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Learn the fundamentals of sales tax
Do you need to collect sales tax in Illinois?
You’ll need to collect sales tax in Illinois if you have nexus there. There are two ways that sellers can be tied to a state when it comes to nexus: physical or economic. Physical nexus means having enough tangible presence or activity in a state to merit paying sales tax in that state. Economic nexus means passing a states’ economic threshold for total revenue or the number of transactions in that state.
Do you have physical nexus in Illinois?
Illinois considers a seller to have physical nexus if you have any of the following in the state:
- A physical presence, like an office, warehouse or place of business
- An employee, contractor, salesperson, agent or representative in Illinois
- A 3rd party affiliate in Illinois
You can click here to read exactly what the Illinois Department of Revenue (Illinois’s taxing authority) has to say about what constitutes sales tax nexus in Illinois starting on p.2 of this guide.
Do you have economic nexus in Illinois?
Effective October 1, 2018, Illinois considers vendors who make more than $100,000 in sales in the previous four quarters in the state or more than 200 transactions in the state to have economic nexus. This means the state considers these vendors obligated to collect sales tax from buyers in the state. You can read Illinois’s economic nexus guidance for sellers here.
Is what you’re selling taxable?
Services in Illinois are generally not taxable. However, if the service you provide includes creating or manufacturing a product, you may have to deal with the sales tax on products.
Tangible products are taxable in Illinois, with a few exceptions, such as some machinery, equipment and building materials that will be used for certain projects.
Is SaaS taxable in Illinois?
SaaS is considered a non-taxable service in Illinois. (Source)
How to get a sales tax permit in Illinois
Sellers can register online through MyTaxIllinois or mail in form REG-1 to the address specified on the form.
This is the information you need to register for a sales tax permit in Illinois:
- Identifying information about your business
- Type of business
- Owners and officers
- Description of business activities
- The addresses of all Illinois locations from where you plan to ship products
Illinois is different from other states in that, when registering, you need to register every location from where your products might ship to customers. This is because of the way the state of Illinois defines out-of-state sellers.
In short, if you ship products from more than one location in Illinois, you should include this address when registering for your Illinois sales tax permit.
It is free to apply for a sales tax permit in Illinois. Other business registration fees may apply.
Collecting Sales Tax
The sales tax rate you collect in Illinois depends on whether you are based in Illinois or out-of-state.
Illinois is an origin-based sales tax state. So if you live in Illinois, collecting sales tax is fairly easy. Collect sales tax at the tax rate where your business is located.
You can look up your local sales tax rate with TaxJar’s Sales Tax Calculator.
The Illinois state sales tax rate is 6.25%.
If you have more than one location in Illinois, then you would base the sales tax rate you charge on the point of origin of your sale.
How to Collect Sales Tax in Illinois if you are Not Based in Illinois
In Illinois, “The Leveling the Playing Field for Illinois Retail Act” became effective on January 1, 2021. This act introduces changes in sales tax collection for remote sellers and marketplace facilitators.
The changes require remote sellers and marketplace facilitators to collect and remit the state and locally-imposed Retailers’ Occupation Tax (ROT) for the jurisdictions where the product is delivered (destination sourcing) rather than collecting and remitting solely the state use tax.
The only way a seller can report sales at just 6.25% is if they have a physical location in Illinois and have sales being shipped from out of state. Those sales would be subject to the Illinois use tax only.
Should you collect sales tax on shipping charges in Illinois?
Shipping is generally taxable in the state of Illinois. Read a full explanation of sales tax on shipping in Illinois here.
When are Returns Due?
When you file and pay Illinois sales tax depends on two things: your assigned filing frequency and your state’s due dates.
How often will you file sales tax returns in Illinois?
States assign you a filing frequency when you register for your sales tax permit. In most states, how often you file sales tax is based on the amount of sales tax you collect from buyers in the state.
In Illinois, you will be required to file and remit sales tax either monthly, quarterly or annually.
Illinois sales tax returns are always due the 20th of the month following the reporting period. If the filing due date falls on a weekend or holiday, sales tax is generally due the next business day.
Filing Sales Tax
When it comes time to file sales tax in Illinois you must do three things:
- Calculate how much sales tax you owe
- File a sales tax return
- Make a payment
How to Calculate How Much Sales Tax You Owe in Illinois
Calculating how much sales tax you should remit to the state of Illinois is easy with TaxJar’s Illinois sales tax report.
All you do is connect the channels through which you sell – including Amazon, eBay, Shopify, Square and more – and we’ll calculate exactly how much sales tax you collected. All the information you need to file your Illinois sales tax return will be waiting for you in TaxJar. Try a 30-day free trial of TaxJar today.
How to File and Pay Sales Tax in Illinois
You have three options for filing and paying your Illinois sales tax:
- File online – File online at MyTax Illinois. You can remit your state sales tax payment through their online system.
- File by mail – You can use Form ST-1 and file and pay through the mail.
- AutoFile – Let TaxJar file your sales tax for you. We take care of the payments, too. You’ll never have to worry about spreadsheets, calculations or filling out complex sales tax returns.