Illinois Sales Tax
Sales tax issues are always critical to the ability of any company to continue operations. If you have had your sales tax license revoked you should call Andrew B. Gordon immediately, at 312-608-2772 and let an aggressive, sales tax lawyer get your certificate reinstated.
The term “sales tax” actually refers to several tax acts. Sales tax is a combination of “occupation” taxes that are imposed on sellers’ receipts and “use” taxes that are imposed on amounts paid by purchasers. Sellers owe the occupation tax to the department; they reimburse themselves for this liability by collecting use tax from the buyers. “Sales tax” is the combination of all state, local, mass transit, water commission, home rule occupation and use, non-home rule occupation and use, park district, county public safety and facilities, county school facility tax, and business district taxes.
“Sales tax” is imposed on a seller’s receipts from sales of tangible personal property for use or consumption. Tangible personal property does not include real estate, stocks, bonds, or other “paper” assets representing an interest.
If the seller (typically an out-of-state business, such as a catalog company or a retailer making sales on the internet) does not charge Illinois Sales Tax, the purchaser must pay the tax directly to the department. Illinois Sales Tax has three rate structures — one for qualifying food, drugs, and medical appliances; one for items required to be titled or registered; and another for all other general merchandise.
“Qualifying food, drugs, and medical appliances” include
- 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;
- prescription medicines and nonprescription items claimed to have medicinal value, such as aspirin, cough medicine, and medicated hand lotion, excluding grooming and hygiene products; and
- prescription and nonprescription medical appliances that directly replace a malfunctioning part of the human body, such as corrective eye-wear, contact lenses, prostheses, insulin syringes, and dentures.
“Vehicles” include motor vehicles, ATVs, watercraft, aircraft, trailers, and mobile homes. See the Illinois Aircraft/Watercraft and Vehicle Tax Information Guide, for complete definitions and tax applications.
“General merchandise” includes sales of most tangible personal property including sales of
- soft drinks and candy;
- prepared food such as food purchased at a restaurant;
- photo processing (getting pictures developed);
- pre-written and “canned” computer software;
- prepaid telephone calling cards and other prepaid telephone calling arrangements;
- repair parts and other items transferred or sold in conjunction with providing a service under certain circumstances based on the actual selling price;
- grooming and hygiene products;
- See Regulation 130.310 for a full listing.
Use the Tax Rate Database to look up location specific tax rates. Depending upon the location of the sale, the actual sales tax rate may be higher than the fundamental rate because of home rule, non-home rule, water commission, mass transit, park district, county public safety, public facilities or transportation, and county school facility tax.
Prepaid sales tax
Motor fuel distributors must collect “prepaid sales tax” on the motor fuel sold for resale to a retailer who is not an Illinois licensed motor fuel distributor or supplier of diesel. The retailer prepays the sales tax to the motor fuel distributor and then claims a credit for the prepaid tax when the sales tax return is filed.
Units of local government may impose taxes or fees, which the department does not collect. Contact your units of local government (county, municipal, mass transit, etc.) to determine if you must pay any additional taxes or fees not listed below. The following local taxes, which the department collects, may be imposed. Except as noted below, the preprinted rate on the return will include any locally imposed taxes.
- Business District Tax
- Chicago Home Rule Municipal Soft Drink Retailers’ Occupation Tax
- Chicago Home Rule Use Tax on titled and registered items
- County Motor Fuel Tax
- DuPage Water Commission Taxes
- Home Rule County Taxes
- Home Rule or Non-home Rule Municipal Taxes
- Mass Transit District Taxes (Metro-East Mass Transit (MED) Taxes and Regional Transportation Authority (RTA) Taxes)
- Metro-East Park and Recreation District Taxes
- Metropolitan Pier and Exposition Authority (MPEA) Food and Beverage Tax
- Special County Retailers’ Occupation Tax for Public Safety, Public Facilities, and Transportation
- County School Facility Tax
Sales — The following list contains some of the most common examples of transactions that are exempt from tax.
- Sales to state, local, and federal governments
- Sales to not-for-profit organizations that are exclusively charitable, religious, or educational
- Sales of newspapers and magazines
- Sales to out-of-state buyers (Nonresidents may not claim the out-of-state buyer exemption if the motor vehicle or trailer will be titled in a state that does not give Illinois residents an out of state buyer exemption on purchases in that state of motor vehicles or trailers that will be titled in Illinois.)
- Sales of tangible personal property to interstate carriers for hire used as rolling stock (e.g., semi‑tractor trailers, railroad cars)
- Sales of machinery and equipment that will be used primarily in
- manufacturing or assembling of tangible personal property for wholesale or retail sale or lease
- production agriculture, and
- graphic arts
- Qualified sales of building materials that will be incorporated into real estate as part of a project for which a Certificate of Eligibility for Sales Tax Exemption has been issued by the enterprise zone administrator
- Qualifying purchases of tangible personal property used in a manufacturing or assembling process by businesses located in an enterprise zone and certified by the Department of Commerce and Economic Opportunity as qualifying to make these purchases because jobs will be created or retained
- Sales of legal tender, medallions, and gold bullion issued by qualifying governments
- Fuel used for international flights
Organizations — Qualified organizations, as determined by the department, are exempt from paying sales and use taxes in Illinois. Upon approval, we issue each organization a sales tax exemption number. The organization must give this number to a merchant in order to make purchases tax‑free. Examples of exempt organizations are listed below.
