ST-556-LSE Transaction Return for Leases Instructions
General Information
Who must file Form ST‑556-LSE?
If you sell items for lease at retail in Illinois and those items are of the type that must be titled or registered by an agency of Illinois state government (.g., vehicles, watercraft, aircraft, trailers, manufactured (mobile) homes), you must register with the Illinois Department of Revenue (IDOR) to collect Illinois Sales Tax and report these sales for lease on Form ST‑556‑LSE, Transaction Return for Leases.
Note: If you are a leasing company selling such an item at the end of a lease, do not file Form ST-556-LSE. Instead, use Form ST-556, Sales Tax Transaction Return. See the Instructions for Form ST‑556 Sales Tax Transaction Return, available on our website at tax.illinois.gov.
Note: Effective January 1, 2025, persons engaged in the business of renting or leasing the following items are subject to Illinois Sales and Use Tax and must report and pay tax on their rental or lease receipts as they are collected from the customer:
- trailers that must be registered with an agency of this State, other than semitrailers as defined in Section 1-187 of the Illinois Vehicle Code, and
- items that must be titled with an agency of this State but not registered with an agency of this State, such as all‑terrain vehicles (“ATVs”) and off-road motorcycles.
Rentors and lessors of these items should not use Form ST‑556 or Form ST‑556‑LSE to report rental or lease receipts from these items. Instead, rentors and lessors of these items should use Form LSE‑1 to report these rental or lease receipts. If, however, as part of the lease the lessee of a trailer other than a semitrailer will register the trailer with the Illinois Secretary of State in the lessee’s name, then, in addition to reporting and paying tax on lease receipts using the LSE‑1, the trailer lessor must complete Form ST‑556‑LSE for registration purposes only and must mark the “Other” exemption and enter “trailer lease.”
Remote Retailers and Marketplace Facilitators:
If you are a remote retailer or a marketplace facilitator who meets a tax remittance threshold (200 or more separate transactions per year or $100,000 or more in cumulative gross receipts from sales of tangible personal property to purchasers* in Illinois; see the Leveling the Playing Field for Illinois Retail Act Resource Page for additional information), you must register with IDOR to report these sales on Form ST‑556‑LSE for sales for lease. Sales of tangible personal property required to be titled or registered
with an agency of the State of Illinois, including motor vehicles, watercraft, aircraft, and trailers, that are made by a remote retailer or over a marketplace to purchasers in Illinois are sourced the same as all other sales made by a remote retailer or over a marketplace to purchasers in Illinois. See 86 Ill. Adm. Code 131.110(e) and 131.130(c). For sales for lease made by a remote retailer or by a marketplace facilitator on behalf of marketplace sellers, taxes apply at the location in Illinois to which the titled or registered item is shipped or delivered, or the location in Illinois where the purchaser takes possession of the titled or registered item. For sales for lease made by marketplace facilitators of their own items, the marketplace facilitator incurs State and local retailers’ occupation tax at the rate in effect at either the location of the inventory in Illinois or the location in Illinois at which the selling activities otherwise occur (as determined by applying the provisions of 86 Ill. Adm. Code 270.115(c) and (d)). For sales for lease made by marketplace facilitators
of their own items that are not fulfilled from inventory in Illinois and for which selling is not engaged in at any location in Illinois, taxes apply at the location in Illinois to which the titled or registered item is shipped or delivered or the location in Illinois where the purchaser takes possession of the titled or registered item.
If an Illinois purchaser travels to an out‑of‑State location to take possession of an item that is required to be titled or registered with an agency of the State of Illinois, the sale for lease is sourced out of State, and only Use Tax is incurred. The purchaser is responsible for filing the RUT-25-LSE, Use Tax Return for Lease Transactions, and paying the tax. You do not need to file Form ST-556-LSE or collect tax.
Do I need to file Form ST‑556-LSE if no tax is due?
Yes. Anytime you sell an item for lease at retail in Illinois that is of the type that must be titled or registered by an agency of Illinois state government, you must report the sale for lease on Form ST‑556-LSE, regardless of whether you are reporting tax due. Failure to file Form ST-556-LSE as required subjects you to possible penalties for each transaction that goes unreported.
How can I file Form ST-556-LSE?
Form ST-556-LSE must be filed electronically if your annual gross receipts average $20,000 or more. Form ST-556-LSE can be filed electronically by using MyTax Illinois, available at mytax.illinois.gov, or by using an approved service provider in the Electronic Registration and Title (ERT) program.
