Items exempt from Illinois sales tax fall into a handful of categories: qualifying grocery food (fully exempt from the state’s 6.25% rate as of January 1, 2026), menstrual products, farm machinery used in production agriculture, manufacturing and assembly equipment, newspapers and magazines, rolling stock used by interstate carriers, and purchases made by governmental bodies and qualifying charitable, religious, or educational organizations. A separate group of items, including prescription and nonprescription medicines and medical appliances, is not fully exempt but is taxed at a reduced 1% state rate.
Full Exemption vs. Reduced Rate
Before going category by category, it helps to know that Illinois treats “exempt” and “reduced rate” as two different things. A fully exempt item carries no state Retailers’ Occupation Tax at all. A reduced-rate item still carries tax, just at 1% instead of the standard 6.25%. Local taxes layered on by cities, counties, and special districts can apply to both groups, so a state exemption does not always mean a tax-free register receipt.
Grocery Food
Starting January 1, 2026, qualifying food for human consumption purchased for off-premises eating is fully exempt from the state Retailers’ Occupation Tax. Before that date, those same items were taxed at a reduced 1% state rate. The exemption covers unprepared staples like flour, produce, canned goods, dairy products, and meat — essentially, items you buy at a grocery store and take home to prepare yourself.1Justia Law. Illinois Code 35 ILCS 120 – Retailers’ Occupation Tax Act
Several categories of food and drink do not qualify and remain taxed at the full 6.25% state rate:
- Prepared food, meaning any food sold heated or prepared for immediate consumption, such as deli sandwiches, salad bar items, and restaurant meals.
- Soft drinks, meaning non-alcoholic beverages containing natural or artificial sweeteners. Beverages with milk or milk substitutes, or those containing more than 50% fruit or vegetable juice by volume, are not considered soft drinks and can qualify for the exemption.
- Candy, meaning preparations of sugar, honey, or other sweeteners combined with chocolate, fruits, nuts, or flavorings in the form of bars, drops, or pieces. If the product contains flour or requires refrigeration, it is not classified as candy and may qualify.
- Alcoholic beverages and food containing adult-use cannabis.
The soft drink and candy definitions come from the state’s administrative rules and apply regardless of where an item is sold.2Legal Information Institute. Illinois Admin Code Title 86, Section 130.310 – Food, Soft Drinks and Candy
Local Grocery Tax May Still Apply
Although the state eliminated its tax on qualifying groceries, the same law authorized municipalities and counties to impose their own 1% local grocery tax by ordinance. Shop in a jurisdiction that adopted this local tax and you will still owe 1% on qualifying grocery purchases. The Illinois Department of Revenue has reminded retailers in those areas to update their registers and continue collecting the local grocery tax on otherwise exempt food.3Illinois Department of Revenue. CA-2026-01, Proper Procedures for Collecting Local Grocery Tax
Medicines and Medical Appliances
Prescription medications, nonprescription drugs, and medical appliances are taxed at the reduced 1% state rate rather than being fully exempt.4Illinois Department of Revenue. What Are the Retailers’ Occupation and Use Tax Rates in Illinois The reduced rate covers:
- Prescription medicines, including medical cannabis purchased from a licensed dispensary.
- Nonprescription medicines and drugs such as pain relievers, cold medicine, and antacids, as long as the product makes a medicinal claim. Grooming and hygiene products such as soap, shampoo, toothpaste, and sunscreen do not qualify, even when sold at a pharmacy.
- Medical appliances that replace or assist a malfunctioning part of the body, including wheelchairs, prosthetic limbs, hearing aids, and prescription eyeglasses or contact lenses. Insulin, blood sugar testing supplies, and syringes for diabetic use also qualify.
The distinction between nonprescription medicine and grooming products matters. A product must claim to treat, cure, or prevent a physical ailment to qualify for the reduced rate. Items marketed purely for cosmetic or hygiene purposes, even if they offer incidental health benefits, are taxed at the full 6.25% rate.5Illinois General Assembly. Illinois Code 35 ILCS 120/2-10 – Rate of Tax
Menstrual Products Are Fully Exempt
Menstrual pads (including pantiliners), tampons, and menstrual cups are fully exempt from the state sales tax through December 31, 2026. This exemption is separate from the 1% medical rate; these products carry no state tax at all during the exemption period. Pads labeled for dual use as both menstrual and incontinence products still qualify, but products marketed solely for incontinence (such as adult diapers) do not.6Illinois General Assembly. Illinois Admin Code Title 86, Section 130.311 – Drugs, Medicines, Medical Appliances, and Grooming and Hygiene Products
Farm Machinery, Equipment, and Chemicals
Farm machinery and equipment used primarily in production agriculture are fully exempt from the state sales tax. “Production agriculture” means the commercial raising of livestock, crops, or nursery stock for sale; personal gardening and landscaping do not count. Qualifying items range from tractors and harvesters to precision farming technology like GPS systems, soil testing sensors, and computer monitoring software. As of 2024, electrical power generation equipment used primarily for production agriculture also qualifies.7Illinois General Assembly. Illinois Code 35 ILCS 120/2-5 – Exemptions
Individual replacement parts are also exempt, provided the underlying equipment is used primarily (more than 50% of the time) in production agriculture. Farm chemicals are separately listed as a standalone exemption. To document an exempt purchase, the buyer completes Form ST-587, Equipment Exemption Certificate, and the seller keeps a copy.8Illinois Department of Revenue. How Do I Properly Document an Exempt Sale or Purchase of Machinery and Equipment
Motor vehicles that must be registered under the Illinois Vehicle Code generally do not qualify, with limited exceptions for implements of husbandry, agricultural chemical spreaders, and nurse wagons registered under a specific Vehicle Code provision.