- State, local, and federal governments
- Not-for-profit organizations that are exclusively charitable, religious, or educational
- Certain senior citizen organizations
- County fair associations
- Not-for-profit organizations that are operated primarily for arts or cultural purposes
- Certain licensed day care centers
Examples of organizations that do not have to collect sales tax on their retail sales
- Elementary or secondary teacher-sponsored student organizations
- Not-for-profit organizations that are exclusively charitable, religious, or educational who make sales to their members primarily for the purposes of the selling organization (e.g., uniforms, insignia, and scouting equipment by Scout organizations to their members; bible sales by a church to its members)
- Certain sales by not-for-profit service organizations operated for the benefit of persons 65 years of age or older
Filing and payment requirements
If you have questions or concerns about filing requirements you should call us without delay. Missed filing deadlines can close businesses faster than just about anything else.
Titled or registered items — Registered Illinois dealers who sell vehicles, watercraft, aircraft, trailers, and mobile homes must file Form ST‑556, Sales Tax Transaction Return, within 20 days of the delivery date.
Individuals who purchase items that must be titled or registered in Illinois from an out-of-state retailer (i.e., dealer, lending institution, leasing company selling at retail, or leasing company leasing items to Illinois residents) must file Form RUT-25, Vehicle Use Tax Transaction Return, on the date the Illinois title and registration is applied for, but not more than 30 days after the date the item is brought into Illinois.
Individuals who purchase (or acquire by gift or transfer) motor vehicles that must be titled or registered from another individual or private party must file Form RUT‑50, Private Party Vehicle Use Tax Transaction Return, within 30 days from the date the vehicle is purchased or acquired. Individuals who acquire (by gift, donation, transfer, or non-retail purchase) aircraft or watercraft that must be registered must file Form RUT-75, Aircraft/Watercraft Use Tax Return, no later than 30 days from the date the item was acquired or the date the item was brought into Illinois, whichever is later.
Prepaid sales tax on motor fuel — Motor fuel distributors file Form PST-1, Prepaid Sales Tax Return, monthly on the 20th day of the month following the month for which the return is filed.
NOTE: Retailers claim a credit for the amount of prepaid sales tax on Form ST-1, Sales and Use Tax and E911 Surcharge Return, Line 17.
Qualifying food, drugs, and medical appliances and other general merchandise —Registered Illinois retailers and service persons file Form ST-1, Sales and Use Tax and E911 Surcharge Return, monthly, quarterly, or annually, based on the taxpayer’s average monthly liability. The department determines how often a return must be filed.
- A monthly return is due the 20th day of the month following the month for which the return is filed.
- A quarterly return is due the 20th day of the month following the quarter for which the return is filed.
- An annual return is due January 20th of the year following the year for which the return is filed.
Illinois residents who make purchases of tangible personal from non-registered out-of-state retailers (such as catalog or internet transactions) or those who make purchases of tangible personal property from service persons who do not pay use tax directly to us must file Form ST-44, Illinois Use Tax Return. You may complete Form ST-44 electronically on our web site.
- If $600 or less is owed, the return and tax is due April 15th of the year following the year in which the purchase was made.
- If the total tax liability for the year is more than $600, the return and tax is due the last day of the
month following the month in which the purchase was made.
Tangible personal property sold at retail over the internet is taxed in the same manner as any other retail sale. Generally, if the item of tangible personal property is purchased from an
- Illinois retailer, the retailer is responsible for collecting and remitting Illinois sales tax.
- out-of-state retailer who does not collect Illinois sales tax, the purchaser owes use tax and is responsible for paying use tax directly to the department using Form ST‑44.
Quarter-monthly payments — If a retailer or service-person’s average monthly liability is $20,000 or more, quarter-monthly payments must be made. Payments are due the 7th, 15th, 22nd, and last day of the month. Because the statutory threshold for mandated electronic funds transfer (EFT) program participation is $20,000 annual liability, most taxpayers will remit their quarter-monthly payments by EFT. Taxpayers who mail their quarter-monthly remittances to the department must complete Form RR-3, Sales and Use Tax Quarter-monthly Payment.
NOTE: Electronic funds transfer program participants do not complete or mail Form RR-3.
If a motor fuel distributor’s average monthly liability is $20,000 or more, quarter-monthly payments must be made. Payments are due the 7th, 15th, 22nd, and last day of the month. Because the statutory threshold for mandated electronic funds transfer (EFT) program participation is $200,000 annual liability, most taxpayers will remit their quarter-monthly payments by EFT. Taxpayers who mail their quarter-monthly remittances to the department must complete Form PST-3, Prepaid Sales Tax on Motor Fuel.
As you can see, Sales Tax issues are complex and there are countless government requirements for businesses to meet if they are to remain in good standing with the taxing authority. If you find your business in sales tax trouble, please contact us immediately. Our lead sales tax attorney, Andrew Gordon, can be reached on his direct line at 312-608-2772.