Does Public Act 100-587 increase the tax rate?
Does the Act create a new tax in Illinois?
No. Prior to Illinois Public Act 100-587, remote sellers were not required to collect Illinois Use Tax unless they established physical presence in the State. Illinois purchasers acquiring tangible personal property from remote sellers without physical presence have always been subject to Illinois Use Tax.
Who is a remote seller?
A remote seller is an out-of-state retailer that sells tangible personal property to Illinois purchasers from an out-of-state location. If a remote seller has nexus (physical presence or the ‘new’ nexus created by Illinois Public Act 100-587) with Illinois, it is required to register to collect and remit Illinois Use Tax on its sales to Illinois purchasers.
What activities should a remote seller examine to determine whether they have physical presence in Illinois?
Physical presence includes, but is not limited to, the following:
- having an office or other facility in Illinois,
- having employees in Illinois, or
- having other representatives operating in Illinois.
See 86 Ill Adm. Code 150.201 for the definition of a “retailer maintaining a place of business in this State.”
What is Use Tax?
Use Tax is a tax “imposed upon the privilege of using in Illinois tangible personal property purchased at retail from a retailer.”
Who is an Illinois purchaser?
An Illinois purchaser is a person in Illinois who, through a sale at retail, acquires the ownership of tangible personal property, to be used or consumed in Illinois, for a valuable consideration.
Is there a list detailing what tangible personal property is taxable and nontaxable for Use Tax?
Yes, the Illinois Remote Seller Use Tax Matrix is a good resource, identifying the most frequently inquired about items and whether they are subject to Sales and Use Tax. Tangible personal property commonly sold by remote retailers includes, but is not limited to, the following:
- soft drinks;
- grooming and hygiene products;
- grocery-type food, not prepared for immediate consumption;
- books, DVDs, and computer games;
- prewritten and “canned” computer software;
- prepaid telephone calling cards and other prepaid telephone calling arrangements.
Information for Remote Sellers
How do I determine whether I meet the threshold requiring me to register with the Department to collect Illinois Use Tax?
Retailers must review their gross receipts and transactions to purchasers in Illinois for the period from September 1, 2017, through August 31, 2018. The remote seller must register with the Department to collect and remit Use Tax on sales to Illinois purchasers if, for the preceding 12 months, either of the following thresholds apply:
- the remote seller’s cumulative gross receipts from sales of tangible personal property to purchasers in Illinois are $100,000 or more; or
- the remote seller enters into 200 or more separate transactions for the sale of tangible personal property to purchasers in Illinois.
As part of the threshold determination, remote sellers must exclude the following types of sales:
- sales for resale (see 86 Ill. Adm. Code 130. 210),
- sales of tangible personal property that is required to be registered with an agency of this State, including motor vehicles, watercraft, aircraft, and trailers, when these sales are made from locations outside Illinois to Illinois purchasers, and
- occasional sales (see 86 Ill. Adm. Code 130.110).
All sales other than these, even if they are exempt from tax, must be included for purposes of calculating the thresholds.
What are gross receipts?
Gross receipts means all consideration actually received for a sale by a retailer. See 86 Ill. Adm. Code 130.401.
For purposes of determining whether I meet the threshold requiring me to register with the Department, what is a separate transaction?
A separate transaction for purposes of threshold determinations means sales transactions that are documented on separate invoices, regardless of the manner in which the tangible personal property is delivered to the purchaser.
What if I determine that I do not meet either of the thresholds on October 1, 2018?
The remote seller must determine, on a quarterly basis, whether it is obligated to begin collecting Illinois Use Tax. In this case, for each quarter ending on the last day of March, June, September, and December, the remote seller must examine its sales to Illinois purchasers for the immediately preceding 12-month period. If the remote seller met either threshold for the immediately preceding 12-month period, the remote seller is required to register to collect and remit Use Tax for a one-year period.
EXAMPLE: Remote Seller A begins making sales to Illinois purchasers on December 1, 2018. On December 31, 2018 (its first quarterly period after September 30, 2018), the remote seller determines it has not met either selling threshold for the previous 12 months. At the end of March 2019 (its next quarterly period), however, the remote seller determines it made $200,000 in sales to Illinois purchasers during the preceding 12-month period. As a result, the remote seller is required to register to collect and remit Use Tax on sales to Illinois purchasers for a one-year period beginning April 1, 2019, through March 31, 2020. On March 31, 2020, the remote seller must examine its sales to Illinois purchasers for the one-year lookback period beginning April 1, 2019, through March 31, 2020, to determine whether the remote seller must continue to collect Use Tax.
When must a remote seller begin collecting and remitting Illinois Use Tax?
