Illinois Sales Tax Exemptions / Tax Free Items Illinois: Sales Tax Handbook

Illinois:

What purchases are exempt from the Illinois sales tax?

While the Illinois sales tax of 6.25% applies to most transactions, there are certain items that may be exempt from taxation. This page discusses various sales tax exemptions in Illinois.

Sales Tax Exemptions in Illinois

In Illinois, certain items may be exempt from the sales tax to all consumers, not just tax-exempt purchasers.

Some items which are considered to be exempt from sales tax in the state include: machinery, and building materials for real estate development. In addition, newspapers and legal tender (for example: gold, medallions and gold bullion issued by qualifying governments), and jet fuel intended to be utilized for international flights are also tax-exempt items.

Many states have special, lowered sales tax rates for certain types of staple goods - such as groceries, clothing and medicines. Restaurant meals may also have a special sales tax rate. Here are the special category rates for Illinois:


Clothing

  6.25%

Groceries

  1%

Prepared Food

  8%

Prescription Drugs

  1%

OTC Drugs

  1%

These categories may have some further qualifications before the special rate applies, such as a price cap on clothing items. Groceries are generally defined as "unprepared food", while pre-prepared food may be subject to the restaurant food tax rate.

Candy and soda may be included or excluded from any preferential tax rate depending on whether or not the state considers them to be a "grocery":


Is candy taxable in Illinois? Candy is NOT considered a grocery in Illinois
Is soda taxable in Illinois? Soda is NOT considered a grocery in Illinois

Are services, shipping, installation, etc taxable in Illinois?

The taxability of transactions involving services, shipping, and installation of tangible goods can be slightly complicated with various laws applying to slightly different situations. To learn more about how these transactions, and other more complicated situations, are subject to the Illinois sales tax see the Illinois sales taxability FAQ page.


Other tax-exempt items in Illinois

This table lists a number of additional categories of goods and services that are exempt from Illinois' sales tax. For a list that also shows taxable items, see the list of taxable and nontaxable items in Illinois.

Category Exemption Status
Leases and Rentals
Motor Vehicles EXEMPT *
Tangible Media Property EXEMPT *
Manufacturing and Machinery
Machinery EXEMPT
Raw Materials EXEMPT *
Medical Goods and Services
Medical Services EXEMPT
Newspapers and Magazines
Newspapers EXEMPT
Periodicals EXEMPT
Occasional Sales
General Occasional Sales EXEMPT *
Motor Vehicles EXEMPT *
Optional Maintenance Contracts
General Optional Maintenance Contracts EXEMPT *
Services
Janitorial Services EXEMPT
Transportation Services EXEMPT
Software and Digital Products
Custom Software - Delivered on Tangible Media EXEMPT
Custom Software - Downloaded EXEMPT
Customization of Canned Software EXEMPT *
Digital Products EXEMPT
Trade-Ins
General Trade-Ins EXEMPT

* See notes in category taxability page for details



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Source: http://www.salestaxhandbook.com/illinois/sales-tax-exemptions