If you sell into Illinois from another state, you must start collecting Illinois remote seller sales tax once your gross receipts from Illinois buyers reach $100,000 over the prior 12 months. As of January 1, 2026, that dollar figure is the only trigger: the old 200-transaction alternative is gone.1Illinois Department of Revenue. FY 2026-12, Destination-Based Retailers’ Occupation Tax Changes The tax you collect is a destination-based Retailers’ Occupation Tax, so the rate depends on where each buyer takes delivery, and combined rates run from 6.25% up to roughly 11% in parts of the Chicago area.
When You Have to Start Collecting
A remote seller is any retailer without a physical presence in Illinois that ships tangible personal property to buyers in the state. You check whether you’ve crossed the $100,000 line at the end of each calendar quarter (March 31, June 30, September 30, December 31), looking back at the previous 12 months.2Legal Information Institute. Illinois Administrative Code Title 86, Part 131 – Leveling the Playing Field for Illinois Retail Act
Once you’ve crossed it, you must register with the Illinois Department of Revenue and begin collecting on the first day of the first calendar month that starts at least 30 days after you crossed the threshold. That’s a rolling 30-day window, not the start of the next quarter. Sellers routinely get this wrong and start late.
Marketplace Sales Don’t Count Toward the Threshold
If a marketplace facilitator has certified that it will collect and remit tax on your behalf, those sales don’t count toward your personal $100,000 threshold. Only your direct sales, such as those through your own website, factor in.3Illinois Department of Revenue. Frequently Asked Questions (FAQs) for Marketplace Facilitators, Marketplace Sellers, and Remote Retailers If you sell both ways, track each channel separately. It can be the difference between having an Illinois filing obligation and not having one at all.
What Rate to Charge
Illinois treats you as if you were operating at the delivery address. Under the Leveling the Playing Field for Illinois Retail Act, this destination-based sourcing replaced the flat state use tax that remote sellers used to collect, which means the total rate varies with every shipment.4Illinois General Assembly. Illinois Administrative Code 86-131.155 – Tax Sourcing Provisions
The base state rate on most tangible personal property is 6.25%. Local jurisdictions add their own taxes on top, and combined rates in some Chicago-area municipalities reach 11%.5Illinois Department of Revenue. Sales Tax Rate Change Summary, Effective January 1, 2026 Most remote sellers use tax software or the state’s online rate finder for each delivery address. Illinois has hundreds of taxing jurisdictions and a manual rate table is a reliable source of errors.
Reduced Rates, Groceries, and Shipping
Qualifying drugs and medical appliances carry a reduced state rate of 1%, though local taxes still apply.6Illinois Department of Revenue. What Is Significant About Retail Sales of Qualifying Drugs and Medical Appliances?
Effective January 1, 2026, Illinois eliminated its 1% state sales tax on groceries (food for off-premises human consumption, excluding alcohol, soft drinks, candy, and prepared food). Municipalities and counties can impose their own 1% local grocery tax by ordinance. Where they adopt it, the effective rate on groceries stays the same; where they don’t, grocery tax drops to zero.7Illinois Department of Revenue. FY 2026-11, Municipal and County Grocery Occupation Tax Rate If you ship groceries into Illinois, you need to check each destination municipality’s status.
Shipping and handling charges are part of the taxable sale unless two conditions are both met: the charges are separately stated on the invoice, and the buyer had the option to pick the item up or otherwise avoid paying for delivery. If paid shipping is the buyer’s only option, it’s taxable no matter how it appears on the invoice.8Illinois Department of Revenue. Sales Tax Exemptions – FAQs For most remote sellers, that means shipping is taxable in practice.
Software and Digital Products
Prewritten (canned) computer software is treated as general merchandise and taxed at the full 6.25% state rate whether it’s on a disc or downloaded.9Illinois Department of Revenue. Sales and Use Taxes Custom software built to a specific client’s specifications is not subject to sales tax, regardless of delivery method.
Software as a service is generally not taxable in Illinois. The exception is narrow but real: if the SaaS provider transfers a downloadable component to the customer (an API, a desktop agent, a similar access tool), the transaction can cross into taxable territory. Services remain broadly exempt, but the line is thin enough that sellers in this space should review how they actually deliver the product.
How to Register
Registration is done online through MyTax Illinois at mytax.illinois.gov. Select “Register a New Business” (Form REG-1) and apply for a Retailers’ Occupation Tax account.10Illinois Department of Revenue. Business Registration You designate your business as a remote seller during the application so the correct tax type is assigned. Once approved, the state issues your Certificate of Registration electronically through MyTax Illinois.
