2024 Guide to Sales Tax in Chicago, Illinois

What is the Sales Tax in Chicago?

Chicago has a combined sales tax rate of 10.25%. In Illinois, the sales tax rate can be made up of three different sales tax rates:

• The Illinois state sales tax rate: 6.250%
• A Cook County sales tax rate: 2.750%
• A Chicago city sales tax rate: 1.250%

What is Cook County Sales Tax?

Cook County’s sales tax rate is also 2.750%. However, often county sales tax rates are lower than the sales tax rate charged in cities within that county. That’s because some cities might charge additional rates or be subject to a special tax rate that only applies to certain cities in that county.

In Cook County, the amount charged from one city to another can vary considerably due to some cities charging a higher rate.

Tax Rates in Chicago, Illinois

Wondering how much sales tax rates vary in Chicago? Here’s a list of the top 10 ZIP codes in Chicago and the sales tax rates they charge by ZIP code.

Other Tax Rates for Chicago

We’ve now shared the main tax rates for Chicago. Here are some other tax rates that you might have to charge in that city and state.

What Items are Taxable in Chicago?

In Illinois, not all items are taxable. For example, in many states, prescription drugs are exempt from sales tax. The best way to ensure you’re charging taxes on the right items is to add a Tax Information Code (TIC) to all the items you’re selling so that the correct tax is charged. A TIC is a number assigned to a category of goods or services.

Here is a list of some of the things that are taxable in Chicago:

What Items are Exempt from Taxes in Chicago?

In Illinois, there are several items exempt from taxes. States typically make items tax-exempt to encourage their purchase or because the items are essentials. The easiest way to make sure you don’t accidentally charge sales tax on an item that’s exempt is to add a Tax Information Code (TIC) to all your items. A TIC is a number that groups similar goods or services into one category.

Here is a list of some of the things that are tax-exempt in Chicago:

Who Needs to Collect Sales Tax in Chicago?

A business only needs to collect sales tax in Chicago if they have either achieved physical nexus or economic sales tax nexus in Illinois.

How do you do that? By making sales to residents of Cook County or another city in Illinois, either by having a physical presence in Illinois or doing a certain amount in sales to residents of Illinois in a year.

What is Physical Nexus in Illinois?

Physical nexus in Illinois essentially means that your business has a physical presence of some kind in the state. This isn’t just something you qualify for if your headquarters are in the state – there are many ways that out-of-state sellers can have a physical presence in Illinois despite being based elsewhere.

How you qualify for physical nexus in Illinois (full details):

• A physical location in Illinois is the easiest way to qualify for physical nexus. That could include having your headquarters, a satellite office, a warehouse, a distribution center, a showroom, or some other form of physical location.
• If you have affiliates who represent your business in certain kinds of operations in Illinois, this could also mean you qualify for physical nexus.
• Have employees in the state? That could qualify you for physical nexus in Illinois.
• If you have physical property that you rent or lease to someone in Illinois, your business might also have physical nexus there.

What is Economic Nexus in Illinois?

So what if you don’t have any physical ties to the state? In Illinois, you can have economic nexus in the state simply by making $100,000 worth of sales in the state in a year or 200 transactions.

How you qualify for economic nexus in Illinois (full details):

• You need to count all sales made by your business into Illinois, including wholesale sales towards your $100,000 economic nexus threshold and 200 transactions.
• The only exception is that you don’t have to count sales you made through a qualifying marketplace where the marketplace facilitator is collecting taxes on your behalf.
• When you meet the threshold for economic nexus, you need to register for sales tax in Illinois immediately and begin collecting and remitting sales taxes in Illinois.

How to Get a Sales Tax Permit in Chicago?

If you reach either physical or economic nexus, you’ll need to get a sales tax permit in Illinois for all your sales across the state, including in Chicago. Getting your sales tax permit is easy and free.

Here are the steps:

1. Go to the Illinois Department of Revenue website.
2. Answer a few questions about your business.
3. Allow the wizard to identify what permits you need and register you for them.

That’s it! See the State of Illinois’s Sales Tax website for more info.

How Do You Charge the Right Amount for Sales Tax in Chicago?

Want to make sure you charge the right amount in sales tax in Chicago? Since there are cities in Cook County that charge different rates, it can be complicated to ensure you always charge the right amount – especially on remote sales.

Here’s how to stay sales tax compliant:

• Manually check and input rates: Managing your sales taxes yourself is possible since the state’s website will keep you updated on sales tax rates in cities across the state. However, there are many cities in Cook County, making it tedious to always be on top of the rate changes manually.
• Automate your sales tax calculation: Using sales tax automation software like TaxJar or Avalara can help you stay compliant easily. These services keep track of rates for you and apply them as needed.
• Consult with a tax professional: Hiring a tax professional familiar with Illinois sales tax laws can ensure you’re always compliant.

How Do You File and Remit Sales Tax in Chicago?

Once you start collecting sales tax in Chicago, you’ll need to regularly file returns and remit the collected taxes to the Illinois Department of Revenue.

Steps to File and Remit Sales Tax in Chicago:

1. Register for MyTax Illinois: This is the online portal for managing your sales tax filings. If you haven’t already, you’ll need to create an account.
2. Collect Sales Tax: Ensure you’re collecting the correct amount of sales tax from your customers for each transaction.
3. File Your Sales Tax Return: Sales tax returns in Illinois are generally filed monthly, quarterly, or annually, depending on the volume of sales your business conducts. Log in to MyTax Illinois and complete the sales tax return form, which will include information about your total sales, the amount of sales tax collected, and any deductions or exemptions.
4. Remit the Sales Tax Collected: After filing your return, you’ll need to pay the sales tax you collected. This can be done directly through the MyTax Illinois portal using various payment methods like electronic funds transfer (EFT) or credit card.

Deadlines:

• Monthly Filers: Due on the 20th day of the month following the reporting period.
• Quarterly Filers: Due on the last day of the month following the end of the quarter.
• Annual Filers: Due on January 31st of the following year.

Tips for Filing:

• Keep Detailed Records: Maintain comprehensive records of all transactions, including sales receipts, exemption certificates, and tax collected.
• Verify Due Dates: Stay informed about the filing deadlines to avoid late fees and penalties.
• Consult with a Tax Professional: If you’re unsure about any part of the filing process, consider seeking assistance from a tax professional to ensure compliance.

By following these steps and staying organized, you can effectively manage and remit sales taxes for your business in Chicago, ensuring compliance with state and local tax laws.