PIO-101, Illinois Sales & Use Tax Matrix

In Illinois, occupation and use taxes are collectively referred to as “sales tax.” The Retailers’ Occupation Tax Act imposes a tax upon persons engaged in this State in the business of selling tangible personal property at retail to purchasers for use or consumption. 35 ILCS 120/1, et seq.; 86 Ill. Adm. Code 130/101 et seq. The Use Tax imposes a tax on the privilege of using, in this State, any kind of tangible personal property purchased anywhere at retail from a retailer. 35 ILCS 105/1, et seq.; 86 Ill. Adm. Code 150.101 et seq. The Service Occupation Tax imposes a tax upon persons engaged in this State in the business of making sales of service on tangible personal property transferred by sale, lease, or rental incident to a sale of service. 35 ILCS 115/1 et seq.; 86 Ill. Adm. Code 140.101 et seq. The Service Use Tax imposes a tax on the privilege of using, in this State, real or tangible personal property acquired as an incident to the purchase of a service from a serviceman. 35 ILCS 110/1 et seq.; 86 Ill. Adm. Code 160.101 et seq. In addition to the State Retailers’ Occupation Tax and Service Occupation Tax, local occupation taxes are authorized by statute and administered by the Illinois Department of Revenue (“IDOR”). There are, however, no local use taxes on general merchandise administered by IDOR.

See IDOR’s website at tax.illinois.gov for information about sales and use tax, remote retailers, marketplace facilitators, servicepersons, destination-based sales tax, and registration and filing requirements.

Effective January 1, 2026,

• The State of Illinois will eliminate the one-percent (1%) sales and use tax on grocery sales. This change in law also authorizes municipalities and counties to impose a local grocery tax rate of exactly one-percent (1%) by ordinance. The municipality or county must file the ordinance with the Illinois Department of Revenue (IDOR), and the ordinance must be approved. For more information, see FY Bulletin 2026-03, Illinois Grocery Tax Changes Effective January 1, 2026.
• Servicepersons maintaining a place of business in this State are subject to destination-based sourcing on sales of service that would otherwise be sourced outside of this State. For more information, see FY Bulletin 2026-13, Service Occupation Tax Changes (coming soon).
• The 200-transaction threshold will be removed for remote retailers, marketplace facilitators, and servicepersons making transfers of tangible personal property to Illinois purchasers incident to sales of service.

In using this matrix, the presumption is that tangible personal property is taxable unless there is an exemption. Most of the exemptions from tax are use-based (e.g., conditioned on the purchaser using the tangible personal property in a specific manner). A few items are exempt based on the nature of product (e.g., feminine hygiene products). Other exemptions are based on the status of the purchaser (e.g., charitable, religious, and educational organizations). Purchasers claiming a use-based exemption must provide the retailer or serviceperson with required documentation. Status-based exemptions must be documented by providing the retailer or serviceperson with an exemption identification number (“E-number”) issued by IDOR to the exempt entity.

Effective January 1, 2025, if you lease or rent tangible personal property in the ordinary course of your business, you are considered a retailer subject to Illinois’ Sales and Use Tax laws, and you must register with IDOR and pay tax on your lease or rental receipts. See Public Act (P.A.) 103-592 and ID 1049 below. For more information, see Informational Bulletin FY 2025-15, Illinois Sales and Use Tax Applies to Leased or Rented Tangible Personal Property.

Effective January 1, 2025, P.A. 103-592 amends the Retailers’ Occupation Tax Act to provide that a lease of tangible personal property is considered a sale at retail. This also amends the Service Occupation Tax Act to include transfers of tangible personal property by lease or rental incident to a sale of service in Illinois. Generally, this tax on lease receipts does not apply to leases of motor vehicles, watercraft, aircraft, or semitrailers, as defined in Section 1-187 of the Illinois Vehicle Code, that are required to be registered with an agency of the State of Illinois. However, lease or rental receipts from the following titled or registered property is subject to tax:

1. trailers, other than semitrailers as defined in Section 1-187 of the Illinois Vehicle Code, that are required to be registered with an agency of this State; and
2. items that are required to be titled with an agency of this State but not required to be registered with an agency of this State, such as all-terrain vehicles (“ATVs”) and off-road motorcycles.

Use Form LSE-3, Lease/Rental Payments for Certain Titled or Registered Property to report receipts for leases or rentals of these items. This does not apply to “rent-to-own” transactions. For more information, see our website.

High Rate of Tax

Illinois has two tax rates. The rate for general merchandise is 6.25% (high rate).

Low Rate of Tax

The preferential rate for qualifying drugs and medical appliances is 1% (low rate).

Local Taxes and Tax Rate Finder

There are numerous locally imposed retailers’ occupation taxes and service occupation taxes on general merchandise administered by IDOR. The only locally imposed retailers’ occupation taxes and service occupation taxes on qualifying drugs and medical appliances administered by IDOR are in transportation districts. The retailers’ occupation taxes and service occupation taxes on qualifying food administered by IDOR in transportation districts remain in effect. Effective January 1, 2026, municipalities and counties are authorized to impose a local grocery tax rate of exactly one-percent (1%) by ordinance, administered by IDOR. There are no local use taxes on general merchandise administered by IDOR. Tax rates are subject to change twice a year on January 1 and July 1. To determine the effective rate of tax for a specific location, use the Tax Rate Finder.