Illinois — Sales & Use Tax

Illinois does not impose a traditional "sales tax" on transactions. Instead, the state operates under four complementary occupation and use tax acts. The Retailers' Occupation Tax Act (ROT) and Use Tax Act (UT) govern taxes applicable to sales and purchases of tangible personal property at retail. The Service Occupation Tax Act (SOT) and Service Use Tax Act (SUT) govern taxes on tangible personal property transferred incident to sales of services. These four acts are collectively referred to as "sales tax" in common usage.

The Retailers' Occupation Tax is imposed on persons engaged in the business of selling tangible personal property at retail in Illinois, rather than on individual sales transactions themselves. Illinois courts have confirmed that the tax is on the occupation of selling, not on the sales as such. This structural distinction affects nexus determinations, sourcing, and local tax allocation.

In addition to state-level ROT, local governments may impose their own retailers' occupation taxes, which are administered by the Illinois Department of Revenue alongside the state tax.

Source: 35 ILCS 120 Retailers' Occupation Tax Act; 86 Ill. Admin. Code Parts 130, 140, 150, 160; Illinois Tax Matrix (IDOR Publication PIO-101)

Illinois imposes the Retailers' Occupation Tax at two rates depending on the type of property sold. The general rate is 6.25% of gross receipts from sales of tangible personal property made in the course of business. A reduced rate of 1% applies to prescription and nonprescription medicines, drugs, and medical appliances, including products classified as Class III medical devices by the FDA used for cancer treatment pursuant to prescription, along with accessories and components related to those devices, modifications to motor vehicles for disability accessibility, and insulin, blood sugar testing materials, syringes, and needles used by human diabetics.

Effective January 1, 2026, the state eliminated the 1% tax on grocery sales (food for human consumption to be consumed off premises, excluding alcoholic beverages, cannabis-infused food, soft drinks, candy, and food prepared for immediate consumption), though municipalities and counties may impose a local 1% grocery tax by ordinance.

These rates apply only to state-level tax; local governments impose additional retailers' occupation taxes administered by the Illinois Department of Revenue.

Source: 35 ILCS 120/2-10; 86 Ill. Admin. Code § 130.311; Illinois Tax Matrix (IDOR Publication PIO-101)

Effective January 1, 2026, Illinois eliminated the 200-transaction threshold for economic nexus. Remote retailers without physical presence in Illinois must now register and collect retailers' occupation tax if they meet or exceed $100,000 in cumulative gross receipts from retail sales of tangible personal property to purchasers in Illinois during the preceding 12-month period.

Remote retailers must determine whether they meet the threshold on a quarterly basis, ending on the last day of March, June, September, and December, using a rolling 12-month lookback period. If the threshold is met or exceeded during a lookback period, the retailer must begin collecting and remitting all applicable state and local retailers' occupation tax at destination rates on all retail sales to Illinois purchasers.

Exempt sales, sales for resale, and sales made through marketplace facilitators (where the facilitator collects tax) do not count toward the $100,000 threshold.

Source: Illinois Department of Revenue ROT page; IDOR Bulletin FY 2026-12

Effective January 1, 2026, marketplace facilitators must register and collect Illinois retailers' occupation tax if they meet or exceed $100,000 in cumulative gross receipts from retail sales of tangible personal property to Illinois purchasers during the preceding 12-month period. The prior 200-transaction threshold was eliminated as of that date.

A marketplace facilitator is a person who, pursuant to an agreement with an unrelated third-party marketplace seller, facilitates a retail sale by listing or advertising tangible personal property for sale and collecting payment from the customer and transmitting it to the marketplace seller. When threshold requirements are met, the facilitator is liable for all applicable state and local retailers' occupation taxes on sales made through the marketplace, including both the facilitator's own sales and sales made on behalf of marketplace sellers.

Marketplace facilitators must determine threshold compliance quarterly, ending on the last day of March, June, September, and December, using a rolling 12-month lookback period.

Source: 35 ILCS 120/2; 86 Ill. Admin. Code Part 131; IDOR Bulletin FY 2026-12

Illinois uses two sourcing methods for retailers' occupation tax. Remote retailers without physical presence in Illinois apply destination sourcing: they collect tax at the rate in effect at the Illinois location to which tangible personal property is shipped, delivered, or where the purchaser takes possession.

Beginning January 1, 2025, retailers maintaining a place of business in Illinois also use destination sourcing when selling from locations outside Illinois. Retailers selling from inventory within Illinois continue to use origin sourcing, applying tax at the rate where the sale occurs or inventory is located.

Source: 35 ILCS 120/2-12; IDOR Destination-Based Sales Tax Assistance

Illinois law prohibits any person from engaging in the business of selling tangible personal property at retail in Illinois without a certificate of registration from the Illinois Department of Revenue. This requirement applies to both Illinois-based retailers and remote retailers who meet economic nexus thresholds or marketplace facilitator obligations. The statute authorizes the Department to require applicants to furnish a bond or other security under specified circumstances, particularly where owners or officers have prior tax compliance issues.

Registration methods and processing times

Retailers must register using Form REG-1 (Illinois Business Registration Application) through one of three methods:

• Online via MyTax Illinois (mytax.illinois.gov): Processing time is approximately one to two business days. This is the recommended method. Applicants click "Register a New Business (Form REG-1)" on the homepage and complete the web form without needing an existing MyTax account.
• Mail: A completed paper Form REG-1 may be mailed to the Department at the address on the form. Processing time is four to six weeks, and applications are processed on a first-come, first-served basis.
• In person: Applicants may visit a Department office to obtain and complete Form REG-1 with staff assistance.

Illinois law requires retailers to register before making any purchases, sales, or hiring employees subject to Illinois tax obligations.

