IL
Illinois Small Business Tax Guide
Sales tax, registration, filing and business income tax in Illinois, quoted from the state's revenue department and dated. Background only, not tax advice.
Disclaimer: This page is educational content only. Tax laws change, and your situation may differ. It is not legal, tax, or financial advice. Consult a qualified professional licensed in Illinois before making filing or planning decisions.
Tax landscape for small businesses
Illinois sales tax is really two taxes. The Illinois Department of Revenue, or IDOR, says on its sales and use tax page (Illinois, as retrieved on October 31, 2026): "In Illinois, there are two separate but complementary taxes upon the sale and use of tangible personal property." Its answer on rates (Illinois, as retrieved on October 31, 2026) gives the state figure: "6.25 percent on general merchandise, including items required to be titled or registered by an agency of Illinois state government".
On business income, IDOR's answer on business tax rates (Illinois, as retrieved on October 31, 2026) says: "Corporations, other than S corporations, pay 7 percent (.07) income tax and 2.5 percent (.025) replacement tax." It adds: "Subchapter S corporations and partnerships pay replacement tax of 1.5 percent (.015). S corporations and partnerships do not pay Illinois Income Tax." This page doesn't give the individual income tax rate; IDOR or a tax professional can confirm the one for your own return.
Worked example (sample figures, not tax advice): a shop in Illinois sells $400.00 of general merchandise. Using the quoted 6.25 percent, the state portion is $400.00 × 6.25% = $25.00, making the total at the state rate alone $425.00. The sales and use tax page (Illinois, as retrieved on October 31, 2026) warns that "Depending upon the location of the sale, the actual sales tax rate may be higher than the fundamental rate", so check the rate where each sale happens before you send the invoice.
Tax overview
Each row lists a tax area and its notes. Confirm current figures with your state's tax agency or the IRS.
| Tax type | Rate or basis | Notes |
|---|---|---|
| State sales and use tax, general merchandise | "6.25 percent" | IDOR's answer on rates (Illinois, as retrieved on October 31, 2026): "6.25 percent on general merchandise, including items required to be titled or registered by an agency of Illinois state government". IDOR's retailers' occupation tax page (Illinois, as retrieved on October 31, 2026) lists "some of the most common examples of transactions that are exempt from tax", among them "Sales to state, local, and federal governments" and "Sales to not-for-profit organizations that are exclusively charitable, religious, or educational". On resale it says: "Failure to present an active registration number or resale number and a certification to the seller that a purchase is for resale creates a presumption that a purchase is not for resale." |
| Qualifying drugs and medical appliances | "1 percent" | IDOR's answer on rates (Illinois, as retrieved on October 31, 2026): "1 percent on qualifying drugs and medical appliances". |
| Corporate income and replacement tax | "7 percent (.07)" and "2.5 percent (.025)" | IDOR's answer on business tax rates (Illinois, as retrieved on October 31, 2026): "Corporations, other than S corporations, pay 7 percent (.07) income tax and 2.5 percent (.025) replacement tax." |
| S corporations and partnerships | "1.5 percent (.015)" | IDOR's answer on business tax rates (Illinois, as retrieved on October 31, 2026): "Subchapter S corporations and partnerships pay replacement tax of 1.5 percent (.015)." It also says "The pass-through entity tax rate is 4.95 (.0495)." for those that elect it. |
| Federal self-employment tax | "15.3%" | In the US (federal), the IRS self-employment tax page (last reviewed or updated October 30, 2026): "The self-employment tax rate is 15.3%." |
Filing requirements
This list isn't a complete checklist for your business.
Register with IDOR
IDOR's publication on destination-based sales tax (Illinois, as retrieved on October 31, 2026) says: "Register with IDOR electronically using MyTax Illinois. If you are not already registered, select “Register a New Business (Form REG-1)” and complete the registration application." It adds: "IDOR will issue you a Certificate of Registration (Certificate)." For sellers based outside Illinois, IDOR's retailers' occupation tax page (Illinois, as retrieved on October 31, 2026) says a remote retailer is "an out-of-state retailer with no physical presence in Illinois who meets a tax remittance threshold of" "$100,000 or more in cumulative gross receipts from sales of tangible personal property to purchasers in Illinois" or "200 or more separate transactions for the sale of tangible personal property to purchasers in Illinois", and that "A remote retailer shall determine on a quarterly basis, ending on the last day of March, June, September, and December, whether it meets or exceeds either threshold for the preceding 12-month period."
