#Illinois #Sales #Tax #Guide #for #Businesses
Illinois taxes online
Illinois Sales Tax Guide for Businesses
Table of Contents
Automate Your Illinois Filings
Find Your Economic Nexus
We wrote this guide for online sellers who want to know if they even have to bother with sales tax in Illinois, and if so, how best to tackle the sales tax situation in the Prairie State.
After reading this, you’ll know:
- Do you or don’t you need to collect Illinois sales tax?
- Which customers do you collect from?
- How much do you collect?
- What do you do with all the sales tax you’ve collected?
- Way more than you probably ever wanted to know about Illinois sales tax!
Do you have sales tax nexus in Illinois?
“Sales tax nexus” is just a fancy way of saying “significant presence” in a state.
Illinois considers a seller to have sales tax nexus in the state if you have any of the following in the state:
- An office, warehouse or place of business
- An employee, contractor, salesperson, agent or representative in Illinois
- A 3rd party affiliate in Illinois
You can click here to read exactly what the Illinois Department of Revenue (Illinois’s taxing authority) has to say about what constitutes sales tax nexus in Illinois starting on p.2 of this guide.
Do you have sales tax nexus in Illinois if you sell on FBA ?
Online retailers are increasingly using Fulfillment by Amazon to sell their products. According to Illinois’s rules of nexus, a seller who stores items in a physical location in the state – including an Amazon Fulfillment Center – has sales tax nexus there and must collect sales tax from Illinois buyers.
To determine if Amazon is storing your products in Illinois:
- Login to Amazon Seller Central and pull your inventory report
- Try a 30-day free trial of TaxJar and we’ll show you the states from where your items are shipping with our Amazon badge feature
The current Illinois Amazon fulfillment centers are located at:
Do you have economic nexus in Illinois?
Effective October 1, 2018, Illinois considers vendors who make more than $100,000 in sales in the previous four quarters in the state or more than 200 transactions in the state to have economic nexus. This means the state considers these vendors obligated to collect sales tax from buyers in the state. You can read Illinois’s economic nexus guidance for sellers here and you can read more about economic nexus in every state here.
Is what you’re selling even taxable?
You’ve probably read this far because you realized you have sales tax nexus in Illinois. Your next step is to determine if what you’re selling is even taxable.
Services in Illinois are generally not taxable. So if you’re a pet groomer or a masseuse, you’re in luck and you don’t have to worry about sales tax. But watch out – if the service you provide includes creating or manufacturing a product, you may have to deal with the sales tax on products.
Tangible products are taxable in Illinois , with a few exceptions, such as some machinery, equipment and building materials that will be used for certain projects.
So if you sell handmade furniture, then charge sales tax to your Illinois customers.
But if you’re a pet groomer, don’t charge sales tax to your Illinois customers (unless you also sell them a tangible product!).
If you have sales tax nexus in Illinois and your products are taxable, your next step is to register for a sales tax permit.
How to Register for a Sales Tax Permit in Illinois
Sellers with sales tax nexus in Illinois must apply for an Illinois sales tax permit.
Don’t skip this step! Many states consider it unlawful to collect sales tax in their name without a permit. Go here for more on how to register for a sales tax permit in Illinois.
How to Collect Sales Tax in Illinois
So you’ve determined that you have sales tax nexus in Illinois and what you’re selling is taxable. And you’re all set and registered for your Illinois sales tax permit.
The next step is to determine how much sales tax to collect.
Be sure to note: The sales tax rate you collect in Illinois depends on whether you are based in Illinois or out-of-state.
How to Collect Sales Tax in Illinois if You are Based in Illinois
Illinois is an origin-based sales tax state. So if you live in Illinois, collecting sales tax is fairly easy. Collect sales tax at the tax rate where your business is located.
Example: You live and run your business in Joliet, Illinois in the 60431 zip code. The tax rate there is the total of the 6.25 % Illinois state sales tax rate, the .75% Will County Rate and 1.75 % Joliet rate, for a total of 8.75 % sales tax. Since Illinois is an origin-based state, you would charge all of your buyers in Illinois that 8.75 % rate.
If you have more than one location in Illinois, then you would base the sales tax rate you charge on the point of origin of your sale.
How to Collect Sales Tax in Illinois if you are Not Based in Illinois
This is where things get trickier for online sellers. Illinois wants sellers who made a sale into Illinois from outside the state charge a flat Illinois “use tax” rate of 6.25 %. (“Use tax” is very similar to sales tax, but collected by sellers based out-of-state.) You are not required to charge any local sales tax rates.
Example: You live in Colorado, but have sales tax nexus in Illinois due to a salesperson there. If you make a sale to a buyer in Wheaton, Illinois you would charge the buyer the 6.25 % Illinois state rate.
What are the Amazon sales tax settings for Illinois?
If you are an Amazon pro seller and use Amazon to collect sales tax, be sure you have your sales tax settings set up correctly. Find step-by-step instructions for setting up your Amazon sales tax settings here.
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