Prepared food and drinks sold by a Chicago restaurant are taxed at a combined 10.75%: the 10.25% general sales tax plus the city’s 0.50% restaurant tax. Restaurants located inside the Metropolitan Pier and Exposition Authority (MPEA) zone add another 1.0%, for a total of 11.75%. Alcohol, bottled water, and checkout bags carry additional charges on top. A scheduled transit-funding change in mid-2026 will push every one of these rates up by a quarter point.
What Makes Up the 10.75% Rate
The 10.25% base combined sales tax is collected as a single amount but split four ways:
- State of Illinois: 6.25% under the Retailers’ Occupation Tax
- Cook County: 1.75%
- City of Chicago: 1.25%
- Regional Transportation Authority: 1.0%
The Illinois Department of Revenue (IDOR) collects the full 10.25% for all four jurisdictions on one return. On top of that, the City of Chicago imposes a separate 0.50% tax on all food and beverages sold by a “place for eating.”1Municipal Code of Chicago. Chicago Municipal Code 3-30-030 Tax Imposed That brings the all-in rate on prepared food to 10.75%. Dine-in, carryout, delivery, and catering are all treated the same. A hot sandwich, a plated dinner, and a cup of coffee all qualify. The city collects its 0.50% separately on Form 7525 through the Chicago Department of Finance, not through the state return.2City of Chicago. Restaurant Tax (7525)
The MPEA Zone and the Extra 1%
Restaurants inside the Metropolitan Pier and Exposition Authority zone owe an additional 1.0% food and beverage tax on gross receipts.3Illinois Department of Revenue. Metropolitan Pier and Exposition Authority (MPEA) Food and Beverage Tax The zone is much larger than the downtown Loop. On the lakefront, it runs from Diversey Avenue south to the Stevenson Expressway, and from Ashland Avenue east to Lake Michigan. Separate zones also surround Midway and O’Hare.4Illinois Department of Revenue. IDOR-535 Metropolitan Pier and Exposition Authority Lake Michigan Area Boundaries A spot in Wrigleyville or the West Loop sits inside the MPEA area and charges 11.75% on prepared food.
Alcohol Is Taxed From Several Directions
Every alcoholic drink carries the full 10.25% sales tax at retail, same as any other sale. Three layers of per-gallon excise tax also sit on top, paid by distributors but passed through in restaurant costs.
The Illinois Liquor Gallonage Tax runs $0.231 per gallon on beer, $1.39 per gallon on wine and liquor up to 20% ABV, and $8.55 per gallon on spirits at 20% ABV or above.5Illinois Department of Revenue. Excise Tax Rates and Fees Cook County adds $0.09 per gallon on beer, $0.24 on wine up to 14% ABV, and $2.50 on spirits at 20% ABV or above.6City of Chicago. Liquor Tax Revenue Resource
As of March 1, 2026, the City of Chicago’s per-gallon rates for on-premises consumption are $0.29 on beer, $0.36 on liquor at 14% ABV or less, $0.89 on liquor between 14% and 20% ABV, and $2.68 on spirits at 20% ABV or above.7City of Chicago. Liquor Tax (7573) Also effective March 1, 2026, Chicago added a 1.5% tax on the retail purchase price of alcoholic beverages sold for on-premises consumption, on top of the per-gallon excise.8City of Chicago. Liquor Tax Changes Effective March 1, 2026 The combined excise burden on a gallon of high-proof spirits in Chicago comes to roughly $13.73 before any menu price is set.
Prepared Food vs. Grocery Items
Not every item a restaurant sells counts as prepared food. Sealed packaged food meant for off-premises consumption has historically been taxed at a lower rate: 1.0% at the state level before 2026.
Effective January 1, 2026, Illinois eliminated the 1.0% state grocery tax, and municipalities and counties gained authority to impose their own 1.0% local grocery tax by ordinance.9Illinois Department of Revenue. Illinois Grocery Tax Changes Effective January 1, 2026 Whether a restaurant’s packaged grocery sales carry any local grocery tax depends on whether Chicago and Cook County have adopted such ordinances.