Note: You may request a waiver of the electronic filing requirement if you do not have internet access or demonstrate hardship to file electronically. Contact Taxpayer Assistance at 1 800 732-8866 or 217 782-3336 to request a waiver form. Complete the waiver form and mail it to the address listed on the form. IDOR will notify you if the waiver request is approved or denied.
If you are not mandated to file Form ST-556-LSE electronically or have received a waiver of the electronic filing requirement, you can request preprinted paper returns by calling our Central Registration Division at 217 785-3707. You also can obtain preprinted paper returns using MyTax Illinois. Note that preprinted paper forms will be pre-filled with certain information for each of your business locations. Related sales and use tax forms also are available on our website at tax.illinois.gov.
What is the retailers’ allowance (discount), and how can I claim it for timely filing Form ST‑556-LSE and paying the tax due?
The retailers’ allowance (discount) is an amount that retailers may claim only if the return is filed on or before the due date and only for a percentage of the taxes paid on or before the due date. This discount is allowed as a reimbursement for the expenses incurred in keeping records, preparing and filing returns, remitting the tax, and supplying data to IDOR on request.
For returns due on or after January 1, 2025, the discount is limited to $1,000 per month for all returns (i.e., both Forms ST-556 and ST-556-LSE) filed that month. The $1,000 monthly cap applies to vehicle sales with a delivery date on or after December 12, 2024, which corresponds to returns due on or after January 1, 2025. Retailers will no longer be able to reduce the tax remittance by the amount of the retailers’ allowance when filing Forms ST-556 and ST-556-LSE. To avoid potential billing issues or confusion, IDOR will calculate the discount on these returns through a monthly reconciliation process that will occur approximately 60 days after the end of a monthly liability period. The retailers’ allowance will be issued once the reconciliation process is completed each month.
If you are not mandated to file Forms ST-556 and ST-556-LSE electronically and file using paper returns, do not enter a figure on the retailers’ allowance line. You must remit all tax reported as due on your return to be issued the retailers’ allowance, as applicable, through IDOR’s monthly reconciliation process.
What if I make a mistake while filling out a preprinted paper form?
If you make a mistake on a preprinted paper Form ST-556-LSE, write “VOID” across the form. Keep the voided return in your record for at least 42 months. Do not send any part of the form to us. You will need to complete a new form to send to IDOR.
What if I need help?
If you need help, call our Taxpayer Assistance Division weekdays between 8:00 a.m. and 5:00 p.m. at 1 800 732‑8866, 217 782‑3336, or 1 800 544‑5304 (TTY).
You may also visit our website at tax.illinois.gov.
Language assistance services are available upon request and are free of charge.
See ST‑9‑LSE, A Guide for Reporting Sales Using Form ST‑556‑LSE, Transaction Return for Leases, available on our website at tax.illinois.gov, for additional guidance.
Specific Instructions
1: Enter the name, address, and Federal Employer Identification Number of the leasing company
Enter the name, mailing address, and Federal Employer Identification Number (FEIN) of the leasing company.
2: Enter the name and address of the lessee
Enter the name and address exactly as it appears on the application for title or registration. The address must be the actual address of the party using the leased item in Illinois.
Note: If the item will be registered in the city of Chicago, see the specific instructions for Section 8, Line 4 below.
3: Describe the item leased
Check the correct box (A-E) to show the type of item sold for lease. If the type of item is not identified in boxes A-E, check box F and enter the type of item.
Check the correct box to show whether the item is new or used.
Next, enter the appropriate identification number for the item, such as a vehicle identification number (VIN) for vehicles, trailers, and manufactured (mobile) homes, a hull identification number (HIN) for watercraft, or (N) number for aircraft.
Finally, enter the year, make, body style, and model of the item.
Note: If you sold more than one type of item for lease (e.g., a watercraft and a trailer) or more than one item of the same type (e.g., three motor vehicles) you generally must complete a separate Form ST‑556‑LSE for each item sold. If, however, you wish to report leases for use as rolling stock of more than one of the same type of vehicle to the same customer with the same date of delivery, you may file Form ST-556-R, Resale and Rolling Stock Fleet Exemption Schedule, with a single Form ST-556-LSE.
4: Enter the date of delivery
Enter the date you applied for a change in the title on the sale for lease.
