Illinois Sales Tax Guide
Chapter 1: An introduction to Illinois sales tax management
Sales tax is a tax paid to a governing body (state or local) for the sale of certain goods and services. First enacted in the United States in 1921, sales tax dates back to ancient Egyptian times where paintings depict the collection of tax on commodities. Illinois first adopted a general state sales tax in 1933. Since that time, the rate has risen to 6.25. In the second quarter of 2015, the Illinois Department of Revenue reported $2,279,993 in revenue from taxes on general sales and gross receipts; 20.8% of total Illinois state taxes.
As a business owner selling taxable goods or services, you act as an agent of the state of Illinois by collecting tax dollars from purchasers and passing it along to the state and local tax authority. This is an important point worth emphasizing. Any sales tax collected from residents belongs to the Illinois Department of Revenue. As a business owner, it is your responsibility to manage the taxes you collect to remain in compliance with state laws and avoid penalty and interest payments.When does Illinois sales tax need to be collected?
In Illinois, sales tax is collected on the sale of tangible goods and some services. The tax is collected by the seller and remitted to state and local tax authorities. The seller acts as a pseudo-tax collector.Do I need to collect sales tax in Illinois?
To better understand whether you need to collect sales tax in Illinois, we've created a simple three step checklist you can use to get a better feel for your Illinois tax situation:
- Do I have nexus in Illinois?
- Am I selling taxable goods or services to Illinois residents?
- Is my buyer required to pay sales tax?
If the answer to all three of the questions above is "Yes", then you are required by the Illinois Department of Revenue to collect, file, and remit sales tax.Does sales tax accept out-of-state resale certificates?
At the time of publication, the Illinois Department of Revenue was not accepting out-of-state resale certificates. If you are an out-of-state business and choose to purchase goods for a vendor located in Illinois, you can expect to pay sales tax.What happens if I don't collect any sales tax?
If you meet the criteria for collecting sales tax (nexus in Illinois and selling taxable goods or services to taxable residents) and choose not to collect sales tax, you will be held responsible for the tax due. As such it is extremely important that you set up tax collection at the point of sale. Attempting to contact customers to collect sales tax after the fact is time consuming and unlikely to be fruitful.Is Illinois a Streamlined Sales Tax (SST) state?
At this time, Illinois is not a member of the Streamlined Sales Tax (SST) Agreement.What state sourcing rules apply to Illinois?
Illinois is an origin-based state. Origin-based states are those where the transaction location is defined as the shipping location of the seller rather than the delivery location of the buyer. As a seller, this means you are responsible for applying the sales tax rate determined by the ship-from address on all taxable sales.