18 min read
Maryland Sales Tax Guide
Maryland is a state deeply steeped in history, science, and, of course, sweet, delicious crabs :p The 42nd smallest state in the union, Maryland has...
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:
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!
✅ 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:
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.
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!
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:
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.
Great question!
Before you sign up for Illinois sales tax permit you’ll want the following information on hand:
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.
Illinois doesn’t charge a penny for a new business to register to pay taxes! Zip, zilch, zero! :)
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 :).
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:
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).
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:
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…
The following items are all taxable in the state of Illinois:
*****
Let’s now review some of our clients’ frequently asked questions:
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.
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.
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:
Let’s talk a bit more specifically about where your goods are stored such as in the instance of an Amazon warehouse.
Yes, loads of them! The Amazon fulfillment centers in Illinois are at the following addresses:
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.
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:
For more information see the Illinois DOR’s out-of-state retailer page here.
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.
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 🤞!
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.
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.
After reading this, you will be better equipped to determine when --and when not-- to collect sales tax in Illinois.
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! 🤓🤩
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! :)
Here is a list of exemptions:
For more information, see the Illinois DOR exemptions page for more details.
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:
Altogether, sales tax exemptions apply if the buyer falls under one of these categories.
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.
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! :)
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!
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:
By the time you finish reading this, you will feel confident enough to file and pay your Illinois Sales Tax.
Illinois sales tax payments are due no later than the 20th day following the reporting period.
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.
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.
Paper: Fill out form ST-1 (PDF) and mail to the address on the form
Electronic: File online and submit payment via EFT.
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.
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.
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.
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.
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!
Yes, Illinois requires businesses to file a “Final sales tax” return when closing a business in Illinois.
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:
Now, you are ready to file and pay your sales tax in Illinois. If you have any more questions, feel free to contact us.
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.
18 min read
Maryland is a state deeply steeped in history, science, and, of course, sweet, delicious crabs :p The 42nd smallest state in the union, Maryland has...
17 min read
Massachusetts, the sixth state in the union, is filled to the brim with history and American culture. Home to Boston and starting point of the...
18 min read
Iowa, known as the Hawkeye state, is the birthplace of famous celebs such as Johnny Carson, John Wayne, and Abigail Van Buren (Dear Abby). And though...