Note: This return is due no later than 20 days after the date of delivery.
5: Describe the trade‑in, if any
If you are not claiming a qualified trade-in, skip this section and go to Section 6.
If you are claiming a qualified trade-in, enter the type of item traded in (e.g., automobile, truck, airplane, boat, trailer). Next, enter the
appropriate identification number, year, make, body style, and model of the trade-in.
Note: Trade-in credit is not allowed if the selling price on Section 8, Line 1, is the amount due at signing, plus total lease payments.
What is a qualified trade‑in?
A qualified trade-in is an item that:
- the buyer gives you to reduce the selling price (in part or in full) of the item sold;
- you are allowed to subtract from the total price; and
- you are in the business of selling.
You are “in the business of selling” a particular kind of item if you hold yourself out to the public as being engaged in (or habitually engage in) selling such items.
For example, you may claim the trade‑in of a boat for an auto if you are in the business of selling both boats and autos. However, you may not claim the trade‑in of a boat on an auto if you are in the business of selling only autos.
Note: For sales made on or after January 1, 2020, up to and including December 31, 2021, for purposes of calculating your Sales Tax due, you cannot claim trade-in credit exceeding $10,000 for any first division motor vehicle that was traded in during the sale being reported on Form ST-556-LSE. For sales made on or after January 1, 2022, the $10,000 trade-in credit limit no longer applies.
6: Exempt or lease to a nonresident
If the sale is for a lease to an Illinois resident and is taxable, skip this section and go to Section 7.
If the sale is exempt, check the correct box (A-E), and complete Section 7 and Section 8, Lines 1 and 2.
If you are not required to submit title or registration paperwork on the item, send the return directly to us at
ILLINOIS DEPARTMENT OF REVENUE
RETAILERS’ OCCUPATION TAX
PO BOX 19042 SPRINGFIELD IL 62794‑9042.
A. Lease to non‑Illinois resident
Check this box if you sold a vehicle or trailer for lease to a non‑Illinois resident who took possession of the item in Illinois, and either:
- you issued a drive-away permit for the item sold for lease; or
- the lessee transferred out‑of‑State license plates to the item.
If you issued a drive‑away permit, enter the drive‑away permit number and the two‑letter state abbreviation of the lessee’s state of residence in the space provided. If the lessee transferred current out‑of‑State license plates to the item, enter the out‑of‑State license plate number and the two‑letter state abbreviation in the space provided. Note that the rules about whether a nonresident purchaser exemption can be claimed that apply to sales reported on Form ST‑556 (i.e., whether the purchaser’s state gives Illinois residents a nonresident purchaser exemption on their sales of motor vehicles or trailers that will be titled in Illinois) do not apply in a lease situation. All drive‑away leases to non‑Illinois residents are exempt from Illinois sales tax.
Note: If you claim the nonresident exemption, keep a copy of the lessee’s valid out‑of‑State driver’s license in your records as proof of nonresidency. You also are responsible for obtaining a signed certification documenting the lessee’s eligibility for the nonresident purchaser exemption. As a condition of claiming this exemption, nonresident lessees must certify that they are not residents of Illinois. See ST-588, Nonresidency Exemption Certification for Sales and Leases of Motor Vehicles and Trailers, available on our website at tax.illinois.gov. Retain this certification in your records as proof that no tax was due on the sale of the specified item.
B. Lease for use as farm implement or lease of ready‑mix concrete truck
Check this box if you sold an item for lease to be used primarily in production agriculture or if you sold a ready‑mix concrete truck for lease to be used primarily in the manufacture of tangible personal property to be sold at retail. To claim either exemption, your customer must properly complete Form ST-587, Equipment Exemption Certificate, which you must retain in your records for documentation.
C. Lease to tax‑exempt governmental body
Check this box if you sold an item for lease to a governmental body that has an active Illinois Sales Tax exemption “E” number. In the space provided, enter the governmental body’s active Illinois Sales Tax exemption “E” number.
Note: The lessee must be the governmental body itself rather than a member or officer of the governmental body. The item must be paid for with the governmental body’s funds. The governmental body’s exemption number must have been in effect on the day you made the sale, and the lease must have been executed or in effect at the time of purchase.
D. Lease to an interstate carrier for hire for use as rolling stock
Check this box if you sold an item for lease to be used as rolling stock to haul persons or commodities for hire in interstate commerce. In the space provided, enter the certificate of authority number. Keep a properly completed Form RUT-7, Rolling Stock Certification, in your records for documentation.
