- and vary by what is being sold, We are going to refer you to check out the Illinois Department of Revenue tax rate finder here.

It always helps to be accurate and up to date with this type of information! :)

 

 

What is exempt from Illinois Sales Tax?

 

Sales Tax Exemptions in Illinois

 

Here is a list of exemptions:

  • Purchases for resale
  • Most sales to or by the federal and Illinois State governments, charitable organizations, tribal organization and certain other exempt organizations
  • Vitamins and minerals
  • Groceries are taxed at a lower rate

For more information, see the Illinois DOR exemptions page for more details.

 

 

Who are eligible for Illinois Sales Tax exemptions?

At this point, you should know what products are exempt from sales tax in Illinois. You also want to know who may be exempt.

Under Illinois law, the type of buyer or the way the goods will be used can qualify can buyer for a sales tax exemption. A good example of this is a merchant purchasing goods for resale, aka a wholesaler.

Other common examples of an exempt buyer may include:

  • Government agencies
  • Non-profit organizations
  • Religious groups
  • Out-of-state buyers (should their business not have nexus in their home state).

Altogether, sales tax exemptions apply if the buyer falls under one of these categories.

 

 

What should I do if my customer is exempt from sales tax in Illinois?

Purchasers who are tax exempt must have completed form STAX-1 (online, PDF) and present their exemption certificate at the time of purchase. It is incumbent upon the seller to keep a copy of this exemption certificate. Without doing so, you may be unable to justify tax exempt sales.

Remember, you want to collect and file a copy of the certificate. Such certificates must be produced upon request in the event of an audit to justify tax-exempt sales.

 

 

What happens if I lose an Illinois Sales Tax exemption certificate?

Hmm... Obviously this issue is best to be avoided! Imagine finding out you’ll be audited and discovering you cannot produce an exemption certificate for a buyer! That nightmare scenario would mean you could be held liable to pay all taxes on behalf of the buyer. This is a bad scene and can be avoided by taking proper care with your paperwork… which happens to be one of our specialties! :)

 

 

Does Illinois have a sales tax holiday?

Negative, no break in the taxation for Illinois sales tax.

 

*****

 

We have now covered who you need to collect sales taxes from, how to determine whether goods for sale are deemed taxable, what goods and services fall under tax exemptions, who is eligible for tax exemption certificates, and, finally, the process of collecting sales tax in Illinois state.

Now that we’re this far down the rabbit hole there’s only one thing we need to learn about next… how to pay the piper!

 

 

Filing and Paying Sales Tax in Illinois

 

Filing and Paying Sales Tax in Illinois

It is time to talk about filing and paying your sales taxes in Illinois. In this section, We are going to cover the following frequently asked questions from our clients:

  • When is Illinois Sales Tax due?
  • What are the Illinois Sales Tax thresholds?
  • What if an Illinois Sales Tax filing date falls on a weekend or holiday?
  • How do I file an Illinois Sales Tax Return?
  • How do I correct an Illinois Sales Tax return?
  • What happens if I don’t collect sales tax?
  • What happens if I file or pay my sales tax return late?
  • Do I need to file a return if I don’t collect any sales tax in Illinois?
  • If I close my business, do I need to file a final sales tax return?
  • Does the Illinois Department of Revenue offer a discount for filing on time?

By the time you finish reading this, you will feel confident enough to file and pay your Illinois Sales Tax.

 

 

When is Illinois Sales Tax due?

Illinois sales tax payments are due no later than the 20th day following the reporting period.

 

 

What are the Illinois Sales Tax thresholds?

Illinois determines the thresholds for filing frequency requirements based on the amount of tax owed:

 

Average monthly liability owed to IL File
From $0 - $50.00 Annually
Between $50.01 - $200.00

Quarterly

More than $200.01

Monthly

 

Not sure how to determine your tax filing frequency?

You can review your eCommerce or Point of Sale Software to see the volume of sales you have generated.

Don't worry though! The state will let you know when your due dates change. :)

Watch your mail for a letter from the State of Illinois so that you don't miss any deadlines.

 

 

What if an Illinois Sales Tax filing date falls on a weekend or holiday?

