Illinois excise taxes are per-unit or percentage charges the state applies to specific goods, services, and transactions, separate from the general sales tax. They cover motor fuel, tobacco and vaping products, alcohol, cannabis, utilities, hotel stays, vehicle purchases and rentals, real estate transfers, and new tires. Rates range from a few cents per gallon or kilowatt-hour to double-digit percentages of the sale price, and most are collected by the seller or service provider and remitted to the Illinois Department of Revenue.
How Excise Taxes Differ From Sales Tax
Sales tax is a broad percentage applied to most retail purchases. An excise tax targets a particular product or transaction, often at a fixed amount per unit (per gallon, per pack, per tire) or at a rate that differs from the general sales tax. In some cases both apply to the same purchase: a bottle of liquor carries the alcohol excise tax built into its wholesale cost and then the general sales tax at the register. Local governments frequently stack their own excise taxes on top of the state rate, so what you actually pay depends on where the transaction happens.
Motor Fuel
From July 1, 2025, through June 30, 2026, Illinois taxes gasoline and gasohol at $0.483 per gallon and diesel at $0.558 per gallon.1Illinois Department of Revenue. Motor Fuel Tax Rates and Fees The rate is adjusted annually for inflation. Federal excise tax and, in some counties, a local motor fuel tax apply on top of the state figure. Illinois does not currently impose a separate per-kilowatt-hour excise tax on electricity at commercial EV charging stations, though legislation has been proposed.
Tobacco and Vaping Products
Cigarettes are taxed by the state at $2.98 per pack of 20.2Illinois Department of Revenue. Excise Tax Rates and Fees City and county taxes in the Chicago area can more than double that figure.
All other tobacco products — cigars, pipe tobacco, moist snuff, electronic cigarettes, and vaping liquids — are taxed at 45 percent of the wholesale price.3Illinois General Assembly. Illinois Code 35 ILCS 143/10-10 That unified rate took effect July 1, 2025. Retailers selling any tobacco or vaping product also need a Tobacco Retailer License, which runs $150 per location annually as of the same date.4Illinois Department of Revenue. Tobacco Retailer License Fee Increases, Effective July 1, 2025
Alcoholic Beverages
Alcohol is taxed by the gallon at the wholesale level, with rates that scale by alcohol content:
- Beer and cider (0.5 to 7 percent ABV): $0.231 per gallon
- Wine and other beverages under 20 percent ABV: $1.39 per gallon
- Spirits at 20 percent ABV or higher: $8.55 per gallon
The tax is collected before the product reaches store shelves.2Illinois Department of Revenue. Excise Tax Rates and Fees Many municipalities add their own liquor taxes, so the final burden varies by city.
Cannabis
Recreational cannabis carries a tiered excise tax collected at the register:
- Flower or products with 35 percent adjusted THC or less: 10 percent of the purchase price
- Cannabis-infused products such as edibles, beverages, and tinctures: 20 percent
- Products above 35 percent adjusted THC: 25 percent
Illinois calculates an “adjusted” THC figure that accounts for the conversion of THCa into active THC, which can push a product into a higher bracket than its labeled percentage suggests.2Illinois Department of Revenue. Excise Tax Rates and Fees A separate 7 percent cultivator privilege tax is charged on the first sale from grower to dispensary and gets baked into the retail price.5Illinois General Assembly. Illinois Code 410 ILCS 705/30-50 General sales tax and any local cannabis tax apply on top.
Medical cannabis is treated separately. Qualifying patients pay only the state’s 1 percent retail occupation tax, the same rate used for prescription drugs.
Utility Services on Your Bill
Telecommunications, electricity, and natural gas each have their own excise tax, collected by your provider and shown as a line item.
Telecommunications
Effective July 1, 2025, the state Telecommunications Excise Tax rose from 7 percent to 8.65 percent of gross charges for phone and data service. The increase funds the 9-8-8 Suicide and Crisis Lifeline.6Illinois Department of Revenue. Telecommunications Excise Tax Rate Change, Effective July 1, 2025 Municipalities can add up to 6 percent, bringing the combined rate as high as 14.65 percent in some areas. Outside Chicago, the Department of Revenue collects the local portion on behalf of the municipality.7Illinois Department of Revenue. Simplified Municipal Telecommunications Tax Rate
Electricity
The Electricity Excise Tax uses a declining-rate structure based on monthly kilowatt-hour use. Residential customers almost always sit in the top tier at 0.330 cents per kWh on the first 2,000 kWh. Rates step down through ten brackets to 0.202 cents per kWh above 20 million kWh, a tier that effectively applies only to large industrial users.8Illinois General Assembly. Illinois Code 35 ILCS 640 – Electricity Excise Tax Law
Your bill also includes a monthly Energy Assistance Charge. Starting January 1, 2026, residential customers of utilities serving 100,000 or more Illinois customers pay $0.80 per month; customers of smaller utilities pay $0.40.9Illinois Department of Revenue. Energy Assistance Charge Rate Change, Effective January 1, 2026
Natural Gas
The Gas Use Tax is 2.4 cents per therm or 5 percent of the purchase price, whichever is lower.10Illinois Department of Revenue. Gas Tax Municipalities can impose their own gas tax up to 5 percent of gross receipts, or up to 8 percent in cities with populations above 500,000 (in practice, Chicago). Those local taxes are not collected by the state.
