Chicago Sales Tax Guide for Businesses in 2025

No matter where you live or where your online business is based — if you have customers in Chicago, you must follow city and local sales tax rules in addition to Illinois’s rules. That’s what this guide is for! This guide includes everything you need to know about digital tax laws in Chicago, whether your customers live in Lincoln Park or South Shore.

Chicago Tax Jurisdiction Breakdown for 2025

• Illinois State Sales Tax: 6.25%
• Cook County Sales Tax: 1.75%
• Chicago City Sales Tax: 1.25%
• Regional Transport Authority (RTA): 1.0%

What is the sales tax rate in Chicago, Illinois?

The minimum combined 2025 sales tax rate for Chicago, Illinois is 10.25%. This is the total of state, county and city sales tax rates. The Illinois sales tax rate is currently 6.25%. The Cook county sales tax rate is 1.75%. The Chicago sales tax rate is 1.25%.

The city of Chicago also has a special local sales tax to fund the public transportation system. The RTA tax is an additional 1%.

These rates go for standard taxable products. But other rates might apply to your business.

If you’re selling “vice” products like tobacco or alcohol, you might have an increased rate. If you’re selling essential items, such as medicine or clothing, or educational materials, you might have an exempt or reduced rate. More on that next!

What products are exempt from Chicago sales tax rate?

• Prescription drugs
• Groceries (Unprepared items only; ready-to-eat products and prepared meals are taxable)
• Medical devices

What digital products are taxed in Chicago?

A digital product is any product that’s stored, delivered, and used in an electronic format. These are goods or services that the customer receives via email, by downloading them from the Internet, or through logging into a website.

Most digital products are not taxable in the entire state of Illinois. But the city of Chicago is a unique case because some digital products are taxed by the city itself, but not by the state. So if you’re selling elsewhere in Illinois, your SaaS and cloud-based products will not be taxed.

Chicago taxes the following digital products in special local ways:

• Software-as-a-Service (SaaS) and some other cloud-based products
• Video streaming, audio streaming, and online games

How are SaaS and cloud-based products taxed in Chicago?

While Illinois typically doesn’t tax SaaS, seeing it as a service, Chicago sees it as a leased product. There’s a lesser-known tax called the Chicago Personal Property Lease Transaction Tax. This local tax often gets overlooked because it isn’t technically a sales tax.

The Chicago tax rate for SaaS and cloud-based products is 9%.

How is online streaming content taxed in Chicago?

To cover digital products such as video streaming, audio streaming, and online games, Chicago has an Amusement Tax, which applies to entertainment that is delivered electronically. This excludes streaming content of an educational nature.

The Chicago tax rate for online streaming content is 10.25%.

How does Chicago sales tax compare to the rest of Illinois?

Overall, Chicago's sales tax rate is on the higher end compared to most other regions in Illinois due to additional city taxes. Some areas may only have a rate close to the state minimum of 6.25%, while others, depending on county and local taxes, may reach around 9% or higher.

Chicago is also the only place in the state where SaaS and cloud-based services are subject to tax, a 9% Personal Property Lease Transaction Tax.

Learn more about sales tax rules state-wide in this Business Guide to Sales Tax in Illinois.

What creates sales tax nexus in Chicago?

Since Chicago is located in Illinois, it follows the same state-level sales tax nexus rules except for the economic nexus. Chicago has its own special rule for economic nexus, since the city has its own local tax on some digital products.

Forms of Illinois state sales tax nexus include:

• Economic nexus: When a business sells goods worth $100,000 OR makes 200 sales of tangible personal property in the state within the previous or current tax year. More on that below!
• Physical location: This could be an office or a warehouse holding your inventory.
• Employee location: If you have an employee or any other type of representation based in a particular state or city, your business must register for sales tax there.
• Affiliate nexus: If you rely on in-state businesses to promote and refer your business, and you receive a substantial amount of income through these affiliates, then you have sales tax nexus.
• Trade Shows: Even if you don’t have real estate in a place, if you visit trade shows or markets for more than 15 days in the calendar year, that’s enough of a physical present to constitute sales tax nexus in Illinois.

Chicago economic nexus as a remote seller

If your business is fully located outside of Illinois, then economic nexus is your main concern. Here’s how it works.

The economic threshold amount refers to your total sales in the jurisdiction, within the last four consecutive calendar quarters.

For most products, this means that if your annual sales in Illinois remain below $100,000 or 200 transactions, then you don’t need to worry about sales tax at all. Phew!

But once your sales do surpass the threshold, then you must register for sales tax and comply with all of the Illinois rules around tax rate and collection, invoices, and filing returns.

Also, if you sell the specific digital products that are taxed in Chicago, you must follow another rule.

Chicago’s economic nexus rule for SaaS, cloud-based products, and streaming content:

When an out-of-state business earns $100,000 or more from Chicago residents during the most recent four calendar quarters, it must start collecting the Personal Property Lease Transaction Tax and the Amusement Tax.

Who needs a seller’s permit in Chicago?

Any business with sales tax nexus, according to the rules above, must apply for a seller’s permit in Illinois right away.

The seller’s permit comes with a sales tax registration number, which establishes you in the Illinois tax system as a legal business. This number tracks your business through the system: the taxes you pay, the tax credits you receive, plus the tax you charge from customers.

How to get a seller’s permit in Chicago

So, it turns out you do need to register for tax in Chicago. Don’t worry! Just follow these instructions on how to register for sales tax in Illinois and that will cover you across the state.

How to calculate Chicago sales tax?

Once you’re registered for taxes, you’re expected to apply sales tax to every taxable sale to a Chicago resident. That means 10.25% for most products.

If your customer is a fellow business, and they’ve provided a valid sales tax exemption certificate, then adding and collecting tax isn’t necessary.

How to collect sales tax in Chicago

Tax-compliant receipts in Chicago

In order to comply with tax laws, you should include the following information on your receipts or invoices to customers in Chicago:

• Your business’ name and address
• Your business’ sales tax registration number
• Invoice date
• Invoice sequencing number
• Buyer’s name and address
• Buyer’s sales tax registration number, if they have one.
• sales tax (amount and rate) applied to each item
• Final amount after tax is added

The easiest solution for the sales tax receipt would be to use a sales tax software that automatically generates and sends all invoices (as soon as the sale is complete), and also stores them in the cloud for you.

Quaderno provides automatic tax invoicing for every transaction. The app sends tax-compliant receipts, invoices, and credit notes automatically, on the spot. You can also set up recurring invoicing.

In fact, Quaderno helps automate many other parts of tax compliance, from adding the correct tax rate calculations to your sales to providing instant reports for filing returns. Give it a try for free.

How to file and pay sales tax in Chicago

Charging and collecting tax is only the first half of staying compliant. The second half is filing returns and paying whatever you might owe to the government.

Frequency for sales tax returns in Illinois:

• Monthly: Businesses that collect more than $200 in sales tax per month
• Quarterly: Businesses collecting less than $200 per month but more than $50 a quarter
• Annually: Businesses collecting less than $50 in tax per month

Illinois sales tax returns are due on the 20th day of the month following the reporting period. So that means the April tax return is due by May 20th. If the due date falls on a weekend or holiday, then your sales tax filing is generally due the next business day.

You can usually file and pay online! Check out more instructions on how to file sales tax in Illinois.