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 a 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 the following 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.
      Pursuant to "The Leveling the Playing Field for Illinois Retail Act" effective January 1, 2021 now requires remote sellers to collect ROT on sales based on where the product is delivered, as we explain in more detail here.
    • Remote seller with a physical presence due to inventory: 
      Sellers are subject to ROT on sales where the “ship from” location is within Illinois.
      Sellers are not subject to ROT on sales where the "ship from" location is not within Illinois. These sales would be subject to the Illinois use tax and would reported at the flat rate (6.25%). 
    • 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 the TaxJar API support Retailers' Occupation Tax (ROT)?

Yes. TaxJar Reports for Illinois and our 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 in 2021?

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:

Background: Amazon notified all Illinois sellers of the inability to collect local ROT for remote sellers. 

  • Previously, Amazon would calculate, collect, and transfer the sales tax (both state and local) to the seller.  
  • Effective January 1, 2020, Amazon was required to collect and remit the state use tax due to the Marketplace Facilitator law and the seller was required to pay the local Retailers' Occupation Tax (ROT). 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. 

Now, Amazon (and other marketplace facilitators who meet the threshold requirements as defined by the state) both collects and remits Illinois Use Tax and ROT on behalf of the marketplace seller. 

If I need to file an Illinois sales tax return, how does this affect me?

We updated your Illinois TaxJar Reports and provide general guidance for marketplace sellers here: Illinois Sales Tax Filing Update January 2020: Marketplace Facilitator Laws.