The deadline is moved to the next business day, typically the Monday following the weekend or the day after the holiday. Where possible, we always suggest filing well before the holiday.

 

 

How do I file an Illinois Sales Tax return?

Paper: Fill out form ST-1 (PDF) and mail to the address on the form

Electronic: File online and submit payment via EFT.

 

 

How do I correct an Illinois Sales Tax return?

The easiest and quickest way to amend a return is to do so on the DOR’s sales tax website. To amend by paper [we get it, you hate trees ;p] fill out form ST-1-X (PDF) and mail to the address on the form.

 

 

What happens if I don’t collect sales tax?

If you were required to collect sales taxes and failed to do so for whatever reason, that’s a big time whoopsy! You will ultimately be held responsible for the tax due. Always collect sales tax at the point of sale. Attempting to collect after the fact will be time consuming and most likely unsuccessful.

 

Protip: You are still responsible for remitting sales taxes even if you failed to collect them.

 

What happens if I file or pay my sales tax return late?

This is not a problem our customers tend to face, as we keep them on the straight and narrow. But in the interest of completeness:

 

Illinois’ Department of Revenue has a multi-level approach to assessing sales tax penalties and interest. What follows are the penalty tiers for filing late or not filing at all.

 

  • Tier 1: Either $250 or 2% of the tax due, whichever is less, and which may be reduced with timely payments. If the return was filed on time but cannot be processed, 30 days are given to correct the return before penalty is due.
  • Tier 2: Continued failure to file a return 30 days after receiving a notice of non-filing will result in an additional penalty. The Illinois DOR will impose a penalty of $250 or 2% of the tax due, whichever is greater and without regard to timely payments. The additional penalty may not exceed $5,000. The penalty will be assessed even if there is no tax due.

 

Penalties for failing to pay collected sales tax are based on the number of days late the outstanding tax is (30 or fewer days: 2%, 31+ days: 10%). Note, though, the penalty is 15% of any amount paid only after the commencement of an inquiry of liability and 20% of any amount that isn’t paid within a month of the issuance of an audit-prepared amended return or Form IL-870, Waiver of Restrictions at the conclusion of the audit or investigation. The higher penalty rate also applies to any amount paid within the 30-day period if you fail to sign and return the amended return within that period or if you pay the liability under protest or subsequently file a claim or refund of the payment.

 

 

Do I need to file a return if I don’t collect any sales tax in Illinois?

Yes, Illinois is one of many states that require businesses to file a “Zero-Tax” return. Yup, even if you don't have any sales during a taxing period!

 

 

If I close my business, do I need to file a final sales tax return?

Yes, Illinois requires businesses to file a “Final sales tax” return when closing a business in Illinois.

 

 

Does the Illinois Department of Revenue offer a discount for filing on time?

Yes! 🎉🎉🎉 Though small, the 1.75% ($5.00/year minimum) discount is a welcome one.

 

*****

 

Now that we covered all our bases for filing and paying sales taxes in the state of Illinois, you should feel more at ease about the process.

 

Some things to remember:

  • Due dates are important. If anything, file and pay your taxes early.
  • There are three payment plans for filing and paying your sales taxes depending on how much you collect in sales tax on average in a month.
  • You can file and pay your taxes electronically or by mail
  • If you need to amend a return, you may do so electronically or by paper.
  • If you don’t collect sales tax and you were supposed to, you (not the buyer) is liable to pay the sales tax to the state of Illinois.
  • You will have to pay late fees if you fail to file your tax return on time and/or if you fail to make your tax payment on time.
  • Even if you collect no sales tax, you still need to file a return.
  • You need to file a “Final sales tax report” when you close your business.

Now, you are ready to file and pay your sales tax in Illinois. If you have any more questions, feel free to contact us.

 

Click here if you think sales tax is boring. Book a meeting.


 

Please note: This blog is for informational purposes only and the information is accurate as of 6/28/2019. If you want legal advice on sales tax law for your business, please contact a Sales Tax professional. Keep in mind that sales tax regulations and laws are subject to change at any time. While we strive to keep our blog current, this blog possibly may be out of date by the time you review it.