Guide to Sales Tax in Illinois in 2025

Whether you’ve fully set up shop in Illinois, or simply ship there once in a while, it’s important you know whether your business is liable to their sales taxes. In our 10+ years of experience helping online businesses comply with taxes, we’ve found that tax policies are confusing. So we translated all the information from the Illinois Department of Revenue’s official sales tax laws into language that’s easy to understand.

This guide will tell you everything you need to know, plus direct you to the right places for handling any sales tax responsibility you may have.

What’s taxable in Illinois?

In Illinois, most types of goods where a physical product is transferred are taxable. Below is an overview of products that are generally taxable in Illinois. Some local cities or districts might have their own rules or exceptions, however. For example, the city of Chicago has its own local taxes on SaaS, cloud-based products, and some streaming content. Check out the Chicago Sales Tax Guide for specific rules in the Illinois capital.

• Tangible personal property: These are physical items. Illinois taxes most tangible products.
• Food sold for immediate consumption: This includes hot prepared food.
• Reduced rate items: A reduced rate of 1% applies to qualifying food that has not been prepared for immediate consumption (such as most food sold at grocery stores, excluding hot foods, alcoholic beverages, candy, and soft drinks), qualifying drugs, and medical appliances.

To be absolutely clear about which products are subject to sales tax, and which are exempt, check the Illinois Department of Revenue website.

What are non-taxable items in Illinois?

Illinois has a significant number of sales tax exemptions. Here are a few examples of non-taxable items that you don’t need to charge Illinois sales tax on:

• Most services: Generally, services are not taxable in Illinois.
• Software as a service (SaaS): SaaS is generally not taxable in Illinois, unless the provider transfers to the customer an API, applet, desktop agent, or a remote access agent to enable the customer to access the provider’s network and services.
• Digital goods: Similar to SaaS, digital goods are generally not taxable at the state level.
• Most groceries: Food that has not been prepared for immediate consumption (excluding hot foods, alcoholic beverages, candy, and soft drinks) is taxed at a reduced rate of 1%.
• Agricultural machinery and equipment
• Specific building materials (pending projects)
• Purchases with CalFresh benefits
• Prescription medication
• Medical devices
• Fuel for international flights
• Gold bullion issued by qualifying governments
• Newspapers and magazines

Illinois also exempts certain types of organizations from Illinois sales taxes like government agencies, some nonprofit organizations, and merchants purchasing goods for resale via exemption certificates.

When do you need to collect Illinois sales tax?

As a business owner selling taxable goods or services, you act as an agent of the state of Illinois by collecting tax from purchasers and passing it along to the appropriate tax authority. Sales and use tax in Illinois is administered by the Illinois Department of Revenue (DOR).

To help you determine whether you need to collect sales tax in Illinois, start by answering these three questions:

1. Do you have nexus in Illinois?
2. Are you selling taxable goods or services to Illinois residents?
3. Are your buyers required to pay sales tax?

If the answer to all three questions is yes, then you’re required to register with the state tax authority, collect the correct amount of sales tax per sale, file returns, and remit to the state. Failure to collect Illinois sales tax if you meet the criteria can lead to penalties and interest charges. It’s extremely important to set up tax collection at the point of sale — it’s near impossible to collect sales tax from customers after a transaction is complete.

Do you have sales tax nexus in Illinois?

The word “nexus” refers to a commercial connection in the state. Nexus determines the following questions for a state tax agency: Do you do business here, what kind, and how much? And when you do have nexus, that means you’re obligated to collect tax on your sales there. So the first question for you to answer is whether you have nexus in Illinois.

Illinois physical nexus

| Nexus Trigger | Description | |-------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------| | Physical Presence | Includes having a store, office, warehouse, distribution center, storage space, employee, or representative in Illinois. | | An Affiliate | Ties to business affiliates in Illinois engaging in specified operations like design or solicitation of sales on behalf of the retailer. Affiliate nexus can be established if the remote retailer pays a commission to a person in Illinois and exceeds $10,000 in sales during the preceding four quarterly periods. | | Click-Through Nexus | Involves agreements to reward Illinois residents for referring potential purchasers through internet links, resulting in over $10,000 in sales in the preceding four quarterly periods. | | Trade Shows | Nexus is usually not established if attending conventions or trade shows in Illinois under specific conditions: attendance at no more than two trade shows per year, present no more than eight days in total, and gross receipts from sales at trade shows do not exceed $10,000 annually. |

For more information, see the Illinois Department of Revenue Use Tax Guidance for Remote Sellers, General Definitions, Use Tax, and Trade Show Appearances.

