If you are going to start a business in Illinois, then one of the first things you will need is to get a Sales Tax ID Number. It is sometimes known as Sales Tax License, Sales Tax Permit, Seller’s Permit, Sales Tax Registration, or Sales and Use Tax Number…
This to-the-point guide will inform you about each and every thing that you need to know when applying for a Sales Tax Permit in Illinois.
Who needs a sales tax permit in Illinois?
First thing before starting the registration process is to determine if you even need one. If you meet any requirements listed below then you are entitled to get a Sales Tax permit to legitimize your business in Illinois.
1- Physical Nexus
If you have a physical Nexus in Illinois, then the Department of Revenue will demand you to get the license. Nexus means if you have a physical presence in the area. It includes:
- Offices, Retail shop, Warehouse, Fulfillment Centre. Inventory Store
- Employee, Contractor, Sales Representative or Agent in state of Illinois
- Third Party affiliates
The Illinois Taxing Authority has explicitly mentioned all the categories that are considered as physical nexus. You can read their complete guide to know more details about this.
2- Economic Nexus:
Out-of-state businesses are qualified for Sales Tax ID Number if they fall under either of below two categories:
- If business makes $100,000 or more in annual sales by selling tangible properties to their residents of state
- More than 200 transactions of tangible personal property to resident of Illinois
3- Online Business
If you are running an online business located in an Illinois estate that sells taxable products to its residents.
If you sell products in Seminars, Fairs, or Conventions then you need to get a seller’s text number.
What products and services are taxable in Illinois?
All products and services are taxable with the exception of few things. Let’s discuss them in detail.
1. Physical products
Following products are taxable when sold at retail in Illinois:
- General commodities like Furniture, Electrical Appliances, or clothes
- Register items like Cars, Drugs, or Bicycles
- Food, Medical Devices, or prescriptions
- Certain manufacturing equipment are exempted
- Labour in most of the cases are not required to get ID number in Illinois
For example, you bring a broken phone to a mobile repair shop and the technician fixes it. In this instance, new spare parts are subject to sales tax but the labor to repair the phone is exempted from tax.
Some businesses are required to pay indirect sales tax for the labor. For instance, when you hire a carpenter business to make furniture for your building then the sales tax is applied to the final selling price of the finished product. This includes prices of wooden logs, labor and paint etc.
2. Digital Products
All the digital products, except canned software, are text free.
Most of the services are tax-exempt except following:
- Coin-operated amusement games
- Short-term Lodging
- Automobile rental services
How to register for a sales tax permit in Illinois
Two methods are available to get your Sales Tax ID Number.
1. Online Application:
You can apply for registration through myTax Illinois website.
2. Paper Application:
In this method, you will download Illinois Business Registration Application Form REG1 and send it to the Department of Revenue via email.
Information Required for Applying:
Following information is needed to fill the application form:
1- Type of business entity (LLC, Proprietorship, Partnership, or Corporation)
2- Name and mailing address of owners/members
3- Business name and address
4- Phone number
5- Short description of business including products and services
6- North American Industry Classification System code
7- Federal Employer Identification Number in case of hiring employees
8- Owner’s Social Security Number in case of sole proprietorship
9- Commencement date of business activities
10- Projected monthly sales
11- Estimated monthly taxable sales
12- Employee information
How much does a sales tax permit cost in Illinois?
The process of registration for Sales Tax License in Illinois is free of cost. However, other business registration fees may apply. You can confirm it either by contacting the state’s Taxation Authority or by myNITS advisor instantly.
How long does it take to get an Illinois sales tax permit?
It takes 2-3 business days to receive the Sales ID Number if you have applied through an online application. For physical application, it takes 2-3 weeks for the Tax Authority to issue a sales permit for the business.
After getting registered, you will receive an 8-digit number and a Certificate. By law, you are required to display the registration certificate on a prominent spot in business location where everyone can read it.
Do you have to renew your Illinois sales tax permit?
Sales Tax permit is a one-time registration process. Businesses don’t need any renewal of the permit. However, they are obliged to inform the Illinois Tax department of any changes in mailing address, owners, additional locations, and services.
Certificate of Resale
Businesses can even purchase items to resell without paying the State Sale Tax. They only need to get the Sales Tax exemption certificate from Illinois. In this scenario, the Sales Tax liability is passed from distributor to retailers. They will charge sales tax to the end customer of the item.
Some Important things
The Sales Taxation system of Illinois is somewhat different from other states. You need to mention each location from where you are shipping your products to the customers.
For instance, if you are an Amazon FBA seller then you need to mention all Illinois Amazon Fulfillment centers in which you have inventory.
Getting your Sales ID Number from Illinois is easy. However, if you are overwhelmed by a process then you can get immediate assistance from myNITS advisors.