Illinois Sales Tax Guide (2026): Rates, Nexus, Registration & Filing

Is SaaS taxable?

No at state level (Chicago lease tax may apply).

What is the sales tax rate in Illinois?

Illinois’s state sales tax (the Retailers’ Occupation Tax) is 6.25% on general merchandise. Local and home-rule taxes can push combined rates up to roughly 11% in some areas (Chicago is about 10.25%). Use the Illinois Department of Revenue Tax Rate Finder to confirm a specific local rate.

Items that must be titled or registered (like vehicles) follow separate rules.

Do you have sales tax nexus in Illinois?

Nexus is the connection that obligates your business to collect and remit Illinois sales tax. You can establish it two ways — physically or economically. Either one is enough.

Physical nexus

You have physical nexus if you have a tangible presence in Illinois, such as:

• An office, warehouse, or other physical location in Illinois
• Employees, contractors, or representatives working in the state
• Inventory stored in Illinois
• Affiliate/click-through relationships where referral sales exceed $10,000 over the prior four quarters

Economic nexus

Effective January 1, 2019, out-of-state sellers have economic nexus once they exceed $100,000 in gross sales into Illinois (measured over the prior 12 months). Important 2026 change: under HB 2755, Illinois eliminated the 200-transaction threshold effective January 1, 2026 — the test is now based on the dollar amount only.

What is taxable in Illinois?

Tangible personal property is generally taxable; common exemptions include certain manufacturing machinery and equipment and qualifying building materials. Most services are not taxable unless they involve creating or fabricating a product.

Is SaaS taxable in Illinois?

At the state level, no — Illinois treats SaaS as a nontaxable service. Watch the local angle, though: the City of Chicago’s Personal Property Lease Transaction Tax (the “cloud/lease tax”) applies to SaaS and cloud software used by customers in Chicago, so sales into Chicago can carry that city tax even though the state doesn’t tax SaaS.

How is food taxed in Illinois?

Grocery-type food was historically taxed at a reduced 1%. As of January 1, 2026, Illinois eliminated the statewide 1% grocery tax — but the law lets municipalities impose their own local 1% grocery tax, so groceries may still carry 1% depending on the locality. Prepared food for immediate consumption is taxed at the full rate (plus any local restaurant taxes).

How to register for an Illinois sales tax permit

Obtain a Certificate of Registration before collecting. Taxually can register for you, or you can apply online through MyTax Illinois, by mail (Form REG-1), or in person. Registration is free.

Have ready: business identification and type, owner/officer information, a description of your activities, and the addresses of all Illinois locations you ship from.

How to collect sales tax in Illinois

Sourcing depends on who you are. In-state sellers generally collect at the rate of their Illinois business location (origin-based). Remote and out-of-state sellers (and marketplace facilitators) collect the combined state-and-local ROT based on the delivery location (destination-based) — a rule Illinois tightened effective January 1, 2025 so in-state and out-of-state sellers are treated more evenly.

Filing and paying Illinois sales tax

Filing frequency is set by your average monthly liability: monthly (more than $200), quarterly ($50–$200), or annual (less than $50). Returns (Form ST-1) are due the 20th of the month following the period, and Illinois gives a 1.75% discount for timely filing and payment.

File and pay through MyTax Illinois or by mail. Taxually’s software automates the full process.

Penalties for late or non-compliant filing

Failing to file or pay on time triggers these penalties:

• Late filing: 2% of the tax due.
• Late payment: 2% if paid within 30 days, 10% within 30–90 days, 15% within 90–180 days, and 20% after 180 days.
• Interest accrues on unpaid tax at the current rate.