E. Other
Check this box if the sale is exempt for a reason not identified in boxes A – D.
7: Indicate how you determined your selling price
Check the appropriate box to indicate whether the amount entered in Section 8, Line 1, is comprised of the amount due at lease signing, plus the total of all regular lease payments, with no deduction for trade‑ins, or whether this amount is the actual selling price of the item being leased. Retain a copy of the lease contract in your records for documentation.
Rules of eligibility: Illinois law requires taxpayers to calculate the tax due using the lease signing amount and total lease payments, with no deduction for trade-ins, when selling for lease first division motor vehicles and certain qualifying leased second division motor vehicles. This requirement regarding the alternate selling price applies only to leases entered into on or after January 1, 2015. The lease must be a fixed-term lease contract for a period of more than one year. The qualifying leased second division motor vehicles are those with a gross vehicle weight rating of 8,000 pounds or less, those of a van configuration and designed to transport not less than seven or more than 16 passengers, and those which are self‑contained and designed or permanently converted to provide living quarters for recreational, camping, or travel use and have direct walk‑through access to the living quarters from the driver’s seat. For all other leases, you must use the actual selling price. This includes leases of non‑qualifying items and leases of qualifying items under a lease contract that is not a defined period, including contracts with a defined initial period with the option to continue the lease on a month-to-month or other basis beyond the defined initial period.
Note: If, however, a qualifying vehicle is leased for a defined period (e.g., 24, 36, or 48 months) but the contract contains a provision regarding the “Return of the Vehicle” or a similar provision that allows for the lease to continue for a short period (i.e., 1 to 6 months) but only after the lessee (customer) fails to meet the original terms of the lease or only with further agreement by the leasing company, then this provision does not disqualify the lease from being eligible for the new alternative definition of “selling price.”
8: Enter the price, and figure the tax
Note: When completing Section 8, round to the nearest dollar by dropping amounts of less than 50 cents and increasing amounts of 50 cents or more to the next higher dollar.
Line 1: If you checked Box A in Section 7, enter the amount of the lease contract, including the amount due at lease signing, plus the total amount of all lease payments. Include any charges factored into the lease contract, including, but not limited to extended warranty, registration fees, title fees, negative equity, rebates, cash down payments, and the first month’s lease.
Note: The selling price on which tax is calculated cannot be reduced by the amount of any trade‑in. Therefore, if the amount of the lease contract has been reduced because of a trade-in, to figure out the amount to enter on Step 8, line 1, you must add the amount of any trade‑in to the amount of the lease contract.
If you checked Box B in Section 7, enter the actual selling price, including accessories, federal excise taxes, freight and labor, dealer preparation, documentary fees, and any rebates or incentives for which you as a dealer receive reimbursement. Clean vehicle credits that are applied toward the purchase of a clean vehicle should be included as part of the taxable selling price of the vehicle. Do not subtract the value of any rebate made directly to the customer. In general, any cost passed on to the customer as part of the sale of an item and for which gross receipts are received should be included in the selling price.
Note: If you are selling a new truck for lease that weighs 33,000 pounds or more, or a new trailer or semitrailer chassis weighing 26,000 pounds or more, you may exclude the federal excise tax from the total price.
Line 2: If you claimed a qualified trade-in (see Section 5), enter the total trade-in credit or value. Note that, for sales for lease made on or after January 1, 2020, up to and including December 31, 2021, for purposes of calculating your Sales Tax due, you cannot claim trade-in credit exceeding $10,000 for any first division motor vehicle that was traded in during the sale being reported on Form ST-556-LSE. For sales made on or after January 1, 2022, the $10,000 trade-in credit limit no longer applies. You must identify the traded-in item in the spaces provided in Section 5. Trade-in deduction is not allowed if you checked Box A in Section 7. Do not deduct rebates.
Note: If you claimed an exemption in Section 6 and no tax is due, you do not need to complete the remaining Lines 3-12 of Section 8.
Remember that you and all buyers must sign the return.
Line 3: Subtract Line 2 from Line 1.
Line 4: Calculate your tax due using the following to determine the appropriate rate:
- If you made this sale for lease at your standard business location (i.e., the location printed on the front of the paper
Form ST-556-LSE returns that IDOR issues to you), multiply Line 3 by the tax rate printed on your return.
