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“The sales tax for businesses in Illinois is 6.25%”

What Does The Sales Tax For Businesses In Illinois Mean?

A sales tax is a fee levied on the sale of certain goods and services and paid to the government (state or local). The state of Illinois initially enacted a general state sales tax in 1933, and the base sales tax rate has since climbed to 6.25 percent. In addition to the state sales tax, there may be one or more local sales taxes, as well as one or more special district taxes, each of which can range from 0% to 4.75 percent. Combined sales tax rates in Illinois currently range from 6.25 percent to 11 percent, depending on where the sale is made.

When you offer taxable goods or services, you function as an agent for the state of Illinois, collecting tax from customers and remitting it to the proper tax authorities. The Illinois Department of Revenue is in charge of collecting sales and use taxes in the state (DOR).

The state of Illinois owns any sales tax received from customers, not you. To comply with state and municipal legislation, it is your responsibility to maintain account of the taxes you collect. If this is not done, penalties and interest charges may be applied.

How Much Is The Sales Tax For Businesses In Illinois?

Illinois has a 6.25 percent state sales tax and allows local governments to collect a 4.75 percent local choice sales tax. There are 495 local tax jurisdictions in the state, collecting an average of 1.904 percent in local taxes.

The city of Harvey has the highest sales tax rate in Illinois, at 11.5 percent when combined with the state sales tax.

Illinois Sales TaxThreshold Limit
6.25%$100,000 economic sales threshold and 200 transaction threshold limit

Do You Need To Collect Illinois Sales Tax For Your Ecommerce Business?

Sales tax is levied in Illinois on the sale of tangible items and some services. The seller is in charge of collecting and remitting the tax to the applicable state tax authorities. As a result, the vendor serves as a de facto tax collector.

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Start by completing the following three questions to see if you need to collect sales tax in Illinois:

  • Have you established a nexus in Illinois?
  • Are you selling Illinois citizens taxable products or services?
  • Do your customers have to pay sales tax?

If you answered yes to all three questions, you must register with the state tax agency, collect the proper amount of sales tax per sale, file returns, and send them to the state.

Therefore, this is what the Illinois sales tax for eCommerce businesses is all about. Now the question arises: what types of goods and services are taxable under Illinois? Let’s see.

What Types Of Goods and Services Are Taxable In Illinois?

The first step in sales tax compliance is determining if your company’s products or services are taxable in Illinois.

Traditional Goods or Services

Physical items, such as furniture, home appliances, and automobiles, are all subject to sales tax in Illinois.

Prescription and non-prescription drugs, as well as groceries, are all discounted in Illinois.

Digital Goods or Services

A digital good or service is anything that is delivered electronically, such as an album downloaded from iTunes or a film purchased from Amazon.

Businesses in Illinois are not required to collect sales tax on digital goods or services.

Therefore, if you are dealing in any of these goods or services, you are subject to pay sales tax in Illinois. Now let’s look at the tax collection and tax filing process in Illinois.

Tax Collection

After you get your seller’s permit and start your business, you’ll need to figure out how much sales tax to charge different clientele. To avoid fines and the prospect of costly audits, it is vital for business owners to collect the correct rate of sales tax.

When calculating sales tax, you must account for the following categories of purchases:

  • State Sales- Calculating sales tax for traditional business owners selling goods or services on-site is simple: all sales are taxed at the rate determined by the store’s location.
  • In-state Sales- The state of Illinois has a sales tax regime known as origin-based sales tax. This means that long-distance sales in Illinois are taxed based on the buyer’s address. The state, county, and local sales taxes are all subject to this law.
  • Out-of-state Sales- Only Illinois businesses with nexus in other states must pay sales tax on out-of-state sales. A company’s actual presence in another state is referred to as a “nexus.”

Read More: Idaho Sales Tax 2022 For Businesses: A Complete Guide

Tax Filing

You’re ready to file your sales tax return now that you’ve applied for your Illinois seller’s permit and learned how to charge the correct amount of sales tax to all of your customers. You avoid penalties and fines by adhering to all filing deadlines.

Businesses in Illinois are required to file sales tax forms and make sales tax payments online.

How often do you need to file the Illinois sales tax?

  • Annual Filing- If your company receives less than $50 in sales tax per month, you must file returns on an annual basis.
  • Quarterly Filing- If your company collects between $50 and $200 in sales tax every month, you should file returns every three months.
  • Monthly Filing- If your company collects more than $200 in sales tax every month, you must file returns on a monthly basis.

What If You Fail To File The Tax Return Before The Deadline?

Filing Deadline

The 20th day of the month is the deadline for all Illinois sales tax returns unless it is a weekend or federal holiday, in which case the deadline is pushed out to the next business day.

Penalty for Late Filing

If the filing date falls within 30 days of the deadline, Illinois imposes a late filing penalty of 2% of the original tax. Regardless of whether you make timely payments, if you do not file a return within 30 days after receiving a notice of non-filing, you will be charged an additional penalty equal to the greater of $250 or 2% of the tax due on the return. The penalty cannot exceed $5000.

Illinois additionally imposes a 2% late payment penalty if the payment is made between 1 and 30 days after the deadline. The rate increases to 10% of the unpaid tax reported on the initial tax return after 30 days. If your business is audited for unpaid sales tax, the interest penalty climbs to 15%, and if you keep delaying, the rate might rise to 20% of the total outstanding sales tax.

Need Assistance With Illinois Sales Tax

If you need any assistance with the Illinois Sales Tax in 2022, please do not hesitate to contact us. FreeCashFlow is a tax and accounting agency with 20+ years of experience and the highest level of honesty in Los Angeles, California. We are here to provide the best possible help with your tax and accounting problems.

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