Illinois economic nexus

• A significant amount of sales in California in the preceding twelve months. This is called an economic nexus, a sales tax nexus determined by economic activity, i.e. – the amount of sales you make in a particular state, not including sales through a marketplace.
• The threshold in California is $100,000 in gross annual sales or 200 separate transactions.

To learn more about how this works, check out the Ultimate Guide to US Economic Nexus.

Gross receipts include taxable and exempt sales. Gross receipts do not include:

• Sales for resale
• Sales of tangible personal property that is required to be registered with an agency of Illinois, including motor vehicles, watercraft, aircraft, and trailers
• Sales of tangible personal property to purchasers in Illinois that a remote retailer makes through a marketplace so long as the remote retailer has received certification that the marketplace facilitator assumes the rights and duties as the retailer under the Retailers’ Occupation Tax Act (including applicable local occupation taxes) with respect to those sales
• Occasional sales

A remote retailer shall determine on a quarterly basis, ending on the last day of March, June, September, and December, whether it meets or exceeds either threshold for the preceding 12-month period. A remote retailer or marketplace facilitator shall begin collecting taxes for sales beginning on the first day of the quarter immediately following the end of the 12-month lookback period.

To learn more about how this works, check out the Illinois Guidance for Remote Retailers and Marketplace Facilitators as set forth by the Leveling the Playing Field for Illinois Retail Act.

Sales tax rates in Illinois

Tax rates can vary based on the location of your business and the location of your customer, plus the levels of sales tax that apply in those specific locations. The base Illinois state sales tax for general merchandise is 6.25%. There are additional levels of sales tax at local jurisdictions, too. Currently, combined sales tax rates in Illinois range from 6.25% to 11%, depending on the location of the sale.

The total Illinois sales tax rate a customer will pay is made up of:

• A base Illinois state sales tax of 6.25%
• Additional local sales tax rates, which can vary by city, county, and special district.

Check out MyTax Illinois Tax Rate Finder or Quaderno's Sales Tax Calculator to see your product's tax rate, amount, and final price in Illinois.

How to calculate sales tax in Illinois

Illinois generally uses a destination-based sales tax system. This means you’re responsible for applying the sales tax rate determined by the ship-to address on all taxable sales. Add it to the price of your product, and collect the full payment.

How does Illinois sales tax work with marketplaces?

Marketplaces in Illinois are required to collect, report, and pay the tax on sales via their marketplaces. Marketplace sellers are, therefore, not required to pay taxes on what they sell through a marketplace. Here are some special rules that apply to marketplaces in Illinois:

• Taxable and nontaxable sales are counted towards a marketplace facilitator’s economic nexus.
• Marketplace sellers must count the sales made through marketplaces towards their economic nexus even if they don’t have to pay taxes on those sales.
• Marketplace sellers are not required to register for economic nexus if all their sales are made via a marketplace.

See Illinois’s Guidance for Remote Retailers and Marketplace Facilitators as set forth by the Leveling the Playing Field for Illinois Retail Act for more information.

Sales tax on shipping charges in Illinois

Illinois does apply sales tax to shipping costs if the item being shipped is subject to tax. The rule of thumb is that if what you’re selling is subject to tax, then the shipping charges are also subject to tax. (And vice versa is true: If the item being shipped is not subject to sales tax, neither are the shipping charges.) If you happen to be shipping products that are both taxable and nontaxable, then shipping charges for the entire shipment are subject to tax.

How to register for an Illinois sales tax permit

Remote sellers register for sales tax in Illinois according to where you are based. US businesses can register via MyTax Illinois, an online tax portal. (This portal is also where you’ll file and pay your tax returns. For information on how to file, check out this Illinois sales tax filing guide.)

International businesses must register by filling out a form and emailing it to the Illinois tax office. You’ll find more information below. To apply, you’ll need to provide the DOR with certain information about your business, including but not limited to:

• Business name, address, and contact information
• Federal EIN number
• Date business activities began or will begin
• Projected monthly sales
• Projected monthly taxable sales
• Products to be sold

US businesses

The first step is to register for a sales tax permit.

1. Go to the MyTax Illinois website, which will immediately take you to the first step of the REG-1 New Business registration form.