Before you start, have ready your Federal Employer Identification Number, Social Security numbers for all owners or officers, your legal business name, the date you began making sales into Illinois, and a description of what you sell. Missing information is the most common cause of processing delays.
If You Sell Through a Marketplace
Amazon, Etsy, and similar platforms are marketplace facilitators under Illinois law. When a facilitator meets the $100,000 threshold on behalf of its collective sellers, the facilitator (not you) collects and remits the Retailers’ Occupation Tax on those marketplace sales and bears legal liability for the accuracy of those collections.11Illinois General Assembly. Illinois Administrative Code 86-131.130 – Marketplace Facilitators General Provisions12Legal Information Institute. Illinois Administrative Code Title 86-131.145 – Marketplace Facilitators Obligations Procedures Hold Harmless Provisions
If every Illinois sale you make goes through a registered marketplace, you don’t report those sales on your own Form ST-1 at all. The state is explicit: do not include marketplace sales in Total Receipts and then deduct them. Leave them off entirely.3Illinois Department of Revenue. Frequently Asked Questions (FAQs) for Marketplace Facilitators, Marketplace Sellers, and Remote Retailers If you also sell through your own website and those direct sales independently hit $100,000, you still need to register and collect tax on your direct sales.
Filing Returns and Paying
All sales tax reporting flows through Form ST-1 (Sales and Use Tax and E911 Surcharge Return), filed electronically on MyTax Illinois.13Illinois Department of Revenue. ST-1 Sales and Use Tax and E911 Surcharge Return The platform uses Form ST-2 (Multiple Site Form) to calculate tax owed for each delivery location, then rolls it into a single ST-1.
Returns are due the 20th of the month following the reporting period. For monthly filers, the January return is due February 20. Quarterly returns are due the 20th of the month after the quarter ends; annual returns are due January 20 of the following year.9Illinois Department of Revenue. Sales and Use Taxes The Department of Revenue assigns your filing frequency based on your average monthly tax liability. Retailers averaging $20,000 or more a month in tax liability must also make quarterly prepayments.
Late Filing and Late Payment Penalties
Missing a deadline triggers two separate consequences. The late-filing penalty is the lesser of $250 or 2% of the tax due. If you still haven’t filed within 30 days of a nonfiling notice, a second-tier penalty kicks in: the greater of $250 or an additional 2% of the tax shown due, capped at $5,000.14Illinois Department of Revenue. Pub-103, Penalties and Interest for Illinois Taxes
Late-payment penalties scale with how late you are:
- 1 to 30 days late: 2% of the unpaid tax
- 31 or more days late: 10% of the unpaid tax
- After an audit begins: 15% of any amount still unpaid
- After an audit-prepared return is issued: 20% of any amount not paid within 30 days
Interest accrues daily at the federal underpayment rate, which Illinois adjusts every January 1 and July 1.14Illinois Department of Revenue. Pub-103, Penalties and Interest for Illinois Taxes A seller who realizes months in that they should have been collecting is almost always better off addressing it immediately than hoping it goes unnoticed.
Resale Exemption Documentation
When an Illinois buyer purchases tangible personal property for resale rather than personal use, the sale is exempt. To protect yourself, keep a completed certificate of resale on file. The buyer can use Form CRT-61 or supply their own certificate, and you should refresh certificates at least every three years.15Illinois Department of Revenue. Certificate of Resale If you’re audited and can’t produce a valid certificate for an exempt sale, the Department of Revenue will treat that sale as taxable and assess the tax against you.
If You Should Have Been Collecting but Weren’t
Illinois runs a Voluntary Disclosure Program for sellers who missed the obligation. The program caps the lookback at four years, so the state only assesses tax for the prior four years rather than the full period you were out of compliance. To qualify, you have to contact the Board of Appeals before the Department has already opened an audit or investigation.16Illinois Department of Revenue. Voluntary Disclosure Program
One important limit: if you actually collected tax from customers but never remitted it, you owe that money for every period, regardless of the four-year cap. The program waives penalties if you pay all tax and interest within 60 days of the Notice of Assessment. You also have to register through MyTax Illinois and stay compliant going forward.
Records to Keep
Illinois requires you to keep records documenting receipts for each reporting period for at least three and a half years after filing the return.17Illinois Department of Revenue. Pub-113, Keeping Complete and Accurate Records If the Department has issued a Notice of Tax Liability, keep records for that period until the matter is fully resolved.