There’s a trap built into the distinction. If a restaurant offers any on-premises seating, all food sales are presumed taxable at the higher prepared-food rate unless the operator physically separates the grab-and-go retail area from the dining space and keeps separate accounting for each.10Illinois Department of Revenue. Tax Rate Information for Retail Sales of Food and Medicine Without that separation, every sale defaults to the full rate. Alcoholic beverages, soft drinks, candy, and anything prepared to a customer’s individual order never qualify for the lower grocery rate regardless of how they’re packaged.
Tips and Mandatory Service Charges
Voluntary tips are not subject to sales tax. A mandatory service charge or auto-gratuity is exempt only if the full amount is passed through directly to the employees who prepared, served, or cleaned up the meal. If any portion funds wages, benefits, or other business costs, the entire charge becomes taxable gross receipts under the Retailers’ Occupation Tax.11Illinois Department of Revenue. Mandatory Service Charge – Letter Ruling ST24-0019-GIL What the receipt calls the charge doesn’t matter; what happens to the money does.
Bottled Water and Checkout Bag Taxes
Two per-item taxes sit outside the headline food rate and apply to most restaurants:
- Bottled water tax: $0.05 per bottle on every retail sale of bottled water. Wholesalers normally collect this, but if they don’t, the retailer owes it.12City of Chicago. Bottled Water Tax
- Checkout bag tax: $0.15 per bag as of January 1, 2026, up from $0.10 in 2025.13City of Chicago. Checkout Bag Tax
Both are reported separately from the state sales tax and the city’s restaurant tax. Takeout- and delivery-heavy operations feel the bag tax most.
Registering, Filing, and the Vendor Discount
Compliance starts with two registrations. Every business making retail sales in Illinois must register with IDOR for a business tax number, done electronically through the MyTax Illinois portal using Form REG-1.14Illinois Department of Revenue. Business Registration Separately, the restaurant must register with the Chicago Department of Finance for the city’s restaurant tax and any other municipal taxes that apply.2City of Chicago. Restaurant Tax (7525)
The 10.25% combined sales tax is reported on Form ST-1. Most restaurants file monthly or quarterly depending on volume, with the return and payment due by the 20th of the month after the reporting period. When the 20th lands on a weekend or holiday, the deadline moves to the next business day.15Illinois Department of Revenue. ST-1 Instructions The city’s 0.50% restaurant tax is filed separately on Form 7525.
Restaurants that file ST-1 on time and pay in full qualify for a vendor discount, essentially a small commission for collecting the state’s tax. Since January 2025, that discount is capped at $1,000 per month, and missing the deadline by one day forfeits it entirely.16Illinois Department of Revenue. As a Retailer, Am I Allowed a Discount From the Sales Tax I Report Documentation supporting every return must be kept for three and a half years after filing, longer if IDOR has issued a notice of tax liability.17Illinois Department of Revenue. Keeping Complete and Accurate Records
Penalties for Late Filing and Late Payment
Illinois runs late-filing and late-payment penalties on two tracks that can stack.18Illinois Department of Revenue. Pub-103 Penalties and Interest for Illinois Taxes For late filing, the first penalty is the lesser of $250 or 2% of the tax owed. If the restaurant still hasn’t filed within 30 days of receiving a nonfiling notice, a second penalty applies: the greater of $250 or 2% of the tax shown due, capped at $5,000.
Late payment penalties depend on how far past due the payment is:
- 1–30 days late: 2% of the unpaid tax
- 31 or more days late: 10% of the unpaid tax
- After an audit begins: 15%
- After an audit-prepared return or waiver is issued: 20%
Interest accrues daily starting the day after payment is due, at a rate tied to the federal underpayment rate and adjusted twice a year. These are state penalties on the ST-1 return; the City of Chicago has its own penalty structure for the restaurant tax and other municipal levies.
What’s Changing in Mid-2026
Legislation authorizes the RTA portion of the Cook County sales tax to rise from 1.0% to 1.25%, with the RTA board required to vote on approval within 60 days of June 1, 2026.19RTA Chicago. 2026 Regional Transit Budget Available for Public Comment Once in effect, the base combined rate climbs from 10.25% to 10.50%, and every rate downstream rises with it: prepared food goes from 10.75% to 11.00%, and MPEA-zone restaurants from 11.75% to 12.00%. Operators should update point-of-sale systems before the effective date so collection matches the new rates on day one.