Illinois Sales Tax Rates

Total Range for 2024

6.25% – 11%

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Why do you need to collect sales tax in Illinois?

If you’re selling goods and services in Illinois then sales tax might apply! To determine your obligation, we need to understand “nexus,” which ties businesses to states for tax purposes.

Two types of nexus exist:

  • Physical Nexus: Having a physical presence, like an office, warehouse, or employees in Illinois, triggers this type. If you do, you likely need to collect sales tax.
  • Economic Nexus: This kicks in when your sales within Illinois exceed a certain economic threshold. Even without a physical presence, surpassing this threshold requires collecting sales tax.

Is what you’re selling taxable in Illinois?

Now that you understand your Illinois sales tax obligations, the next step is to determine if the specific products or services you offer are subject to Illinois sales tax.

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How to register for sales tax in Illinois

Here’s a step-by-step guide for registering for a sales tax permit online through MyTax Illinois:

  1. Navigate to MyTax Illinois:
  2. Register for a MyTax Illinois Account (if you don’t have one):
    • Click on “Register for an Account” and follow the prompts. You’ll need basic information like your name, address, and Social Security number (SSN) or Employer Identification Number (EIN).
  3. Once logged in, locate the business registration section:
    • Look for options related to “Business registration” or “Sales tax.” These might be under a “Businesses” tab or section.
  4. Find the “Register a New Business (Form REG-1)” option:
    • Click on the option to initiate the online application process.
  5. Complete the online application

  6. Review and submit your application:

    • Carefully review all the information you entered for accuracy.
  7. Receive confirmation:
    • You should receive confirmation of your application submission immediately.

    • Processing times may vary, but the online method is generally faster than mailing a paper application.

Alternative Method: Paper Application

  1. Download Form REG-1, Illinois Business Registration Application, from the IDOR website (resources might be available online).
  2. Complete the form accurately with all required information.
  3. Mail the completed form to the address specified on the form.
  4. Processing times for paper applications are typically longer than online submissions.

How to collect sales tax in Illinois

  1. Determine the Correct Tax Rate
  2. Include Sales Tax in Your Prices
    • You can choose to display prices including tax (inclusive pricing) or exclude tax (exclusive pricing). Be consistent throughout your sales process.
    • If you choose exclusive pricing, clearly indicate that sales tax will be added at checkout.
  3. Collect the Sales Tax at the Time of Sale:
    • This can be done manually by adding the sales tax to the base price or using a point-of-sale (POS) system programmed with the correct tax rate.
  4. Keep Records of Your Sales Tax Collections:
    • It’s crucial to maintain accurate records of your sales and the amount of sales tax collected. This will be necessary when you file your sales tax return.

Example:

Chicago clothing store, jacket costs $59.99 before tax. Chicago has an additional 1.75% local tax (check your rate!).

Calculation:

  1. Total Sales Tax Rate: 6.25% (state) + 1.75% (local) = 8%
  2. Sales Tax Amount: 8% x $59.99 = $4.80 (round to two decimals)
  3. Final Price: $59.99 + $4.80 = $64.79

Customer pays $64.79 (jacket + $4.80 sales tax).

FAQs

Do you have a physical nexus in Illinois?

In Illinois, you generally have a physical nexus, which means you’re required to collect and remit sales tax, if you have any of these connections to the state:

  • Physical Presence: This is the most common way to establish nexus. It includes having a brick-and-mortar store, warehouse, office, or any place of business in Illinois.
  • Employees or Representatives: Having employees, contractors, salespeople, agents, or any kind of representative physically working in Illinois can create nexus.
  • Third-Party Affiliate Nexus: In some cases, having an affiliate with a physical presence in Illinois can create nexus for your business, even if you don’t have one yourself. This applies if the affiliate sells similar products under a similar name or brand.
Do you have an economic nexus in Illinois?

If your business makes over $100,000 in sales to Illinois customers in a calendar year (previous or current) or if you’ve made over 200 transactions, you’ve crossed the economic nexus threshold.

What is use tax in Illinois?

Generally, all Illinois residents are responsible for paying use tax on qualifying purchases they make for use in the state, but where no sales tax was collected.

The use tax rate in Illinois is generally the same as the combined state and local sales tax rate for your area.

Do you need a seller/reseller permit?
  • You need a seller’s permit if you collect sales tax from customers (selling to consumers).
  • You need a reseller permit if you buy from wholesalers tax-free and resell (buying for resale).
How to get a sales tax permit/license in Illinois?

There are two main methods to getting a Illinois sales tax permit:

  • Online Registration (Recommended): This is the faster and preferred method.
  • Paper Application: This is an alternative if you can’t register online.
When are Illinois's Returns Due?

The filing frequency for Illinois sales tax returns depends on your average monthly sales tax liability:

  • Monthly Filing:
    • If your average monthly sales tax liability is greater than $200, the Illinois Department of Revenue (IDOR) may notify you that your filing frequency has been changed to a monthly requirement.
  • Quarterly Filing:
    • This is the most common scenario. If your average monthly sales tax liability is between $50 and $200, you’ll likely file quarterly.
  • Annual Filing:
    • Businesses with an average monthly liability of less than $50 per year can file annually.

No matter the filing frequency (monthly, quarterly, or annually), Illinois sales tax returns are always due by the 20th day of the month following the end of the reporting period.

How to file sales tax in Illinois?
  1. Online Filing (Recommended):
  • You’ll need to file electronically through the MyTax Illinois portal. If you haven’t already, register for a MyTax Illinois account
  • Before filing, have your sales and sales tax collection data readily available for the reporting period. You’ll also need your Sales Tax ID number.
  • Once logged into MyTax Illinois, navigate to the sales tax section and follow the prompts to file and electronically submit your return. You can also make your sales tax payment electronically through MyTax Illinois.
  1. Paper Filing:
  • Download and complete Form ST-1, Illinois Sales Tax Return. You can find the form on the IDOR website or request a copy by mail.
  • Carefully review the instructions included with Form ST-1 to ensure you complete it accurately.
  • Mail the completed form and your sales tax payment to the address specified on the form (don’t mail it to MyTax Illinois).
Is anyone exempt from sales tax in Illinois?

Yes, there are certain categories of people and organizations exempt from paying sales tax in Illinois. Here’s a breakdown:

  • Tax-Exempt Organizations:
    • Exclusively charitable organizations (standards differ from federal non-profit status)
    • Religious organizations
    • Educational organizations
    • Governmental bodies (federal, state, and local)
    • Some senior citizen organizations
  • Purchases for Resale:
    • Merchants with a valid reseller permit can purchase goods tax-free from wholesalers or distributors with the intent to resell them.
    • Manufacturers can buy materials tax-free to use in manufacturing a taxable product (becomes taxable when sold).
    • Contractors can purchase materials tax-free to use in projects where they collect sales tax from the client.
  • Other Exemptions:
    • Certain goods are exempt from sales tax, such as:
      • Fuel for international flights
      • Gold bullion issued by qualifying governments
      • Newspapers and magazines (in some cases)

Contact Yonda Tax Today

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