Illinois Sales Tax Guide
Chapter 5: Filing and paying Illinois sales tax
You're registered with the Illinois Department of Revenue and you've begun collecting sales tax. Congratulations! Remember, those tax dollars don't belong to you. As an agent of the state of Illinois, your role is that of intermediary transferring tax dollars from consumers to state and local tax authorities. Let's take a deeper look at how filing Illinois sales tax returns impacts your business.What does it mean to file an Illinois sales tax return?
Technically speaking, filing Illinois sales tax returns is a two-step process comprised of submitting the required sales data and remitting the collected tax dollars (if any) to state and local tax authorities.
In most states, there are a number of options for submitting sales tax data to the state. Business owners may complete a Illinois sales tax filing form and mail it to the Illinois Department of Revenue or they can file electronically online. In all states, filing online is recommended.
The filing process forces the business owner to detail their total sales, the amount of sales tax they have collected, and from where. The Illinois Department of Revenue wants to be kept up to date on your business growth (or lack thereof) to make sure they are getting the tax dollars due. By completing ongoing filing of monthly, quarterly, or semi-annual, or annual Illinois sales tax returns, they stay abreast of your growing company.When am I required to file my sales tax return?
The Illinois Department of Revenue will assign you a filing frequency. Typically, this is determined by the size of your business. State governments typically ask larger businesses to file more frequently. Visit our Illinois filing due dates page for more information.Am I required to file and pay my Illinois sales tax at the same time?
Illinois sales tax returns must be filed and paid at the same time and are governed by the same due date.I want to webfile my Illinois sales tax. What are my options?
Avalara has built the TrustFile product to allow business owners a quick and easy way to prepare and webfile Illinois sales tax returns. Users can sign up and use the service to prepare Illinois returns free for 30-days.
Filers may also file directly with the Illinois Department of Revenue by visiting their site and entering your transaction data manually. This is a free service, but preparing Illinois sales tax (breaking it down by jurisdiction) can be time consuming - especially for larger sellers.Can a 3rd party file my sales tax on my behalf?
Yes! Many business owners recognize they are not a tax professional and therefore, choose to outsource their sales tax sales and use tax filing to services like Avalara TrustFile or to an accountant or bookkeeper. This is a normal business practice that can save business owners time and help them avoid costly mistakes due to inexperience and a lack of deep knowledge about Illinois sales tax code.What happens if I file or pay my sales tax return late?
The Illinois Department of Revenue uses a tiered system for assessing sales tax penalties and interest. The following shows the tiers for late-filing or non-filing penalties.
- Tier 1: The lesser of $250 or 2% of the tax required to be shown due on the return and reduced by timely payments or credits. If the return is timely filed but cannot be processed, you will have 30 days to correct the return before penalty is due.
- Tier 2: If you do not file a return within 30 days after receiving a notice of non-filing, an additional penalty will be imposed equal to the greater of $250 or 2% of the tax shown due on the return without regard to timely payments. The additional penalty may not exceed $5,000. The penalty will be assessed even if there is no tax due.
Penalties for failing to remit collected sales tax are based on the number of days the outstanding tax is late (1 – 30 days: 2%, 31 + days: 10%). However, the penalty is 15% of any amount that is not paid until after the initiation of an audit or investigation of your liability and 20% of any amount that is not paid within 30 days after the issuance of an audit-prepared amended return or Form IL-870, Waiver of Restrictions at the conclusion of the audit or investigation. The 20% penalty rate also applies to any amount paid within the 30-day period if you fail to sign and return the amended return within that period or if you pay the liability under protest or subsequently file a claim or refund of the payment.Do I need to file a return if I didn't collect any sales tax in Illinois?
Yes! Once you've successfully registered for and been issued a Sales Tax License, you are required to file at the completion of each assigned collection period regardless of whether any sales tax was collected. This is what is known as a "zero-tax filing".
Failure to submit a required zero-tax filing can result in penalties imposed on your business by the Illinois Department of Revenue so don't take this responsibility lightly.If I close my business, do I need to file a final sales tax return?
Yes! The Illinois Department of Revenue requires all businesses to "close their books" by filing a final sales tax return. This also holds true for business owners selling or otherwise transferring ownership of their business.Does the Illinois Department of Revenue offer a discount for filing on time?
Vendor discounts are rebates offered to tax filers by state tax jurisdictions to compensate filers for the effort involved with collecting, filing, and remitting sales tax in a timely manner. Such discounts are frequently cited as outdated by those who see them as a tax loophole for big businesses. With online buying and SaaS services like Avalara TrustFile, the days of managing receipts, balancing books, and writing checks to the state have long since been replaced by computer automation.
The Illinois Department of Revenue currently offers a vendor discount (also known as a dealer collection allowance) of 1.75 with a maximum of no maximum and a minimum of $5 per year.