File Form ST-1 on your schedule
IDOR's sales and use tax page (Illinois, as retrieved on October 31, 2026) says retailers of general merchandise "must file Form ST-1, Sales and Use Tax and E911 Surcharge Return." Its due dates: "A monthly return is due the 20th day of the month following the month for which the return is filed.", "A quarterly return is due the 20th day of the month following the quarter for which the return is filed." and "An annual return is due January 20th of the year following the year for which the return is filed."
Larger sellers pay quarter-monthly
The same page (Illinois, as retrieved on October 31, 2026) says: "If a retailer or service-person’s average monthly liability is $20,000 or more, quarter-monthly payments must be made. Payments are due the 7th, 15th, 22nd, and last day of the month."
Servicepersons register and file too
IDOR's Publication 113-SOT on service occupation tax (Illinois, as retrieved on October 31, 2026) is for servicepersons "who have a physical presence in Illinois or meet the $100,000 Tax Remittance Threshold", and says they "are required to register with the Illinois Department of Revenue (IDOR), collect Service Occupation Tax (SOT), file returns, and remit the tax to IDOR." IDOR's publication on destination-based sales tax (Illinois, as retrieved on October 31, 2026) defines that threshold as "$100,000 or more in cumulative gross receipts from sales of TPP or sales of service to purchasers in Illinois for the preceding 12-month period as determined on a quarterly basis, ending on the last day of March, June, September, and December."
Federal estimated tax
In the US (federal), the IRS estimated taxes page (last reviewed or updated September 25, 2026) says: "Individuals, including sole proprietors, partners, and S corporation shareholders, generally have to make estimated tax payments if they expect to owe tax of $1,000 or more when their return is filed."
Deductions and write-offs
Confirm with your state how it treats each item.
- Deduct a share of self-employment tax: the IRS self-employment tax page (In the US (federal), last reviewed or updated October 30, 2026) says: "You can deduct the employer-equivalent portion of your self-employment tax in figuring your adjusted gross income."
- Pick a bookkeeping method: the IRS recordkeeping page (In the US (federal), last reviewed or updated May 1, 2026) says: "You may choose any recordkeeping system suited to your business that clearly shows your income and expenses."
- Whether Illinois follows a given federal deduction isn't covered here; ask a tax professional about your return.
Practical tips
- If you sell a service, the service itself isn't what's taxed. IDOR's Publication 113-SOT (Illinois, as retrieved on October 31, 2026) says: "The service component of a sale of service remains nontaxable. The only part of a sale of service that is taxable is the transfer of TPP as part of that sale of service."
- Show parts as their own invoice line (TPP is IDOR's short form for tangible personal property). Among the ways a serviceperson can figure the tax, the same publication (Illinois, as retrieved on October 31, 2026) lists "SOT on separately stated Selling Price of TPP transferred as an incident of a sale of service".
- Check local rates twice a year. IDOR's sales and use tax page (Illinois, as retrieved on October 31, 2026) says: "Local tax rates are generally subject to change twice a year on January 1 and July 1."
- Store receipts alongside your costs. Billed's expense tracking page (checked October 31, 2026) says: "Record what your business spends, keep each receipt with its expense, and turn your spending into expense reports you can export for your accountant."
Frequently asked questions
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At a glance
| Tax | IDOR or IRS wording |
|---|---|
| State sales and use tax | "6.25 percent on general merchandise, including items required to be titled or registered by an agency of Illinois state government" (IDOR answer on rates, Illinois, as retrieved on October 31, 2026) |
| Services | "The service component of a sale of service remains nontaxable." (IDOR Publication 113-SOT, Illinois, as retrieved on October 31, 2026) |
| Corporations | "7 percent (.07) income tax and 2.5 percent (.025) replacement tax" (IDOR answer on business tax rates, Illinois, as retrieved on October 31, 2026) |
| S corporations and partnerships | "replacement tax of 1.5 percent (.015)" (IDOR answer on business tax rates, Illinois, as retrieved on October 31, 2026) |
| Federal self-employment tax | "The self-employment tax rate is 15.3%." (IRS, In the US (federal), last reviewed or updated October 30, 2026) |
When this isn't for you
This page doesn't cover the individual income tax rate, payroll withholding, property tax or local taxes that IDOR doesn't collect. Nothing here is tax advice; questions about your own returns are for the Illinois Department of Revenue or a tax professional.