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What is the relationship between retailers' occupation and use tax in Illinois?

In Illinois, there are two separate but complementary taxes upon the sale and use of tangible personal property. Section 2 of the Retailers’ Occupation Tax Act imposes a tax upon persons engaged in the business of selling tangible personal property at retail to purchasers for use or consumption.  Section 3 of the Use Tax Act imposes a tax upon the privilege of using, in this state, tangible personal property that is purchased anywhere at retail from a retailer.  These two taxes comprise what is commonly known as "sales tax" in Illinois.  See e.g., Ji Aviation v. Ill. Dep't of Rev., 335 Ill. App. 3d 905, 914 (4th Dist. 2002).

The retailer uses its gross receipt to calculate its retailers’ occupation tax liability, and as a part of the same transaction, the retailer satisfies its statutory obligation to collect the use tax owed by the customer. In effect, this use tax collection reimburses the retailer for its retailers’ occupation tax liability. If a retailer does not collect use tax on a sale of tangible personal property to a customer who will use that property in Illinois, the customer must pay the use tax directly to the State of Illinois.

You can find additional information on our Sales and Use Tax 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.


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