- If you made this sale for lease at an off-site location (e.g., a tent sale), follow the instructions on ST-23, How to Report Off-Site Sales on Form ST‑556, Sales Tax Transaction Return, or Form ST‑556‑LSE, Transaction Return for Leases, available on our website at tax.illinois.gov.
- Clean vehicle credits that are applied toward the purchase of a clean vehicle should be included as part of the taxable selling price of the vehicle.
Note: If your sales location is in Cook, DuPage, Kane, Lake, McHenry, or Will County and the address of the party registering the item, as shown on Form ST-556-LSE, Section 2, is within the corporate limits of the city of Chicago, you must collect an additional 1.25 percent (.0125) Chicago Home Rule Use Tax. To help you calculate the tax due on one of these sales for lease, we preprint a combined rate below Line 4 on the paper Form ST-556-LSE returns that IDOR issues to you. This combined rate includes your tax rate, plus the additional 1.25 percent Chicago Home Rule Use Tax. To figure the correct tax due, multiply the amount subject to tax on Line 3 by the combined rate. Enter the result on Line 4.
Line 5: If the address entered in Step 2 is located in an area in which tax has been imposed by the Regional Transportation Authority or Metro‑East Transit District, your customer may owe additional tax. If your sales location is within the boundaries of one of these areas, the additional tax is already included in your combined tax rate. If, however, your sales location falls outside these boundaries, you are not required to collect any additional use tax, but as a courtesy, you may collect and remit the additional tax so that your customer will not be billed for it later. If you have determined that the sale is subject to the additional use tax, multiply the amount on Line 3 by any difference in rates (expressed as a decimal), and enter the result on Line 5.
Finally, list the applicable county and city or village for the address entered in Step 2, if any, and, if the address is in Madison or St.
Clair County, the township.
Do not report municipal or county home rule use tax on Line 5.
Line 6: Add Lines 4 and 5.
Line 7: For returns due on or after January 1, 2025, this discount for timely filing and payment is limited to $1,000 per month for all returns (i.e., both Forms ST-556 and ST-556-LSE) filed that month. Do not enter a figure on Line 7. You must remit all tax reported as due on Form ST‑556‑LSE to be issued the retailers’ allowance, as applicable, through IDOR’s monthly reconciliation process.
Line 7a:
Note: Line 7a is preprinted only if you have a business location in the Metro‑East Mass Transit District portion of St. Clair County. IDOR is responsible for collecting and administering the fee imposed by the transit authority on sales of items at retail when those items will be titled or registered by an agency of Illinois state government. Multiply Line 3 by 0.5 percent (0.005).
- If the result is less than $20, enter the result on Line 7a.
- If the result is $20 or more, enter $20 on Line 7a.
Line 8: Subtract Line 7 from Line 6. If you calculated an amount on Line 7a according to the above instruction, subtract Line 7 from Line 6, and then add to that total the amount on Line 7a.
Line 9: If you collected more tax than is due on this sale, enter the amount you overcollected.
Line 10: Add Lines 8 and 9.
Line 11: If you have a credit memorandum or prior overpayment and you wish to use it towards what you owe, enter the amount you are using on Line 11.
Line 12: Subtract Line 11 from Line 10, and enter the amount due. Also, enter the identifying number from the remittance you are sending to pay the tax due on this return. If you are filing more than one Form ST-556-LSE, enclose a separate remittance for each return.
Sign the return
Both the seller and buyer must sign the return.
If you claimed a qualified trade-in for the item sold for lease, the signatures also declare that the title of the traded-in item has been
properly assigned and surrendered to the seller.
Penalty and Fee Information
We will bill you for any amounts owed, including the following penalties and fees:
- You owe a late filing penalty if you do not file a processable return by the due date.
- You owe a late payment penalty if you do not pay the amount you owe by the original due date of the return.
- You owe a bad check penalty if your remittance is not honored by your financial institution.
- You owe a cost of collection fee if you do not pay the amount you owe within 30 days of the date printed on a bill that we send you.
- You owe a nonfiling penalty for transaction returns if you do not file a processable transaction return (ST-556, Sales Tax Transaction Return, or ST‑556‑LSE, Transaction Return for Leases) by the due date, but only if no tax is due on the return.
For more information, see Publication 103, Penalties and Interest for Illinois Taxes, available on our website at tax.illinois.gov.
ST-556-LSE Instructions (R-12/24)