Certificate of Registration

Upon approval, the Department issues a Certificate of Registration electronically for retailers' occupation tax accounts. The certificate is no longer printed and mailed. It lists the business's Sales and Use Tax Account ID, business name, address, effective date, registered tax types, and expiration date. Businesses access and print the certificate through their MyTax Illinois account by selecting "View more account options" and then "View Account Letters" in the Letters and Messages panel. If a business cannot access MyTax Illinois, it may request a paper copy from the Central Registration Division by emailing REV.CRD@illinois.gov and providing the Illinois account ID or license number and business name.

Registration timing for remote retailers

Remote retailers and marketplace facilitators who meet the $100,000 gross receipts threshold during a 12-month lookback period must register and begin collecting tax. The Department's guidance indicates that retailers who previously met the 200-transaction threshold (eliminated January 1, 2026) but do not meet the current $100,000 threshold should discontinue collecting tax and may have their registration status automatically changed to "voluntary use tax" status. The Department notifies affected retailers of registration status changes.

Tax site registration for destination-based sales

Retailers making destination-based sales must register tax sites for each local jurisdiction (county, municipality, or business district) where they have made or plan to make sales. Remote retailers and marketplace facilitators no longer need to manually add or remove sales locations before filing returns; all sales locations are available on one screen when filing Forms ST-1 and ST-2 through MyTax Illinois. Illinois-based retailers selling from locations outside Illinois must register new tax sites for destination-based sales using the "Maintain Locations" feature in MyTax Illinois or by contacting the Central Registration Division at 217-785-3707.

Source: 35 ILCS 120/2a; IDOR Business Registration; IDOR Publication 113, Registering Your Business; IDOR Bulletin FY 2026-12

The Illinois Department of Revenue assigns each retailer a filing frequency for Form ST-1 (Sales and Use Tax and E911 Surcharge Return) based on the retailer's average monthly tax liability. The Department reviews accounts annually and notifies retailers if their filing frequency changes.

Filing frequency thresholds

The Form ST-1 Instructions establish the following filing frequencies based on average monthly liability:

• Annual filing: Assigned to retailers with average monthly liability of $200 or less. The annual return covers the calendar year and is due by January 20 of the following year.

• Quarterly filing: Assigned to retailers with average monthly liability greater than $200. Quarterly returns cover calendar quarters ending March 31, June 30, September 30, and December 31.

• Monthly filing: The Department may notify a retailer that its filing frequency has been changed to a monthly requirement if average monthly liability is greater than $200.

The Form ST-1 Instructions state that the Department determines how often a retailer must file a return based on initial registration and annual liability. The Instructions note that filing requirements "based on your average monthly liability are determined as follows: If your average monthly liability is greater than $200, IDOR may notify you that your filing frequency has been changed to a monthly requirement."

Standard due date and weekend/holiday rule

Form ST-1 returns, regardless of filing frequency, are due on the 20th day of the month following the end of the reporting period. The Form ST-1 Instructions state: "You must file this return, along with any payment you owe, on or before the 20th day of the month following the end of your reporting period." If the due date falls on a weekend or state holiday, the return and payment are due the next business day.

Quarterly returns are due April 20, July 20, October 20, and January 20. Monthly returns follow the same 20th-day rule; for example, the January return is due by February 20.

Quarter-monthly accelerated payments

Retailers and servicepersons with average monthly tax liability of $20,000 or more must make quarter-monthly accelerated payments. The Illinois Department of Revenue's Sales & Use Taxes page states that these payments are "due the 7th, 15th, 22nd, and last day of the month."

Retailers subject to quarter-monthly payment requirements have two calculation options. The IDOR guidance explains that a retailer may remit a minimum of 22.5% of the actual tax liability for the current month, or may pay 25% of the actual liability reported for the same month in the preceding year. The quarter-monthly payments are in addition to the monthly Form ST-1 return, which remains due on the 20th of the following month and reconciles the four accelerated payments against total liability.

The IDOR guidance notes that "because the statutory threshold for mandated electronic funds transfer (EFT) program participation is $20,000 annual liability, most taxpayers will remit their quarter-monthly payments by EFT." Taxpayers who mail their quarter-monthly remittances to the Department must complete Form RR-3 (Sales and Use Tax Quarter-monthly Payment). Electronic funds transfer program participants do not complete or mail Form RR-3.

The Form ST-1 Instructions warn that a late-payment penalty applies "if you do not pay the amount you owe by the original due date of the return or were required to make quarter-monthly payments and failed to do so."

Electronic filing requirement

The Illinois Administrative Code Part 760 provides that effective January 1, 2023, "with respect to retailers whose annual gross receipts average $20,000 or more, all returns required to be filed pursuant to the Retailers Occupation Tax Act and Use Tax Act including, but not limited to, returns for motor vehicles, watercraft, aircraft, and trailers that are required to be registered with an agency of this State, shall be filed electronically."

Retailers who demonstrate that they do not have access to the Internet or demonstrate hardship in filing electronically may petition the Department to waive the electronic filing requirement. The regulation provides that retailers required to file electronically who fail to do so "may not take the discount allowed to reimburse them for the expenses incurred in keeping records, preparing and filing returns, remitting the tax and supplying data to the Department on request."

Filing requirement when no sales occur

The Form ST-1 Instructions state: "You must file Form ST-1 by the required due date even if you do not have gross receipts for a reporting period." This requirement applies to all assigned periods.

Source: 35 ILCS 120/3; Form ST-1 Instructions, for reporting periods January 2024 through December 2025; Illinois Department of Revenue, Sales & Use Taxes; 86 Ill. Admin. Code Part 760