Illinois: Retailers' Occupation Tax (ROT) Update January 2020
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What is Retailers' Occupation Tax (ROT)?
The Illinois Sales Tax structure imposes two separate but complementary taxes upon the sale and use of tangible personal property. The Illinois Retailers' Occupation Tax (ROT) is a portion of the sales tax that is imposed on Illinois sellers of tangible personal property.
- There is the state tax rate of 6.25% and Illinois municipalities may impose an additional local sales tax called the Retailer's Occupation Tax.
- For remote sellers, the state tax rate is referred to as "use tax" and for intrastate sellers, "ROT" simply means sales tax.
- Sellers fall into three categories which determines their collection requirements:
- Remote seller with economic nexus only: Sellers are subject to the combined state and local ROT at the purchaser’s location.
- Remote seller with a physical presence due to inventory:
Sellers are subject to ROT on sales where the “ship from” location is within Illinois. Shipments from outside of Illinois into the state collect the use tax* only.
- In-state seller: Sellers charge the combined state and local ROT at the brick and mortar location.
- The ROT is measured upon the seller’s gross receipts and the seller is statutorily required to collect the use tax from their customers.
Does TaxJar Reports and SmartCalcs API support Retailers' Occupation Tax (ROT)?
Yes. TaxJar Reports for Illinois and our SmartCalcs API support this Illinois' sales tax collection structure by separating out the "Sales from locations within Illinois" with the jurisdictional breakdown.
- The amounts for "Sales from locations outside Illinois" are indicated on a separate row in your Illinois TaxJar Report.
What changed and how does this affect me?
While the Illinois sales tax collection structure itself did not change, marketplace facilitator laws went into effect January 1, 2020 changing the requirements for who is responsible for collecting and remitting the Retailers' Occupation Tax:
- Beginning January 2020, marketplace facilitators are required to collect and remit Illinois use tax on all sales of tangible personal property to Illinois purchasers,
Amazon sellers have received a notice regarding Amazon's sales tax collection for Illinois:
- Previously, Amazon would calculate, collect, and transfer the sales tax (both state and local) to the seller.
- Effective January 1, 2020, Amazon is required to collect and remit the state use tax due to the Marketplace Facilitator law.
- However, the seller is still required to pay the local Retailers' Occupation Tax (ROT)
- Amazon notified all Illinois sellers of the inability to collect local ROT for remote sellers.
- In short, remote sellers are responsible to collect and remit the local Retailers' Occupation Tax for sales where the "ship from" location is within Illinois or with a physical presence in Illinois.
If I need to file an Illinois sales tax return, how does this affect me?
We understand this leaves a tax liability for which you as the seller will be paying out of your own pocket because Amazon is not collecting this additional ROT.
We updated your Illinois TaxJar Reports and provide general guidance for marketplace sellers here: Illinois Sales Tax Filing Update January 2020: Marketplace Facilitator Laws.