With a state sales tax rate of 6.25%, plus an average local rate around 2%, Illinois has one of the highest sales tax burdens in the United States. Understanding sales tax in Illinois laws and using exemptions judiciously allows consumers to reduce costs on major purchases. Likewise, companies doing business in Illinois must closely follow registration and collection requirements to remain compliant. This guide provides Illinois Sales Tax Calculator and an overview of Illinois sales tax and how it impacts taxpayers.
Illinois Sales Tax Calculator
The Illinois sales tax calculator is an online tool that helps calculate the total sales tax due for purchases made in Illinois. To use the calculator, you first select the county and city where the purchase is being made. This will populate the state, county, and city tax rates based on the location selected. You then enter the total purchase price. The calculator will automatically calculate the estimated total sales tax by applying the applicable tax rates to the purchase price. The total tax amount and breakdown of state, county, and city taxes is displayed.
Illinois Sales Tax Calculator
Illinois Sales Tax Calculator
Illinois sales tax calculator allows you to easily estimate the sales taxes to be collected at checkout for purchases in Illinois. The automatic calculation saves time and ensures tax rates are applied correctly based on the purchase location. The calculator is a convenient way for Illinois businesses and consumers to estimate sales tax amounts when preparing invoices, shopping online, or budgeting purchases.
Overview of Illinois Sales Tax
Illinois first enacted a 2% state sales tax in 1933 which applied to tangible goods. The rate increased gradually over the decades before reaching 6.25% in 2017. Combined with local sales taxes imposed by cities, counties and transportation districts, Illinois residents can pay over 8% in highly taxed areas.
In addition to the general rate, Illinois imposes sales tax on select services, alcohol, gasoline, cigarettes, and other items. The state also taxes groceries at 1%. Vehicle sales incur taxes based on the larger of the purchase price or 80% of the fair market value.
What Transactions are Subject to Sales Tax in Illinois?
Illinois levies its 6.25% state sales tax, plus any local taxes, on sales of most tangible goods. The state also taxes various services including:
- Restaurant meals
- Hotel stays
- Streaming media like Netflix or Spotify
- Telecom services including home phone and cellular plans
- Automobile rentals
- Amusements like concert and theater tickets
Though expansive, Illinois exempts some goods like prescription medicine and groceries eligible for SNAP from its general rate. But many routine purchases by consumers and businesses face sales tax in Illinois.
Exemptions to Sales Tax in Illinois
Illinois provides exemptions on the following transactions:
- Prescription drugs and medical supplies – Sales of prescription medication, medical equipment, and devices are exempt from general sales tax. However, many over-the-counter medications do incur tax.
- Groceries – Food that qualifies for federal SNAP benefits is exempt. However, candy, soft drinks, prepared food, dietary supplements and grooming items still face the 1% tax.
- Manufacturing machinery and tools – Certain equipment used for production is exempt.
- Farm machinery and equipment
- Trade-in value of motor vehicles – Only the difference between the purchase price and trade-in amount is taxed.
- Nonprofits – Charities and certain schools can buy goods tax exempt with an E-number.
Understanding Illinois’ exemptions allows taxpayers to reduce costs by avoiding unnecessary sales tax.
Who Collects and Remits Sales Tax in Illinois?
In Illinois, the responsibility to properly charge, collect, report, and remit sales tax falls on the retailers making taxable sales. The tax is collected from consumers at the point of sale.
Both in-state and out-of-state sellers must collect Illinois sales tax when making taxable sales into the state in excess of $100,000 per year. Following the Wayfair Supreme Court decision, Illinois enacted economic nexus thresholds that require remote retailers to collect based on sales volume.
Marketplace facilitators like Amazon must collect on behalf of third-party merchants when they exceed Illinois transaction thresholds.
How Illinois Uses Sales Tax Revenue
In fiscal year 2022, Illinois collected over $9.3 billion in state sales tax revenue plus another $3.5 billion in local sales taxes. These funds support essential public services including:
- Public education – K-12 schools, community colleges, state universities.
- Healthcare – Medicaid, mental health services, support for local hospitals.
- Public safety – State police, courts, corrections.
- Transportation – Highway maintenance, transit, driver services.
- Local governments – Revenue sharing to support municipal services.
- Pensions – Teacher, state worker, and public safety retirement funds receive a portion of sales taxes.
Without robust sales tax collections, Illinois would struggle to adequately fund these programs and others that its residents rely on.
Recent and Possible Future Changes to Illinois Sales Taxes
Illinois frequently updates its sales tax policies through new legislation. Recent changes include:
- Online sales tax expansion – Illinois passed economic nexus provisions in 2018 after the Wayfair case opened the door for states to tax more remote sales.
- Grocery tax repeal – The state stopped taxing groceries in 2020 but allowed the 1% local tax to remain.
- Gasoline and cigarette tax increases – Illinois hiked fuel and tobacco taxes in 2019 to increase revenue.
- Sales tax base expansion – Taxation of more services like streaming entertainment was enacted to grow collections.
- Temporary tax holidays – Illinois provides occasional sales tax holidays for back to school purchases.
Ongoing proposals that may impact sales tax laws in Illinois include further base expansion to more services and steeper rate hikes. Illinois also faces pressure to cut sales taxes on everyday goods while increasing taxes on luxury services.
Sales Tax Compliance Tips for Illinois Businesses
Any business that makes retail sales of goods or covered services in Illinois must collect and remit the appropriate sales taxes. Useful tips for staying compliant include:
- Obtain a tax ID number – Register for an account with the Illinois Department of Revenue after crossing economic nexus thresholds.
- Integrate sales tax software – Using solutions like AvaTax or Taxjar can simplify rate calculations, filings, and remittance.
- Charge all applicable rates – Ensure your POS system applies the correct state and local tax rate based on Illinois delivery addresses.
- Collect for online and catalog sales – Remit Illinois taxes on any orders shipped to Illinois addresses in excess of the economic nexus standard.
- File returns on time – Returns for state tax are due the 20th of the next month. Local return deadlines vary.
- Keep exemption certificates – Maintain any valid tax exemption documents from customers like resale or nonprofit certificates.
Proper sales tax compliance takes diligence but is crucial for any business making taxable sales into Illinois. Consider outsourcing sales tax management if struggling to keep up internally. Failing to collect, report, and remit the full amounts owed can lead to audits, penalties, and liens.
Conclusion
With combined state and local rates reaching over 8% in Chicago, Illinois imposes some of the highest sales tax burdens in the country. This earns substantial revenue for the state but also drives shoppers into neighboring Indiana and online. While rates may climb further and the tax base expand, Illinois is also sensitive to pushing its advantage over competing states too far. This leads to periodic exemptions, holidays, and cuts providing brief relief to taxpayers. But the underlying dynamics around sales tax in Illinois will continue posing challenges in 2023 for both policymakers hoping to fund government services and businesses required to collect taxes in a complex marketplace.
