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Illinois has several sales tax rates in addition to the state tax rate of 6.25 percent. The state also has several discretionary taxes for local jurisdictions, including counties, cities, and governmental jurisdictions. A business must add discretionary taxes to the state’s tax rate to charge the appropriate sales and use tax rates.
Types of taxes
Most tangible personal property and services are taxed in Illinois. Certain items, such as food items, have a lower statewide sales tax, but discretionary taxes might bring the tax rate closer to the full rate charged by the state.
Sales and use tax
Illinois implements occupation taxes on top of the state sales tax. When the state talks about tangible personal property, it does not include stocks, bonds, real estate, and other paper assets.
If a business does not pay sales tax and does not collect sales tax on the resale of the product, it must pay use taxes. For example, a business purchases two cases of Widget A with the intent of selling one case and using the other case in the business.
The business does not pay sales tax as the purchase is in one transaction. The business will collect sales tax from its customers for the case of Widget A that it resells. Since it keeps the other case for use in the business, it will not collect sales tax from the customer. Thus, the business must pay use tax on the second case of Widget A.
Food and beverage tax
Food for consumption off property is taxed at 1 percent on sales tax returns. This rule has several exceptions, including:
- Hot food products are dispensed from a vending machine.
- Candy dispensed from a vending machine.
- Soft drinks are dispensed from a vending machine.
- Food for immediate consumption.
- Sandwiches, whether hot or cold.
- Alcoholic beverages.
- Items that contain cannabis, such as cannabis flower, products infused with cannabis, and concentrate.
The exceptions are taxed at the regular state rate of 6.25 percent plus discretionary taxes.
Remote sellers must pay Illinois sales tax if they accumulate $100,000 or more in gross receipts or have 200 or more separate transactions of tangible personal property sold to Illinois residents. Remote sellers must check quarterly taxes to determine whether they might hit either of these thresholds for a 12-month period.
Marketplace sellers and facilitators are also subject to the same thresholds as remote sellers, depending on who collects the taxes. In many cases, marketplace facilitators collect taxes for all sales on its site. If not, the marketplace seller must collect and remit a tax return for her own business.
Prepaid sales tax rate for gasoline and other fuel products
Illinois charges a prepaid sales tax rate of 18 cents per gallon on fuel products, including gasoline, diesel, biodiesel, gasohol, and other motor fuel products.
Certain use taxes
In addition to the regular use tax of 6.25 percent on retail sales, Illinois has other use taxes certain business taxpayers must pay, including:
- Aircraft use tax: 6.26 percent. If you purchase an aircraft from someone not in the business of selling aircraft in the retail sector, you must pay sales tax on the purchase price or fair market value of the aircraft, whichever is higher.
- Private party vehicle use tax: This tax varies depending on the circumstances. Some tax rates are determined by the vehicle’s age, others by the fair market value or the purchase price. The Private Party Vehicle Use Tax Chart for 2022 will help a person or business determine the tax obligation.
Discretionary taxes (Local sales taxes)
Illinois has several counties and municipalities that charge additional taxes. Locate the tax for your business location by searching for an address or local government. For example, Adams County has the following taxes:
- Sales tax for general merchandise: 6.5 percent. The use tax is the same percentage.
- Qualifying food and drugs: 1 percent. The use tax is the same percentage.
- Vehicle tax: 6.25 percent. The use tax is the same percentage.
- Adult-use cannabis: 10.25 percent. The use tax is the same percentage.
- Medical cannabis: 1 percent. The use tax is the same percentage.
- Aviation fuel: 6.25 percent. The use tax is the same percentage.
- Automobile renting tax: 5 percent.
- Telecommunication tax: 7 percent.
Additional discretionary taxes
Some local governments also charge a tax rate for businesses located in their jurisdiction. These taxes might come in the form of taxes or fees. The taxes or fees charged by local governments are collected by those governments, not through the state sales tax filing portal. Local governments include:
- Chicago Home Rule Municipal Soft Drink Retailers’ Occupation Tax.
- Business District Tax.
