Need to Collect Sales Tax in Illinois?
Economic Threshold: $100,000
Transaction Threshold: 200
The obligation to collect sales tax in Illinois is determined by your business's nexus. Your physical nexus is determined by the activity or physical presence within the state. Reaching a sales or transactions threshold can create economic nexus obligations requiring your business to collect and remit sales tax within the state.
Economic Nexus
Vendors are required to collect sales tax from their customers in the case of having a gross revenue of more than $100,000. To learn more, read our article on how
economic nexus affects your business.
Physical Nexus
Your business has physical nexus if it has any of the following items within the state of Illinois:
✅ Retail of taxable items
✅ Employees reside in the state
✅ Alteration or repair of personal property
✅ Rentals of short-term living spaces
✅ Rental or lease of personal property
✅ Rentals, lease, or licenses to use real property
✅ Manufacturing products for retail
✅ Importing goods from any state or foreign country, for retail purposes, use in business or pleasure
✅ Ownership of property in-state
✅ Providing taxable services
Here is a more extensive list of what the state of Illinois considers instances of creating
sales tax nexus.
Taxability
Typically, services are not taxable, however, services such as repairing or producing a product will create sales tax liability. Physical products are taxable in-state with a few exceptions. Taxability can change state to state and often depends on how your product/services are defined. Like much of sales tax, this can often be difficult to manage alone. Reach out if you need help understanding the taxability of your products/services.
Collecting Sales Tax
As an origin-based sales tax state, unlike the majority of other states, Illinois requires sellers in-state to charge the rate at which the seller is located. This may include state, county, city, and district tax rates. So if you operate your business from Illinois, you collect origin-based sales tax at the Illinois rate and your local tax rate.
Sellers based outside of Illinois selling into the state are required to charge sales tax based on the buyer's location. Illinois' state sales tax rate is 6.25%.
When are sales taxes due?
Sales tax returns are dependent upon the state's due dates and the vendor's filing frequency. If the seller exceeds the economic threshold, they are liable to file on a monthly basis. If the seller does not exceed the threshold, then returns could be due quarterly or annually.
Sales tax returns are due by the 20th of the month following the reporting period. Illinois requires an extra business day to process payments and as a result, the "payment" is due a day earlier than the filing date.
How to File Sales Tax Returns
Illinois has three options to file your sales tax returns:
✅ File by mail
✅
Outsource the filing process to a third-party like TaxConnex
Check out the
TaxConnex Difference to learn more about how TaxConnex can remove the burden of sales tax from your plate.
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