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What statutes govern occupation and use taxes in Illinois?
There are four tax acts that specify what the different taxes are and how they are collected. The Retailers’ Occupation Tax Act (ROT) and Use Tax Act (UT) govern taxes applicable to sales and purchases at retail. The Service Occupation Tax Act (SOT) and Service Use Tax Act (SUT) govern taxes applicable to sales and use of tangible personal property transferred incident to sales and purchases of service. Other tax acts govern sales taxes imposed by units of local government.
The ROT and SOT specify how the tax on tangible personal property sold in Illinois is imposed. The ROT governs sales of tangible personal property made by retailers, and the SOT governs tangible personal property transferred as part of a sale of service. See 86 Ill. Admin. Code Parts 130 and 140.
The UT and SUT specify how the tax on the privilege of using tangible personal property in Illinois is imposed and identify the types of sales and transactions in which use tax is applicable. The UT governs purchases from retailers. It also imposes tax on a business that removes merchandise it would have sold but instead uses in its business. The SUT governs merchandise received as part of a sale of service. See 86 Ill. Admin. Code Parts 150 and 160.
A key difference between retailers' occupation and use tax is that retailers' occupation tax is remitted to the Illinois Department of Revenue (IDOR) by a registered retailer or service person, but use tax is paid directly to the IDOR by the purchaser if the tax was not collected when the merchandise was sold. For additional information, see our Sales and Use Taxes Information page.
Note: The Leveling the Playing Field for Illinois Retail Act requires remote retailers and marketplace facilitators that meet certain thresholds to register to remit retailers' occupation tax for sales of tangible personal property to Illinois customers made on or after January 1, 2021. For more information, see our Leveling the Playing Field for Illinois Retail Act Resource Page.