Filing Illinois sales tax means registering for an account, collecting tax at the correct combination of state and local rates, and submitting returns on the schedule the state assigns based on your liability. The process can get complicated because Illinois runs two different sourcing systems at once: in-state retailers source tax based on where they sell from, while remote and marketplace sellers source it based on where the customer receives the goods. That split, plus numerous home rule municipalities, such as Chicago, that can apply their own taxes that stack, makes Illinois one of the most difficult states to get right.

Illinois collected more than US$10.5 billion in sales tax in fiscal year (FY) 2025, which made state tax the state's second-largest source of revenue. Below, we'll go over how to file Illinois sales tax, how to determine whether you have nexus in Illinois, what the registration process actually requires, and how to work through the ST-1 return.

Key takeaways

• Illinois taxes sellers through the Retailers' Occupation Tax. Nexus can come from a physical presence or from crossing the economic threshold in sales with Illinois customers.

• Filing frequency (monthly, quarterly, or annual) depends on average monthly tax liability and determines when returns and payments are due.

• In-state and remote sellers follow different sourcing rules for local tax. Identical sales can carry different tax rates depending on the seller's location.

What is Illinois sales tax?

Illinois technically doesn't tax "sales". What ends up on the receipt is the Retailers' Occupation Tax, a tax on the privilege of selling goods at retail. The seller carries the legal liability for the tax even though the customer pays it at checkout. The general rate is 6.25% statewide, though it drops to 1.00% for qualifying food, drugs, and medical appliances.

Who needs to collect Illinois sales tax?

As a retailer, Illinois requires you to collect Retailers' Occupation Tax if you're selling tangible goods to customers in the state. Nexus – the connection that gives Illinois the legal authority to make a business collect its tax – establishes this tax obligation.

There are two types of nexus, and qualifying for either one means you must collect and remit Retailers' Occupation Tax:

• Physical nexus: Having any kind of physical presence (e.g., an office, employee, warehouse, inventory) in Illinois instantly establishes nexus. Even inventory in a third-party fulfilment centre counts.

• Economic nexus: This applies to remote sellers based on sales volume rather than physical footprint. Once you exceed US$100,000 in gross receipts with Illinois customers over a span of 12 months, you have to register, collect, and file Illinois sales tax, even with zero employees or square footage in the state.

Marketplace rules add another layer of tax liability. If a business sells only through a marketplace that's already collecting and remitting Illinois tax on its behalf, it usually doesn't need to register separately for those sales. But if a seller is also making direct sales alongside marketplace sales, it needs to track nexus and file for the revenue tied to those direct sales. And not every platform handles Illinois tax collection the same way. A seller can't assume the marketplace is collecting and remitting tax on its behalf without confirming it.

How do you register for an Illinois sales tax account?

Registering for an Illinois sales tax account starts with Form REG-1, the Illinois Business Registration Application. You can file on paper or through the state's online portal, MyTax Illinois. Online submissions typically process in one to two working days, while paper filings can take several weeks.

Before you start the application, have this information ready:

• Federal Employer Identification Number (EIN): Required for any business beyond a sole proprietorship using a Social Security number (SSN)

• Business structure and ownership details: Legal name, entity type, and information on owners or officers

• Estimated monthly sales tax liability: Used to assign your filing frequency going forward

• North American Industry Classification System (NAICS) code and business activity description: Used to classify what you sell and how it gets taxed

Once the state approves your application, it issues an Illinois Business Tax (IBT) number, which becomes your account identifier for each return you file afterwards. If your business operates in multiple home rule jurisdictions, you might need to register each physical location separately since Illinois tracks local tax obligations by site.

How often do you need to file Illinois sales tax returns?

Illinois assigns your filing frequency based on average monthly tax liability. It revisits this assignment periodically as your sales patterns change.

Here's what the filing tiers look like:

• Monthly filers: Businesses averaging more than US$200 in monthly liability file every month.

• Quarterly filers: Businesses averaging US$50 – US$200 per month file on a quarterly schedule.

• Annual filers: Businesses under US$50 in average monthly liability qualify for a single annual return.

You must file returns, along with any payment you owe, by the 20th day of the month following the end of your reporting period. If you miss this deadline, Illinois starts applying penalties and interest the next day, applied to whatever balance is still unpaid. Some larger monthly filers also face an accelerated payment requirement, where a portion of the current month's estimated liability is due before the period even closes. The rest is reconciled on the standard return.

