Illinois Tax Laws – Nuances and Recent Changes

Illinois tax code is complex, and a lot of it is fairly punishing to local residents and businesses. In fact, one study rated Illinois the “least friendly” state in terms of taxes.

Navigating the maze of tax laws and regulations often requires expert guidance, especially when it comes to more complex tax situations. Here, we’ll look at some of the nuances of Illinois’s tax code.

Illinois Tax Nuances

Some of the particularities of the tax laws in the state include use tax, ROT, and sales taxes, each of which can impact businesses in some way.

Illinois Use Tax and ROT

One of the items local businesses might have to keep in mind is the difference between use taxes and Retailer’s Occupation Tax (ROT).

  • Use taxes (UT) are sales taxes charged on items purchased without paying at least 6.25 percent sales tax. They’re often assessed on items purchased from outside the state via the internet.
  • Retailer’s Occupation Tax (ROT) is like a use tax, but imposed on sellers rather than purchasers. It may be assessed by both the state and local areas.

Remote sellers in the state generally have to deal with use tax and not ROT, but recent laws are changing that. The exact result, however, is uncertain since the senate bills involved seem to be in conflict with one another.

Taxes on goods

Sales taxes are assessed on items purchased in the state, but some items may have extra taxes on top of that. For instance:

  • Gasoline is taxed at $0.38 per gallon by the state (plus more by county).
  • Wireless service has a tax of 20.91%.
  • Sin taxes assessed on cigarettes are up to $2.98 for the state (plus more in local municipalities).
  • Additional sales taxes may be assessed by locality.

If you’re running a business that sells goods, you’ll want to know which laws apply to you and make plans to meet those obligations.

Recent Changes to Illinois Tax Laws

Some of the changes proposed to Illinois’s tax laws include those listed below.

Franchise tax to be repealed

Franchise taxes, or the taxes that businesses have to pay for the right to operate in the state, are being repealed. By 2024, they will be completely gone, but in the meantime, businesses will have increasing amounts of their income exempted from year to year.

Sales tax adjustments

In the past, remote sellers have paid use tax, but a new law under Senate Bill 690 proposes that they’ll instead pay ROT. Nevertheless, Senate Bill 689 extends use taxes to marketplace facilitators and sellers, who will have to pay them on behalf of their vendors, potentially rendering the switch to ROT detrimental.

New tax credits

Senate Bill 689 has also added a number of tax credits designed to benefit local businesses, including the EDGE Credit and the High Impact Business Investment Credit.

Knowing Your Tax Liability

In order to navigate the numerous changes taking place and make sure you meet your tax obligations, it may be necessary to get legal guidance, particularly if you’re running a business in the state. Hart David Carson LLP can help you through that process.

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