Illinois requires remote sellers with nexus under Illinois Public Act 100-587 to begin collecting Use Tax on October 1, 2018. To ensure the remote seller's registration is properly processed by October 1, 2018, the remote seller should complete the registration prior to October 1, 2018. The remote seller should indicate a start date of October 1, 2018, on the application. If a remote seller does not meet the registration requirements on October 1, 2018, but does meet the requirements later, then the remote seller is required to register to collect and remit Illinois Use Tax the beginning of the quarter following the quarter in which it met either of the thresholds.
I already voluntarily collect and remit Use Tax, should I continue?
Remote sellers that were registered in Illinois prior to Public Act 100-587 and the U.S. Supreme Court's decision in South Dakota v. Wayfair, Inc. will continue to collect and remit Use Tax. However, if you meet either threshold, your status with the Department will change to that of a mandatory Use Tax collector. You must contact the Department to update your registration. This will not affect the way you collect and remit Use Tax to the Department. Once you become a mandatory Use Tax collector, you will be subject to all provisions of the Use Tax Act, including late file/late pay penalties.
Are remote sellers liable for Use Tax on all sales into Illinois?
Remote sellers are required to collect and remit Use Tax on all sales of tangible personal property to Illinois purchasers, unless an exemption applies (e.g., a sale for resale).
Are remote sellers required to collect and remit local (city or county) taxes?
No. Local Sales Tax refers to the local retailers’ occupation taxes that are imposed on retailers engaged in the business of making sales of tangible personal property in a local taxing jurisdiction in Illinois. These taxes are generally imposed by home rule or non-home rule jurisdictions, mass transit districts, or counties and are remitted to the Department. They are disbursed to local governments based upon where the sales occurred. For the local sales taxes that are imposed on general merchandise and administered by the Department, the law does not authorize a local use tax to be imposed on purchases. As a result, when a remote seller makes a sale of tangible personal property to an Illinois purchaser from a location outside Illinois, there is no local use tax to collect. Generally, only the 6.25% or 1% Illinois Use tax must be collected and remitted to the Department by remote sellers. However, if the tangible personal property that is sold is in the inventory of the remote seller that is located in a jurisdiction in Illinois at the time of its sale, the remote seller would incur Retailers’ Occupation Tax, including any applicable local retailers’ occupation taxes on this transaction. See 86 Ill. Adm. Code 270.115(d).
As a remote seller am I liable for Illinois Business or Individual Income Tax in Illinois?
In general, a resident of Illinois will always be subject to these taxes. Activity conducted in interstate commerce may establish sufficient nexus with Illinois to permit imposition of these taxes on a non-resident taxpayer, as well, when the nonresident earns or receives income in Illinois. The fact that the Illinois Income Tax Act requires a nonresident taxpayer to allocate or apportion income to Illinois does not create a presumption that the taxpayer has nexus. See 86 Ill. Adm. Code Parts 100.3000 through 100.3500.
Does Illinois provide compensation to reimburse retailers for some administrative expenses of Use Tax collection?
Yes. A retailer may deduct 1.75% of the Use Tax due on timely filed and paid returns. The discount is not allowed on excess tax collected (i.e., tax improperly collected). In the case of partial payment or accelerated payors, the discount will be calculated on the portion of timely paid tax. If a taxpayer is mandated to electronic file and fails to electronically file Form ST-1, the taxpayer cannot claim this discount.
If I am a remote seller who sells through a marketplace, must I register to collect Illinois Use Tax?
Yes. You are required to register to collect and remit Illinois Use Tax, provided you meet either of the thresholds, unless the marketplace is collecting and remitting Use Tax on sales made into Illinois. We recommend contacting your marketplace for more information.
If I make sales through my own website, must I register to collect Illinois Use Tax?
Yes. You will be required to register to collect and remit Illinois Use Tax, even if you don’t have a physical presence in Illinois, if you sell tangible personal property to Illinois purchasers and meet either threshold.
How do I register with the Department?
Register with the Department electronically using MyTax Illinois available at mytax.illinois.gov.
- To register a new business, click on the blue button that says “Registration,” and then click “Register a new Business” to complete Form REG-1, Illinois Business Registration Application. After you receive an email that the application has been processed, allow one business day before signing up for MyTax Illinois. To create a MyTax Illinois account, click on the “Sign up Now” button, and submit the requested information.
- If you already have a MyTax Illinois account, you can register for new tax types by simply logging into your MyTax Illinois account and clicking on “Register for New Tax Accounts” to complete the registration.
Contact our Central Registration Division at 217 785-3707 for information or assistance with registering your business.
Note: There is no charge to register with the Department.
What is the Use Tax rate?