2. Provide standard personal information, as well as more business details. When it’s time to provide your business’ legal address, you must verify it by clicking the button below.

3. You’re required to select your primary business activity and primary business type (e.g. Advertising & Business Services, Computer/Programming/Software, etc.). If that’s not enough to capture everything your business does, you’re also given the option to select a *secondary *activity and type.

4. Then follows a series of questions about your industry and the products you sell. These are simple Yes or No questions, and you can click on whichever answer fits your business. Note: Whenever you see a hyperlinked question with blue text, simply click on it to read helpful clarification! See below.

5. Then you’ll see a screen that asks all remote retailers to immediately click “Next”. This section is for brick-and-mortar businesses only. If you don’t have a permanent location in Illinois, then carry on!

6. Now at the Changing Locations screen, you should check off all the municipalities and counties in Illinois where you currently tax at a destination rate. You can scroll down, click through the list, or use the search filter feature.

7. Finally, enter information about the responsible parties, i.e. the people responsible for the business’ tax obligations. That could be one or more people, and you’re free to enter someone else in the form.

8. Submit!

Your application takes about 1-2 days to process. You’ll be notified via email.

Once reviewed and approved, you should receive a sales tax permit. When you do, you’ll also be assigned a filing frequency: monthly, quarterly, or yearly.

International businesses

In summary, the registration process is pretty simple! You must fill out Form REG-1, Illinois Business Registration Application and email it to [email protected].

However, the form requires a lot of information, so it’s worth looking through and gathering all the necessary documents and data ahead of time. Here’s a sneak peek:

Things to note about this form:

• Question 1 asks about a Federal Employer Identification Number (FEIN or EIN). If you aren’t familiar with this, take a moment to read about what an EIN number is and how to get one.
• Although the form is designed for US addresses, simply write in your full location and country in the fields provided for “State,” etc.
• You must print it out and sign it physically, then rescan to email. Electronic signatures are not accepted.

Processing could take anywhere from 6 to 8 weeks. Once approved, you’ll be assigned a filing frequency: monthly, quarterly, or yearly.

Now that you’re registered for sales tax, you can activate your MyTax Illinois account.

After your application is reviewed and approved, you should receive a seller’s permit and registration certificate. You’ll also receive a security code in the mail that will enable you to create an online tax account. The website doesn’t state how long you should expect to wait, but if you have any questions, you can email the tax office for out-of-state sellers at [email protected].

Once registered, you’ll be assigned a tax filing frequency: monthly, quarterly, or yearly.

Sales tax guides for other states

• Alabama Sales Tax Guide
• Alaska Sales Tax Guide
• Arizona Sales Tax Guide
• Arkansas Sales Tax Guide
• California Sales Tax Guide
• Colorado Sales Tax Guide
• Connecticut Sales Tax Guide
• Delaware Sales Tax Guide
• Florida Sales Tax Guide
• Georgia Sales Tax Guide
• Hawaii Sales Tax Guide
• Idaho Sales Tax Guide
• Indiana Sales Tax Guide
• Iowa Sales Tax Guide
• Kansas Sales Tax Guide
• Kentucky Sales Tax Guide
• Louisiana Sales Tax Guide
• Maine Sales Tax Guide
• Maryland Sales Tax Guide
• Massachusetts Sales Tax Guide
• Michigan Sales Tax Guide
• Minnesota Sales Tax Guide
• Mississippi Sales Tax Guide
• Missouri Sales Tax Guide
• Montana Sales Tax Guide
• Nebraska Sales Tax Guide
• Nevada Sales Tax Guide
• New Hampshire Sales Tax Guide
• New Jersey Sales Tax Guide
• New Mexico Sales Tax Guide
• New York Sales Tax Guide
• North Carolina Sales Tax Guide
• North Dakota Sales Tax Guide
• Ohio Sales Tax Guide
• Oklahoma Sales Tax Guide
• Oregon Sales Tax Guide
• Pennsylvania Sales Tax Guide
• Rhode Island Sales Tax Guide
• South Carolina Sales Tax Guide
• South Dakota Sales Tax Guide
• Tennessee Sales Tax Guide
• Texas Sales Tax Guide
• Utah Sales Tax Guide
• Vermont Sales Tax Guide
• Virginia Sales Tax Guide
• Washington Sales Tax Guide
• Washington, D.C. Sales Tax Guide
• West Virginia Sales Tax Guide
• Wisconsin Sales Tax Guide
• Wyoming Sales Tax Guide