Illinois: Sales Tax Handbook
What constitutes sales tax nexus in Illinois?
One of the more complicated aspects of Illinois sales tax law is sales tax nexus, the determination of whether a particular sale took place within the taxation jurisdiction of Illinois, and is thus subject to state (and possibly local) sales taxes.
If a vendor's transactions are determined to have nexus in Illinois, the vendor must register for a Illinois sales tax license and collect appropriate sales taxes from the buyer for all transactions with nexus in the state. On this page, we have compiled some of the most commonly needed facts about what constitutes sales tax nexus in Illinois.
Sales Tax Nexus in Illinois
Illinois imposes tax obligations upon those who establish a physical presence in the state. In order to be deemed responsible for collecting sales tax, or having tax nexus, a retailer must first create a ÃƒÂ¢Ã¢â€šÂ¬Ã…â€œphysical presenceÃƒÂ¢Ã¢â€šÂ¬Ã‚Â in the state. Simply put, nexus is not solely established based on a brick and mortar location.
A physical presence in Illinois is deemed as: accepting purchase orders, retaining storage, or sustaining a physical location.
Out of state retailers can trigger nexus obligations in Illinois by merely establishing a physical presence within state lines.
A physical presence can be established by businesses that offer services like, a consistent delivery route in the state or repetitive installations within state lines. Physical presence is deemed as a physical location and/or repetitive occurrence in the state to work.
If your business has any type of â€œphysical presence"Â within state lines, it is considered to be doing business in Illinois.
For additional details on sales tax nexus law in Illinois, see the nexus information page from the Revenue Department at http://www.revenue.state.il.us/legalinformation/regs/part150/150-201.pdf
Taxation of Internet-Based Sales in Illinois
NOTE: 2018 Supreme Court Ruling Regarding Online Sales Taxes
In the 2018 Supreme Court case South Dakota vs. Wayfair Inc, Et Al., the court overturned a previous ruling that required a merchant to have physical nexus in order for a state to collect sales tax. This means that any state is now free to enforce collection of sales taxes on out-of-state online merchants. The information provided here may be subject to change, and many states are expected to begin collecting online sales taxes following this ruling.
Generally, Illinois does not charge sales tax on Internet-based transactions determined to have nexus within the state. This means that purchases from Amazon.com and other Internet-based retailers may be sales-tax-free. The Illinois Supreme Court stated that the click-through nexus definition provisions, that can be found in 35 ILCS 105/2(1.1) and 35 ILCS 110/2(1.1), to be void as of October 13, 2013.
The nexus status and taxability of Internet-based sales, by vendors and/or consumers within Illinois, have been the subject of hot debate in recent years. You can learn more on our introduction to Internet-based sales taxes.
Does my business have tax nexus in Illinois?
The folks at the sales tax compliance company Avalara are an approved Illinois sales tax partner, and you can use their free Illinois nexus wizard tool to determine whether or not your business has nexus, and is therefore required to pay Illinois sales taxes. If you're interested in automating your sales tax collection and filing process, click here to get more information.
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