Manufacturing and Assembly Machinery
Machinery and equipment used primarily in manufacturing or assembling tangible personal property for sale or lease are fully exempt. “Primarily” again means more than 50% of the time. The exemption applies to new facilities, expansions, and replacement machinery alike. Since July 2017, it also covers graphic arts machinery and equipment used primarily in graphic arts production.9Illinois General Assembly. Illinois Code 35 ILCS 120/2-45 – Manufacturing and Assembly Exemption
General office equipment, computers used for administrative tasks, and machinery used to generate electricity or treat water for retail sale do not qualify. Businesses claiming this exemption must keep records showing each piece of equipment is used more than 50% of the time for exempt purposes, and should document purchases with Form ST-587.10Illinois Department of Revenue. Sales Tax Audit Manual – Chapter 15
Purchases by Government and Nonprofit Entities
Tangible personal property sold to governmental bodies or to organizations operated exclusively for charitable, religious, or educational purposes is fully exempt. The exemption turns on who is buying rather than what is being bought. Limited liability companies qualify only if they are organized and operated exclusively for educational purposes.7Illinois General Assembly. Illinois Code 35 ILCS 120/2-5 – Exemptions
To make tax-free purchases, an eligible organization must first obtain a sales tax exemption identification number (commonly called an “E-number”) from the Illinois Department of Revenue. There is no fee to apply. Organizations can submit a request through MyTax Illinois or by mailing Form STAX-1. Once issued, the organization gives the E-number to retailers at the time of purchase. Without valid documentation, the retailer must collect the full tax.11Illinois Department of Revenue. Information for Exclusively Charitable, Religious, or Educational Organizations; Governmental Bodies; and Certain Other Tax-Exempt Organizations
Rolling Stock Used by Interstate Carriers
Motor vehicles and trailers used as rolling stock by interstate carriers for hire are exempt from the state sales tax. The vehicle must be used to transport people or property for hire across state lines, not just for a company’s internal deliveries or employee travel. For motor vehicles, the gross vehicle weight rating must exceed 16,000 pounds.12Illinois Department of Revenue. Form RUT-7 Instructions – Rolling Stock Certification for Motor Vehicles and Trailers
The carrier must hold an active USDOT number with the carrier operation classified as “interstate” and the operation listed as “authorized for hire,” “exempt for hire,” or both. Vehicles used at an airport to support aircraft operating in interstate commerce are an exception to the USDOT requirement. Purchasers document the exemption on Form RUT-7, Rolling Stock Certification.
Newspapers and Magazines
Sales of newspapers and magazines are exempt from the Retailers’ Occupation Tax under the state’s longstanding newsprint and ink exemption. The exemption applies to printed periodicals regardless of the seller. Books and sheet music, by contrast, are generally taxable when sold at retail for use or consumption.
Vehicle Trade-In Credits
Trading in a vehicle toward the purchase of a new one reduces the taxable selling price, so you pay sales tax only on the difference. The traded item must be “like kind and character” as the item being purchased, and the trade-in value is the credit assigned to the vehicle regardless of any outstanding loan balance on it.13Illinois General Assembly. Illinois Admin Code Title 86, Section 130.455 – Motor Vehicle Leasing and Trade-In Allowances
Local Taxes Can Still Apply
Every exemption and reduced rate above applies to the state-level Retailers’ Occupation Tax. Illinois municipalities, counties, and special districts can impose their own additional sales taxes. Home-rule municipalities can add tax in 0.25% increments with no cap, and non-home-rule municipalities can add up to 1% in 0.25% increments.14Illinois Department of Revenue. Home Rule and Non-Home Rule Sales Taxes
Combined with the 6.25% state rate, total sales tax on general merchandise in Illinois ranges from under 7% in some areas to over 10% in parts of the Chicago metro area.15Illinois Department of Revenue. FY 2025-25, Sales Tax Rate Change Summary Items taxed at the reduced 1% state rate (like medicines) or fully exempt from the state rate (like qualifying groceries) may still carry local tax depending on where you shop. Jurisdictions that adopted a local grocery tax can charge up to 1% on grocery food even though the state’s share is now zero.