IL Sales Tax 101 States

How to Know if You are Overpaying or Overcollecting Illinois Sales Tax

by Carrie Almany

Illinois sales tax

We have noticed that some customers could be overpaying or reporting an overcollection of sales tax on their tax returns in the state of Illinois. This is often due to how customers are registered with the state.  Illinois requires you to register all your selling locations with the state (to the state of Illinois, a third-party fulfillment center where inventory is stored is considered a location).   Figuring out how to register all your locations in Illinois and why you may be collecting or reporting incorrectly can be confusing and frustrating. But rest assured!  We will help you with this process.  Let’s jump right in!

How to Register Sales Location(s) within the State of Illinois

There are different options for registering a location in Illinois.  What option is best for you is dependent upon whether you currently have a registered location in Illinois.

You have never registered a location in Illinois

If you are already registered to collect sales tax in Illinois but have never registered a selling location there, you will need to contact the state registration division at 217-785-3707.  You will need to provide them with the addresses of all locations.  Also, you will want to confirm with the registration division that they make the new locations effective for the current tax return reporting period.

FBA Sellers

To complicate sales tax matters for FBA sellers, Amazon operates numerous fulfillment centers in the state of Illinois. If you are selling via FBA to Illinois customers, then you likely have multiple sales locations that must be registered.  See page 6 of Illinois’ Response to Comments on Local Sourcing Regulations.

If you sell via FBA, we recommend that you go ahead and register ALL fulfillment centers in IL.  This will avoid having to call in the future and add new locations every time Amazon stores your inventory in a new/different, non-previously registered Illinois warehouse. Once the state registers these sales sites within their system, you will be able to correctly collect, report and remit sales and use taxes on your tax return according to the rates of each location.

You can see a list of all Illinois Amazon fulfillment centers here, but to be more precise, you should check your own Inventory Event Detail report.

You already have at least one registered location in Illinois

If you already have at least one registered location in Illinois but need to add new locations, login to MyTaxIllinois account, click on the ST-1 link and then click the “Maintain locations” link to add sites to your account. You’ll be brought to a page where your currently registered sites will be listed under the Site Maintenance tab.  You will see two other tabs to choose from:

  • A permanent location is one from which items are sold from a fixed location. Examples include a building, FBA warehouse, or storefront. A permanent location should have a complete street address (no PO Box numbers).
  • A changing location is one that constantly changes (i.e., door-to-door-sales, home party sales, festivals, flea markets, craft shows, etc.).

If you only sell via FBA, you would add a “permanent location.” If you also sell at trade shows, craft fairs, etc. you may also be required to add a “changing location.”

Once you choose which type of location is applicable you will click “add site” and enter the required information.

Why Should I Register All My Locations in Illinois?

To put it in the simplest form, Illinois requires you to do so.  If you do not register all locations in Illinois, you may be unable to report your taxes correctly, and in some circumstances, actually overpay sales tax to the state. The three scenarios below detail the most likely reasons:

Case #1: You are Overpaying Sales Tax to the State

If you have not yet registered all your locations within Illinois, then you may be overpaying if  your registered location in Illinois is in a city/county with a higher tax rate than the unregistered location.

Illinois sales tax overpayment example:

Your business is headquartered near Chicago (Cook County) and when you ship products from there you (correctly) charge the local combined sales tax rate of 10.25%. When you registered for your Illinois sales tax permit, you included your business HQ address, but did not include other locations from where your products might ship. You also ship sales from the Amazon fulfillment center in Edwardsville, IL (Madison County) where the local combined sales tax rate is 7.10%. In keeping with Illinois’s sales tax rules, you charge 10.25% on orders shipped from your HQ and 7.10% on orders shipped from the fulfillment center in Edwardsville.

In this scenario, the problem lies in failing to register Edwardsville, IL as one of your business locations. In this scenario, the Illinois taxing authority will erroneously assume  that you should have collected 10.25% sales tax on all orders since the only location registered is in Chicago.

In this case, while you may be collecting sales tax correctly, the state’s sales tax filing system will only give you the option to report all sales at the 10.25% rate.  If the Edwardsville location is not registered, you will not have the option on your return to correctly report these sales at the correct rate causing an overpayment to the state.

Case #2: Your Business is Located in Illinois and Your Registered Location is at a Lower Sales Tax Rate

This scenario is the exact opposite of the scenario above.  If you have not yet registered all your locations within Illinois, then the state will think you are overpaying sales taxes if your registered location in Illinois is in a city/county with a lower tax rate than the unregistered location.

Illinois sales tax return reporting an overpayment example:

Your business is located near Edwardsville, IL (Madison County) and when shipping products from that location you (correctly) charge the sales tax rate of 7.10%. When you registered for your Illinois sales tax permit, you included your business HQ address, but did not include other locations from where your products might ship.  You also have another business location in Chicago (Cook County), from where you (again correctly) charge the sales tax rate of 10.25% when shipping items to customers.

Illinois’s taxing authority will ask you to report sales from within Illinois and then automatically calculate tax due at your business location of 7.10%. Because you do not have the Chicago (Cook County) location registered, you will only be able to report sales tax at 7.10%. Therefore, it will look like you have overcollected sales tax on the items sourced from Chicago. You have collected correctly but since the Chicago location is not registered you are not able to report these collections correctly on the tax return.

Note: It’s important that you remit all sales tax you’ve collected, even if Illinois’s online sales tax filing system only allows you to enter in collections at the 7.10% rate!

Case #3: Your Business is NOT Located in Illinois, but You Have an Unregistered Illinois Location

If your business is headquartered outside of Illinois but you have selling locations in the state that have not been properly registered,  then you will not be able to report your collections correctly on your sales tax return. Let’s look at an example.

Illinois sales tax return reporting an overpayment example:

Your business is headquartered outside the state of Illinois and therefore are  required to charge all your Illinois customers the 6.25% state sales tax rate. You have not registered any locations within the state of Illinois. However, you notice that Amazon is now shipping your items from the Joliet, IL (Will County) fulfillment center, where the sales tax rate is 8.75% (which you are, correctly, charging).

Because you didn’t include any Illinois locations when registering for your Illinois sales tax permit, the Illinois taxing authority will think that you should have charged 6.25% on all sales and will consider any instances where you collected 8.75% to be an overcollection of tax.  You have collected the correct amount of tax but are unable to properly report the tax on your return.

Note: It’s important that you remit all sales tax you’ve collected, even if Illinois’s online sales tax filing system seems to think that you should underpay!

How Do I Find My Illinois Locations?

We have updated the TaxJar Illinois state report to help you determine your sales tax locations within the state and if you have multiple locations. If you see locations under “Sales from location within Illinois” you may register with the state of Illinois at 217-785-3707.  If you already have a location registered and need to add more, you can do this through your MyTaxIllinois account.

How do I register to collect sales tax in Illinois?

Before you register any Illinois locations you must be registered to collect sales tax in Illinois.  You can find out more on how to register for an Illinois sales tax permit here.

As always, feel free to reach out with any comments or feedback, by either commenting on this post, or emailing us at support@taxjar.com.

Start your 30 day free trial of TaxJar. No credit card required.