As an e-commerce seller, you will need to collect sales tax in Illinois if you have:
(1) Gross receipts of $100,000 or more or 200 or more transactions in Illinois (economic nexus),
(2) Physical presence in Illinois (physical nexus).
An out-of-state seller’s obligations to collect taxes on sales made into Illinois can vary depending on the way the seller conducts business. The Leveling the Playing Field for Illinois Retail Act Flowchart illustrates the obligations for these sellers.
Below, we will highlight some of the basic provisions of Illinois sales tax law.
What is the tax rate range for Illinois?
State: Illinois’s sales tax rate for general merchandise 6.25%. Other rates apply to certain foods, drugs, medical appliances and items that must be titled or registered.
Local: Local jurisdictions have the authority to impose several different sales taxes for various purposes. Not all these taxes are administered by the Department of Revenue. Illinois Revenue Sales and Use Tax
Do you have physical or economic nexus in Illinois?
Physical nexus. Certain business activities create physical nexus in Illinois. If you have physical nexus, you are required to collect and remit sales tax on all taxable sales that are shipped to Illinois. Examples of business activities that can create physical nexus in Illinois include:
- A physical business presence in the state (office, warehouse, etc.)
- An employee located in the state (contractor, salesperson, representative, etc.)
- A third-party affiliate in Illinois
Sales & Use Taxes – Types of retailers
Economic nexus. Illinois recognizes economic nexus for any vendor with $100,000 or more in cumulative gross receipts or 200 or more transactions into Illinois from sales of tangible personal property. Once you have economic nexus established, you will be obligated to collect sales tax from buyers in the state.
- Gross receipts include taxable and exempt sales.
- Gross receipts do not include:
- Sales for resale
- Sales of tangible personal property that is required to be registered with an agency of Illinois, including motor vehicles, watercraft, aircraft, and trailers
- Sales of tangible personal property to purchasers in Illinois that a remote retailer makes through a marketplace so long as the remote retailer has received certification that the marketplace facilitator assumes the rights and duties as the retailer under the Retailers’ Occupation Tax Act (including applicable local occupation taxes) with respect to those sales
- Occasional sales
- A remote retailer shall determine on a quarterly basis, ending on the last day of March, June, September, and December, whether it meets or exceeds either threshold for the preceding 12-month period.
- A remote retailer or marketplace facilitator shall begin collecting taxes for sales beginning on the first day of the quarter immediately following the end of the 12-month lookback period.
Guidance for Remote Retailers and Marketplace Facilitators as set forth by the Leveling the Playing Field for Illinois Retail Act
What are examples of sales of taxable items?
- Tangible personal property
- Food sold for immediate consumption
- food that has not been prepared for immediate consumption, such as most food sold at grocery stores, excluding hot foods, alcoholic beverages, candy, and soft drinks (reduced rate of 1%)
- Qualifying drugs and medical appliances (reduced rate of 1%)
What are examples of sales of nontaxable/exempt items?
- Most services
- Agricultural machinery and equipment
- Specific building materials (pending projects)
- Software as a Service (SaaS), unless the provider transfers to the customer an API, applet, desktop agent, or a remote access agent to enable the customer to access the provider’s network and services.
Are there any sales tax holidays?
Illinois recognizes a back to school tax holiday in the month of August where rates are reduced on certain school supplies.
Retailer Resources - Illinois Revenue
Is Illinois a member of the SST (Streamlined Sales Tax)?
Currently, Illinois is not a full or associate member of the Streamlined Sales Tax (SST) project.
How to get a sales tax permit / links to register in this state?
You can register online at: My Tax Illinois.
MyTax Illinois Tax Rate Finder
For more information on Illinois rates, see: Illinois Revenue Sales and Use Tax.