Hotel Stays
Illinois charges a 5 percent Hotel Operators’ Occupation Tax on 94 percent of gross rental receipts, producing an effective rate of about 4.7 percent.11Illinois General Assembly. Illinois Code 35 ILCS 145 – Hotel Operators Occupation Tax Act It applies to any room rented for fewer than 30 consecutive days, including traditional hotels, motels, short-term rentals, lodging houses, retreat centers, and conference centers. A guest staying 30 days or more becomes a permanent resident and is exempt. Local lodging taxes, especially in Chicago and the surrounding metro, can more than triple the state portion.
Vehicle Purchases and Rentals
Buying From a Private Party
When you buy a vehicle, trailer, or mobile home from an individual rather than a dealer, you owe the Private Party Vehicle Use Tax at the Secretary of State’s office when you apply for a title.12Illinois Department of Revenue. Private Party Vehicle Use Tax
For a purchase under $15,000, the tax is set by model year: $465 for vehicles one year old or newer, stepping down to $100 for vehicles 11 years or older. For purchases of $15,000 or more, the tax is based on price, from $850 (for $15,000 to $19,999) up to $10,100 (for $1 million or more). Transfers between spouses, parents, siblings, or children are taxed at $15. Motorcycles and ATVs owe a flat $25. Certain transfers, such as those from a deceased spouse’s estate, are fully exempt.13Illinois Department of Revenue. Private Party Vehicle Use Tax Chart for 2026
Renting or Leasing
Vehicle rentals and leases are subject to the Automobile Renting Occupation and Use Tax at 5 percent of gross receipts, with municipalities and counties allowed to add up to 1 percent.14Illinois Department of Revenue. Automobile Renting Occupation and Use Tax Rentals in Cook County carry an additional 6 percent tax from the Metropolitan Pier and Exposition Authority, so renting near O’Hare or downtown Chicago costs noticeably more in tax than renting downstate.
Real Estate Transfers
When Illinois real property is sold, the state transfer tax is $0.50 per $500 of the sale price (effectively $1 per $1,000). Counties can add up to $0.25 per $500, and home-rule municipalities may impose their own transfer taxes.15Illinois Department of Revenue. Real Estate Transfer Tax Stamp Purchase Forms and Procedures The buyer typically pays the county and municipal portions and the seller pays the state portion, though the split is negotiable in the purchase contract. The deed generally cannot be recorded until the transfer tax stamps have been purchased.
New Tires
Illinois charges a $2.50 fee on each new or used tire sold at retail for use on vehicles driven on public roads, as well as on tires for aircraft and certain farm equipment. Tires sold as part of a complete vehicle purchase, by mail order, or at wholesale are exempt.16Illinois Department of Revenue. Tire User Fee The fee funds waste tire disposal and recycling programs.
Who Has to File and How Often
Any business engaged in a taxable activity must register with the Illinois Department of Revenue before collecting or remitting excise taxes. Registration is done through the state’s online Business Registration system, and each excise tax requires its own account.
Filing frequency is based on average monthly liability. Higher-volume businesses file monthly, with returns due by the last day of the month following the reporting period. Lower-volume taxpayers may be assigned quarterly or annual schedules. The Department of Revenue sets your frequency and notifies you of any change.
Non-individual taxpayers with an annual liability of $20,000 or more must pay by Electronic Funds Transfer.17Illinois General Assembly. Illinois Code 20 ILCS 2505/2505-210 – Electronic Funds Transfer Most filers use the MyTax Illinois portal. Some high-volume filers must pay four times per month. Keep records supporting your returns for at least three and a half years after filing, or longer if the department has issued a notice of tax liability.18Illinois Department of Revenue. What Must I Keep in My Books and Records?
Penalties and Interest for Late Payment
Missing an excise tax deadline triggers penalties under the Uniform Penalty and Interest Act, and they escalate the longer you wait:
- Late filing: 2 percent of the tax due, up to $250. If you still haven’t filed within 30 days of a nonfiling notice from the Department of Revenue, an additional penalty of $250 or 2 percent of the tax (whichever is greater, up to $5,000) is added.
- Late payment within 30 days: 2 percent of the unpaid amount.
- Late payment beyond 30 days: 10 percent of the unpaid amount. If the department has already begun an audit, the penalty rises to 20 percent.
Interest runs separately on top of penalties. From January 1, 2025, through June 30, 2026, the underpayment interest rate is 7 percent, calculated as simple interest using a daily rate.19Illinois Department of Revenue. Interest Rates The Department of Revenue reviews that rate twice a year and may adjust it.