Avalara Taxrates > Blog > Sales Tax News > Illinois may expand sales tax base, lower rate - Avalara

Illinois may expand sales tax base, lower rate

  • Mar 14, 2017 | Gail Cole

 Tattooing would be taxable, but haircuts would remain exempt under Illinois Senate Bill 9.

The Illinois Senate is calling for a broader sales tax with a lower rate. It has proposed a plan to broaden sales tax to many services, drop the sales tax rate from 6.25 percent to 5.75 percent, and increase the sales tax rate on groceries and medicines from 1 percent to 5.75 percent.

The “Grand Bargain,” as the Senate’s plan is called, does not have unilateral support. In his 2017 Budget Address, Gov. Rauner said he is open to broadening the sales tax “to cover everyday services.” However, he strongly opposes raising the tax rate on food and medicine: “We cannot raise taxes on people’s groceries and medicine.”

Expand sales tax to services

Senate Bill 09, which was introduced earlier this month, proposes a broader tax as of January 1, 2018, but no rate reduction. Bill sponsor Sen. Toi Hutchison provided a simple explanation for the measure: “Our economy used to be things we made. Now, it’s things we do.” Noting that neighboring Wisconsin taxes 16 types of services, she said her plan would tax the following eight services:

  • Cable television and digital streaming services
  • Landscaping services
  • Laundry, dry cleaning, cloth pressing services (except coin-operated, self-service machines)
  • Personal care services (e.g., nail care, tanning, tattooing) not including hair styling
  • Private detective services and home security system installs
  • Repair, servicing, alteration, fitting, cleaning, painting, coating, towing, inspection, or maintenance services
  • Storage services, including self-storage or mini-storage
  • Structural pest control services

Taxing these currently exempt services would generate approximately $291 million annually.

Lowering the sales tax rate and broadening sales tax to include more services is an idea embraced by the Civic Federation, “an independent, non-partisan government research organization.” Its State of Illinois FY2018 Budget Roadmap underscores the untenable nature of the state’s fiscal situation and proposes enacting “a new service tax including a broad-based definition of consumer services” to stabilize Illinois’ financial position. It proposes reducing the general sales tax rate to 5.5 percent (as compared to the Senate proposed 5.75 percent). The plan exempts business-to-business transactions.

On the other side of the issue, Illinois Chamber of Commerce President Todd Maisch says that taxing services would hurt the small businesses that provide them. Other opponents argue that sales tax is by nature regressive, hitting people with lower incomes the hardest.

An automated tax solution helps businesses stay on top of sales and use tax changes. Learn more.

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.