Illinois: Sales Tax Handbook
What is included in Illinois' sales tax basis?
Many times, an otherwise-taxable transaction will include bundled fees like excise taxes, installation fees, or finance charges or be modified with coupons, installment payment plans, etc. One question that will often arise is whether or not a certain payment or fee is included in a transaction's taxable basis.
The taxable basis refers to the portion of an entire transaction that is subject to Illinois' sales tax. This page answers common questions about which common fees are included in the sales tax basis in Illinois, and which are excluded.
- Are coupons and discounts included in the sales tax basis?
- Are excise taxes included in the included in the sales tax basis?
- How are installment-based sales taxed?
- Are installation fees included in the sales tax basis?
- Are finance charges included in the sales tax basis?
- Can I get a refund on sales taxes paid on returned or repossessed items?
- Can I get a refund on sales taxes paid on bad debts?
Inclusion in Sales Tax Basis
Are coupons and cash discounts included in the Illinois sales tax basis?
What is not included are retailers coupons or discounts. Reimbursed coupons are included.Top
Are excise taxes included in the Illinois sales tax basis?
Excise taxes are separate levies added by many states to the price of commodity items such as alcohol, gasoline, etc. What is not included are federal taxes collected from customer, federal excise taxes on retail sales, state motor fuel tax, and the state tire fee. What is included are federal excise taxes on manufacture, import taxes, tax on non- retail sale, state liquor tax, and cigarette tax .Top
How are installment-based sales taxed?
Many businesses offer customers payment plans that allow them to pay the full price for a product over time in installments, often leading to confusion about when and how much sales tax is collected and remitted to Illinois. The state has implemented the following provisions regarding installment sales:
Payments reported as received
Are installation charges included in the Illinois sales tax basis?
While the taxation of tangible goods is relatively straightforward, some states consider the installation costs associated with a tangible object (like carpeting, a home or vehicle fixture, etc) to be taxable. Illinois policy states:
Installation charges are generally excluded from the taxable price of a tangible product.
Note: Excluded if separately contracted
Are finance charges included in the Illinois sales tax basis?
Many businesses offer customers financing on higher-value products, and include financing charges in the overall cost of the item. These finance charges may also be subject to sales taxes. Illinois policy states:
Finance charges are generally included in the taxable price of a tangible product.
How can I get reimbursed for sales taxes paid on items that are returned or repossessed?
If a taxable good for which sales tax has been collected is returned or reposessed by the merchant, the state may allow the amount of sales tax collected to be either deducted from the merchant's current sales tax balance or refunded to the merchant by the state. Illinois' policies state that returns and repossessions are:
Deductible, if the amount charged including tax is refunded to the purchaser
Note: A credit is allowed for the uncollected portion of the sale price of repossessed property
How can I get reimbursed for sales taxes paid on bad debts?
If a merchant offers goods to a consumer on credit and the payment for those goods becomes delinquent, the merchant may be eligible to be reimbursed any sales tax they paid to the state on the consumer's behalf when the transaction was made. The method of reimbursement varies state by state.
Tax paid on bad debts can generally be recovered by the merchant as a deduction or credit.
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