New Illinois Retailers’ Occupation Tax regulations for remote sellers and marketplace facilitators went into effect on January 1, 2021.1 These regulations were born out of Illinois Public Acts 101-0031 and 101-0604, signed into law in 2019 as the Leveling the Playing Field for Illinois Retail Act and amendments thereto, respectively.
Following the U.S. Supreme Court’s decision in South Dakota v. Wayfair, Inc.,2 Illinois previously enacted economic nexus thresholds of $100,000 for sales of tangible personal property or 200 separate sales of tangible personal property, which became effective on October 1, 2018 for remote sellers and on January 1, 2020 for marketplace facilitators.3 However, prior to January 1, 2021, remote sellers and marketplace facilitators were only required to remit Illinois Use Tax. Because local jurisdictions are not authorized to impose use tax, remote sellers and marketplace facilitators were previously only required to remit state use tax if they crossed the economic nexus thresholds from sales to Illinois customers.
Under the Leveling the Playing Field for Illinois Retail Act, state and local Retailer’s Occupation Tax (ROT) is required to be remitted by remote sellers and marketplace facilitators based on destination sourcing rules (e.g., customer ship-to location), with certain exceptions. Illinois retailers and retailers with physical presence in Illinois making sales to Illinois customers will still follow origin sourcing rules for ROT. Sellers need to be mindful of how they conduct business in Illinois to apply the correct amount of ROT. Among other things, the new regulations provide a number of examples highlighting the differences in sourcing depending on the type of seller and where the business activities are deemed to take place.
The Illinois Department of Revenue has also compiled information on its website to assist taxpayers in understanding the impact of these new rules.4
For up-to-date information on all things transaction tax in Illinois, as well as other states, please refer to Ryan News & Insights, or please reach out to one of the contacts below.
1 Ill. Admin. Code tit. 86, § 131,101 et al., January 1, 2021.
2 South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (2018).
3 35 ILCS 105/2(9); 35 ILCS 110/2d(b).
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