Who qualifies for a sales tax exemption?
Your organization must be
- not-for-profit, and
- organized and operated exclusively for charitable, religious, educational, or governmental purposes,
to qualify for the exemption from state and local sales tax.
Who receives sales tax exemptions?
Sales tax exemptions are given to
- Exclusively charitable organizations
- Licensed not-for-profit day care centers
- Not-for-profit organizations that are operated primarily for arts or cultural purposes
- Qualifying senior citizen organizations
- State, local, and federal governments
Do nursing homes and not-for-profit hospitals qualify for the exemption?
Not-for-profit hospitals and nursing homes that qualify as exclusively charitable institutions are not subject to sales tax when selling food or medicine to their patients. Hospital dining facilities that are not open to the general public are also exempt.
However, a hospital or hospital auxiliary incurs a sales tax liability when selling candy, chewing gum, tobacco products, and razor blades, since these items aren't necessary for basic hospital service and place the hospital in competition with community businesses.
Who doesn't qualify for a sales tax exemption?
Some organizations do charitable work, but aren't primarily organized and operated for charitable purposes. Therefore, they don't qualify for this exemption. These include civic and fraternal organizations, such as
- American Legions,
- Chambers of Commerce,
- Elks Clubs,
- Lions Clubs,
- Rotary Clubs,
- Veterans of Foreign Wars, and
- Unions and trade associations.
What if an exempt organization sells items?
If your organization is exempt from paying sales taxes on its purchases, it still must collect sales taxes on items it sells, except in the three instances below.
- The items are sold only to the organization's members, students, patients, or inmates.
- The sales are from occasional dinners open to the general public, no more than twice in any one year.
- The sales are not in direct competition with businesses in the community.
The money your organization raises from any of these instances must be intended to further the charitable purpose of the organization in order for the exemption to apply.
Note: Gift shops or rummage stores operated by exempt organizations are commercial enterprises that are in competition with community businesses and are ineligible for a sales tax exemption on the sales they make.
How does an organization apply for a sales tax exemption?
There is no application form. Your organization should submit their request to us at the address located at the end of this page. If eligible, the department will issue your organization a sales tax exemption number. The sales tax exemption may take up to 90 days to process and it is not retroactive. Your organization must give this number to a merchant in order to make purchases tax-free.
To apply, your organization should send a letter requesting the exemption, and include a copy of the minimal documentation including
- The articles of incorporation,
- The organization's constitution, if unincorporated,
- The by-laws,
- A detailed narrative that explains purposes, functions, and activities of your organization,
- The IRS letter, respecting federal tax-exempt status, if your organization has one,
- Brochures or other printed material explaining the purposes, functions, and activities of your organization,
- The most recent financial statement. If the organization is a religious organization, they do not need to submit a financial statement with the initial request, and
- Any other information that describes the purposes, functions, and activities of your organization.
Do you need additional sales tax exemption information?
Phone: 217 782-8881
ILLINOIS DEPARTMENT OF REVENUE
SALES TAX EXEMPTION SECTION 3-520
101 W JEFFERSON ST
SPRINGFIELD, IL 62702-5145