- Chicago Home Rule Use Tax on titled and registered items.
- Home Rule County Taxes.
- County Motor Fuel Tax.
- Home Rule or Non-Home Rule Municipal Taxes.
- Metro-East Park and Recreation District Taxes.
- Mass Transit District Taxes.
- County School Facility Tax.
- Metropolitan Pier and Exposition Authority Food and Beverage Tax.
- Special County Retailers’ Occupation Tax for Public Safety, Public Facilities, Mental Health, Substance Abuse, and Transportation.
Registering for and filing Illinois’ taxes
- Titled or registered goods, such as motor vehicles, trailers, watercraft, aircraft: Form ST 556. A business must file these forms and pay the taxes within 20 days of the date of delivery.
- Items for lease: Form ST 556-LSE. A business must file these forms and pay the taxes within 20 days of the date of delivery.
- Leasing registerable items that must be registered with an agency of the Illinois state government to sell to a retailer: Form ST-556-D (to bulk file).
- Registered items purchased from a private party: Form RUT-50. The business or individual must pay the tax within 30 days of purchase.
- Aircraft and watercraft purchased in a private sale: Form RUT-75. The business or individual must pay the tax within 30 days of purchase.
- Prepaid sales tax on fuel: Form PST-1, due on the 20th day of the month following the month the business collected the tax. For example, tax collected in January is due on or before February 20.
- Qualifying food, medical appliances, drugs, and general merchandise: Form ST-1. The due dates are the 20th day after the month you collected the taxes for monthly returns, the 20th day of the following the end of the quarter for quarterly returns, and January 20 of the following year for yearly returns.
- Use tax owed if a business did not pay tax on items purchased for business use from out-of-state retailers: Form ST-44.
These tax forms are all available through a business’s tax account.
Determining payment frequency
To determine when your sales tax payments are due, look at your tax obligation. If the business tax liability is $20,000 or more, the business must make quarterly payments. The best way to pay is EFT. If you do file manually, you must file Form RR-3 with your report and payment.
Illinois tax exemptions
Illinois has several tax exemptions. The most common exemptions include:
- Any sales to federal, state, and local governments.
- Sale to non-profit organizations that are religious, charitable, or educational.
- Newspapers and magazines.
- Out-of-state buyers, since they must pay sales tax in their own state. In most cases, the Illinois business charges the buyer’s home state and discretionary sales and use taxes.
- Sales of tangible personal property to interstate carriers used as rolling stock, such as railroad cars and semi-trucks.
- Machinery and equipment used for manufacturing and production agriculture.
- Building materials for incorporation into real estate as part of a project that has a Certificate of Eligibility for Sales Tax Exemption issued by the enterprise zone administrator.
- Certain tangible personal property is used in manufacturing or assembling by a business located in an enterprise zone. The business must be certified by the Department of Commerce and Economic Opportunity.
- Sales of medallions, legal tender, and gold bullion issued by a qualifying government.
- Fuel for international flights.
- Qualified organizations with a sales tax exemption certificate.
Calculating Illinois’ sales and use tax liability
The easiest way to calculate Illinois sales and use tax is to look up the business address and use the tax rates posted for that business location. Multiply sales by the total sales tax or program each tax into the business point-of-sale software.
For example, Adams County has a sales tax of 6.5 percent, which is 6.25 percent for the state and .25 for the county. A $10 sale would have a tax of $0.65 for a total of $10.65. (10 times .065 is .65.)
If the item is cannabis for adult use, multiply the total sale by 10.25 percent. A sale of $50 would have a tax of $5.13, for a total of $55.13. (50 times .1025 is 5.13.)
The state sales and use tax rate is 6.25 percent. Illinois local jurisdictions have several discretionary taxes that vary from the local district to local district.
You can apply online or download a PDF form for the resale certificate and mail it to the Illinois Department of Revenue.
It depends on that state’s rules. Many have a threshold you have to meet for retail sales tax. However, as a convenience to the customer, most businesses collect the other state’s sales tax and files a report with that state.