The Use Tax rate is 6.25% for general merchandise and 1% for qualifying food, drugs and medical appliances. See 86 Ill. Adm. Code 130.310 and 130.311 for information about what items qualify as food, drugs, and medical appliances. To determine the appropriate Use Tax rate for your sale, refer to the Illinois Remote Seller Use Tax Matrix.
Once I register with the Department, when is the tax due?
You must file Form ST-1, Sales and Use Tax and E911 Surcharge Return, along with any payment you owe, on or before the 20th day of the month following the end of your reporting period. Once you are registered you will receive a letter with your specific filing frequency.
How do I file and pay the tax due?
Once you are registered with the Department, you can use MyTax Illinois, available at mytax.illinois.gov, to file your Form ST-1. MyTax Illinois also allows for electronic payment of any tax due.
You can also file Form ST-1 using a third-party software vendor or through our Electronic Filing Program.
Remote sellers must report Use Tax on Form ST-1, Step 3,
- Line 6a for sales associated with general merchandise purchases, and
- Line 7a for sales associated with food, drug, and medical appliance purchases.
Is Illinois Public Act 100-587 being applied retroactively, and, if I have been selling in Illinois for a while, must I remit tax for sales prior to October 1, 2018?
No. The Department will begin enforcing Public Act 100-587 on October 1, 2018. Sellers with no physical presence in Illinois are not responsible for collecting and remitting tax on sales prior to that date.
How often are remote sellers required to file Use Tax returns?
A remote seller's filing frequency is based on the information provided with registration. Remote sellers will be notified by the Department of their filing frequency (monthly or quarterly) based on their registration. The Department may review a remote seller's filing frequency on an annual basis and change the filing frequency based on the remote seller's filing history. The Department will notify the remote seller if the Department changes the filing frequency.
Are remote sellers subject to audit by the Department?
Yes. Remote sellers are subject to audit like any other business.
Has Illinois signed the Streamlined Sales Tax Agreement?
Illinois has not signed the Streamlined Sales Tax Agreement and is not a participating state.
If I am an Illinois retailer that makes remote sales to multiple other states, is there an easy way for me to register in those states?
We recommend you contact each state in which you have sales. See https://www.taxadmin.org/state-tax-agenciesfor contact information..
What if I determine I no longer meet either threshold?
If you determine that you are no longer required to collect and remit Use Tax, you must contact the Department to update your registration. If your registration is not updated with the Department, you will be considered to be actively registered with the Department and required to collect and remit Illinois Use Tax.
I am a Direct Wine Shipper, does Public Act 100-587 affect my registration, collection and remittance requirements to Illinois?
No. Direct Wine Shippers are required to register to collect and remit Use Tax regardless of the thresholds contained in P.A. 100-587. See 235 ILCS 5/5-1(r).
Information for Illinois purchasers
What if an Illinois resident purchases tangible personal property over the internet?
If an Illinois resident is not charged Illinois Use Tax on tangible personal property shipped into Illinois, the purchaser must report Illinois Use Tax on the purchase price directly to the Illinois Department of Revenue. The individual should report the Illinois Use Tax on Form IL-1040, Individual Income Tax Return, or ST-44, Illinois Use Tax Return.
What effect does Illinois Public Act 100-587 have on Illinois purchasers?
Illinois purchasers may see an increased number of remote sellers collecting Illinois Use Tax.
Information for Local Governments
Will there be additional retailers on the Annual Taxpayer Location Address List for my taxing district?
No. Public Act 100-587 will not cause an increase in the number of retailers located in your taxing district.
Do the retailers in my taxing district need to collect additional Illinois taxes?
No. The retailers in your location are not affected by Public Act 100-587, because they incur Retailers’ Occupation Tax (ROT) on their retail sales. Public Act 100-587 affects collection of Illinois Use Tax by remote sellers only.
How is the local government portion of the taxes distributed?
The 1.25% local share of Sales Tax and any local add-on Sales Taxes are administered by the Department of Revenue and allocated to the local government where the Illinois retailer or distribution center is located.
The 1.25% local share of Use Tax is allocated to municipalities and other taxing jurisdictions based on set statutory provisions. The remainder of the local government portion is allocated to municipalities (other than Chicago) and counties based on their relative population as compared to the statewide population.
Can local governments expect a large increase in revenue?
No. Most of the large internet retailers are already voluntarily collecting and remitting Illinois Use Tax from sales to Illinois purchasers. Any increase in revenue will be from smaller internet retailers who meet the threshold limits of $100,000 or more in cumulative gross receipts or 200 or more separate transactions to purchasers in Illinois in the preceding 12-month period. While the State anticipates a $200 million per year increase, local government allocations are expected to be substantially smaller.