Rental Purchase Agreement Use Tax is imposed on or after January 1, 2018, on the rental of tangible personal property under a rental purchase agreement, an arrangement typically known as a “rent-to-own” transaction. Rental Purchase Agreement Use Tax shall be paid to the Department directly by any person using the rented merchandise in Illinois if this tax has not been collected by a merchant who, in the ordinary course of the merchant’s business, regularly leases, offers to lease, or arranges for the leasing of merchandise under a rental purchase agreement.
“Renting” is considered any transfer of the possession or right to possession of merchandise to a user for a valuable consideration under a rental purchase agreement. Gross receipts include the total rental price or leasing price but do not include receipts received for delivery, reinstatement, processing, waiver, or club program fees.
“Rental price” means the consideration for renting merchandise valued in money, whether received in money or otherwise, including cash, credits, property, and services. Rental price shall be determined without any deduction on account of the cost of the property rented, the cost of materials used, labor or service cost, or any other expense whatsoever.
Rental price does not include the following:
- charges added by a merchant on account of the merchant’s tax liability under the Rental Purchase Agreement Occupation and Use Tax Act or on account of the merchant’s duty to collect from the consumer the Rental Purchase Agreement Use Tax imposed by the Act;
- compensation paid to a merchant by a consumer in consideration of the merchant’s waiver of any right of action or claim against the consumer for loss or damage to the merchandise rented;
- separately stated charges for insurance; or
- other separately stated charges that are not for the use of tangible personal property, including charges for Chicago’s Personal Property Lease Transaction Tax.
A “rental purchase agreement” is an agreement for the use of merchandise by a consumer for personal, family, or household purposes for an initial period of four months or less that is automatically renewable with each payment after the initial period and that permits the consumer to become the owner of the merchandise. These transactions are governed by the Rental-Purchase Agreement Act,
815 ILCS 655/0.01 et seq.
Note: Rental Purchase Agreement Use Tax does not apply to items that must be titled or registered by an agency of the state of Illinois (
e.g., motor vehicles, watercraft, etc.).
The Rental Purchase Agreement Use Tax rate is 6.25 percent (.0625).
Form/Filing & Payment Requirements
You must file Form ST-244, Rental Purchase Agreement Use Tax Return, and pay the Rental Purchase Agreement Use Tax monthly during the term of the rental purchase agreement. Each month of the term of the rental purchase agreement is a separate reporting period, and you must submit a separate Form ST-244, along with a payment for any tax due, for each reporting period. Form ST-244 and its accompanying payment are due on or before the last day of the month following the end of each reporting period. However, if your total tax liability for the year is $600 or less, you may pay the tax for the entire year (January 1 through December 31) by filing one Form ST-244 on or before April 15 of the following year.
Illinois law requires Form ST-244 to be filed electronically, and the tax to be paid electronically. Use
MyTax Illinois to file your Form ST-244 and pay any tax due.
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