Illinois Sales Tax Filing Update January 2020: Marketplace Facilitator Laws
Illinois has passed a law requiring Marketplaces to collect and remit sales tax on sales facilitated through the marketplace effective January 1, 2020.
• Amazon, eBay, Etsy and Walmart began this collection on January 1, 2020.
Please review general information regarding Marketplace Facilitators and how your TaxJar Sales Tax Reports support these changes here in our FAQ.
In this article, we summarize Illinois's state guidance on the following questions:
- Do I need to register for a sales tax license in Illinois?
- Should I cancel my existing registration if all my sales are marketplace-collected?
- Do I need to collect sales tax on Illinois sales on non-marketplace platforms?
- Do I still need to file returns in Illinois?
- Filing & Reporting Changes Related to Illinois' Marketplace Facilitator Law (How to File as a Marketplace Seller)
I've never registered for an Illinois license. Do I need to register for a sales tax license in Illinois now?
If you are a retailer with a physical presence in Illinois or you are a remote seller who has crossed the economic nexus threshold for Illinois ($100,000/year in gross revenue, or more than 200 separate sales transactions in Illinois in the previous 12 months), then you will need to register for an Illinois sales tax license.
- If you've imported your sales across all platforms into your TaxJar account, you can determine if you have economic nexus in the state by running the Sales & Transactions Checker.
- If you do not meet any of the criteria that create nexus in Illinois (physical, economic or otherwise), you won't need to register for a sales tax license in this state.
I have already registered for a license in Illinois and all of my sales are Marketplace-only sales. Should I cancel my existing registration?
- We always recommend checking directly with the state or a sales tax consultant who can provide more detailed advice specific to your business scenario prior to canceling your registration.
Do I need to collect taxes on my Illinois sales on other platforms?
Yes--if you have nexus in the state (physical or economic) and you make sales to customers in Illinois on platforms outside of the marketplace that is automatically collecting and remitting, you will also need to collect tax on your end on the Illinois orders that are processed on the other platforms.
Do I still need to file returns in Illinois?
Yes--once you register for a license, you will be required to file a return based on the frequency the state has assigned you.
- If you've previously registered, the state expects you to remain registered and continue to file returns including zero returns.
Filing & Reporting Changes Related to Illinois' Marketplace Facilitator Law
We're aware of a unique requirement in Illinois' law that affects how individual marketplace sellers should file returns in this state.
Illinois says the tax collection on interstate sales (sales from locations outside Illinois into Illinois) should be a flat Illinois state “use tax” rate of 6.25%.
- The state also says that if a remote seller has a physical presence in Illinois (including inventory stored in Amazon's warehouses), they are then required to collect an additional local tax called the Retailers’ Occupation Tax (ROT) on top of the state rate for any intrastate sales (sales from locations inside Illinois into Illinois.)
- The Retailer's Occupation Tax ranges from 2-4% depending on the local rate at the buyer's address.
- When Amazon announced their intent to begin marketplace facilitator collection in Illinois, they noted that they did not yet support a way to collect the ROT for intrastate sales and this collection responsibility would remain with the sellers until they released support to collect ROT.
Typically, when a state enacts a Marketplace Facilitator law, the state expects the marketplace to collect and remit all applicable state and local taxes on behalf of their sellers.
- However, our research team noted that according to the Illinois Department of Revenue's (IDOR) regulations, a marketplace seller with intrastate sales subject to ROT is required to remit the state use tax of 6.25% + ROT directly to the state.
- The marketplace facilitator should not collect and remit the amounts on the seller's behalf for these intrastate sales.
- Instead, the marketplace is required to send the full tax amount collected to the seller so that the seller can then report and remit these amounts to the IDOR.
What does this mean for Marketplace Sellers?
According to the state's guidance:
- The Marketplace should collect and remit the 6.25% state use tax on all interstate sales.
- A seller with a physical presence in Illinois should collect and remit the 6.25% state use tax + the Retailer's Occupation Tax (ranging from 2-4%) on all intrastate sales.
How will this affect your Illinois Sales Tax Report?
Sellers with no intrastate sales will not see a major difference. You will report your interstate sales as "Marketplace Sales" on line 16 of Schedule A when you file.
Sellers with intrastate sales will need to report those to the state as non-marketplace sales.
- If you are a marketplace seller with intrastate sales in Illinois, your Illinois Report will display a tax due amount of combined state use tax + ROT.
- This tax due amount may be higher than the amount your marketplace collected if your marketplace did not collect the ROT amounts on your behalf.
If you're not sure how your marketplace is handling ROT collection for your intrastate sales, or if you're not certain that your marketplace has passed the use tax amounts along to you to file, we recommend reaching out to your marketplace facilitator to learn more.