How do you complete the Illinois ST-1 sales tax return?

The ST-1 is the standard return many registered sellers file. You begin with total gross receipts for the period, then subtract allowable deductions before applying any rate.

Here's what you can subtract:

• Sales for resale: Goods sold to another business that will resell them, since tax applies at the final retail sale, not each step before it

• Sales to exempt organisations: Purchases by qualifying non-profits, government entities, or other exempt buyers

• Returned goods: Merchandise that customers sent back during the filing period

• Out-of-state deliveries: Receipts from goods shipped to locations outside Illinois, where the state's tax doesn't apply

What's left after those subtractions is your taxable receipts. Multiplying that figure by the applicable rate gives you the base tax due.

If any of your sales fall under home rule or other local taxes, you'll attach Schedule A, which breaks taxable receipts down by taxing jurisdiction so the state can route local shares to the right municipalities and counties. A business running a single store outside a home rule area might never need to touch Schedule A. A retailer with locations across several Illinois cities, on the other hand, could be splitting receipts across a dozen or more local rates on one return. Getting the allocation wrong means the wrong jurisdiction gets paid.

Businesses that operate multiple physical locations under a single registration also file Form ST-2, which itemises receipts and tax owed by individual sites instead of reporting the business as one combined total. Between the two forms, Illinois expects a level of location-specific detail that other states generally don't require.

How do Illinois's home rule and local taxes affect your sales tax filing?

Illinois gives home rule municipalities (generally cities with populations over 25,000 or that have voted to adopt home rule status) the power to layer their own Retailers' Occupation Taxes on top of the state rate. Chicago is a prime example: its home rule tax stacks with county and regional transit taxes to reach a combined 10.5%.

How that local tax gets sourced depends on which category the seller fits into:

• In-state retailers with a physical Illinois presence: These sellers generally still source tax based on their own selling location under origin-based rules, the system Illinois has used for decades.

• Remote and marketplace sellers without a physical Illinois presence: These sellers source tax based on the customer's delivery address under destination-based rules, a change introduced by the state's 2021 Leveling the Playing Field for Illinois Retail Act.

That split exists because origin-based sourcing used to give some Illinois-based online sellers an incentive to locate warehouses or offices in lower-tax jurisdictions, which undercut local revenue elsewhere in the state. Applying destination-based rules to remote sellers closed that gap.

How Stripe Tax can help

Stripe Tax reduces the complexity of tax compliance so you can focus on growing your business. Start collecting taxes globally by adding a single line of code to your existing integration, clicking a button in the Dashboard, or using our powerful application programming interface (API).

Stripe Tax helps you monitor your obligations and alerts you when you exceed a tax registration threshold based on your Stripe transactions. It can also register to collect tax on your behalf in the US, automate US filings in the Dashboard, and manage global filings through trusted partners. Stripe Tax automatically calculates and collects sales tax, value-added tax (VAT), and goods and services tax (GST) on:

• Digital goods and services in all US states and over 100 countries
  
• Physical goods in all US states and 42 countries
  

Stripe Tax can help you:

• Understand where to register and collect taxes: See where you need to collect taxes based on your Stripe transactions. After you register, switch on tax collection in a new state or country in seconds. You can start collecting taxes by adding one line of code to your existing Stripe integration, or add tax collection with the click of a button in the Stripe Dashboard.

• Register to pay tax: If you need to register for sales tax in the US, let Stripe manage your tax registrations. You'll benefit from a simplified process that prefills application details – saving you time and simplifying compliance with local regulations. If you need help registering outside of the US, Stripe partners with Taxually to help you register with local tax authorities.

• Automatically collect tax: Stripe Tax calculates and collects the right amount of tax owed, no matter what or where you sell. It supports hundreds of products and services and is up-to-date on tax rules and rate changes.

• Simplify filing: Stripe Tax automates US filings in the Dashboard, powered by TaxJar. For global filings, Stripe Tax seamlessly integrates with filing partners, so your global filings are accurate and timely. Let our partners manage your filings so you can focus on growing your business.

Learn more about Stripe Tax or get started today.

FAQs about how to file Illinois sales tax