Illinois Sales Tax on Invoices: A Practical Guide
Last verified: · Verify with the Illinois Department of Revenue before relying on a specific rate.
Illinois has one of the highest combined sales tax rates in the country (10.25% in Chicago) and a unique two-tier ROT/UT framework that separates Illinois retailer tax from out-of-state-seller use tax. On the SaaS and services front, Illinois is friendly — most professional services and SaaS subscriptions are not taxed. This guide covers what small businesses and out-of-state sellers need to know.
The headline rate
Illinois's state sales tax is 6.25%. Local rates vary widely:
- Chicago / Cook County: 10.25% combined (6.25% state + 1.25% county + 1.25% city + 1.5% RTA)
- Most Chicago suburbs: 7.5%-8.5%
- Downstate Illinois: often 6.25% state rate alone, or with small county additions
Do you need to register?
Illinois-based businessesselling tangible personal property must register for the Retailers' Occupation Tax (ROT) before making taxable sales.
Out-of-state sellers must register and collect Illinois Use Tax (UT) once they have $100,000 or more in Illinois sales OR 200 or more separate transactionsin the previous calendar year. The "OR" test means either threshold triggers nexus. Illinois retains the 200-transaction prong (which several states have dropped or raised).
The ROT vs UT framework
Illinois's framework is unusual: in-state retailers pay ROT (Retailers' Occupation Tax) on their gross receipts; out-of-state sellers and Illinois buyers pay UT (Use Tax) on goods used in Illinois. The rates are typically identical, but the taxes are technically separate. From the buyer's perspective, the result is the same (sales tax appears on the invoice), but the underlying registration and remittance differs.
For an out-of-state seller hitting Illinois economic nexus, the registration is for Use Tax — not ROT. Both go through MyTax Illinois (the DOR's online portal). The distinction matters mostly for the seller's registration paperwork, not for the customer-facing invoice.
What's taxable, what isn't
Illinois taxes tangible personal property and a narrow list of services. Notable for invoicing:
- SaaS, cloud computing, downloaded software: generally NOT taxed. Custom and prewritten software delivered electronically are treated as nontaxable services.
- Most professional services: NOT taxed. Accounting, legal, consulting, design, freelance work, photography services — all exempt.
- Telecommunications and hotel occupancy: taxable (often with additional separate taxes layered on).
- Tangible personal property: taxable.
Frequently asked questions
What is Illinois's state sales tax rate?
Illinois's state sales tax rate is 6.25%. Local jurisdictions can add additional rates that vary widely — Chicago and Cook County have one of the highest combined rates in the United States at 10.25% (6.25% state + 1.25% county + 1.25% city + 1.50% Regional Transportation Authority). Most Illinois suburbs are at 7.5%-8.5%; downstate areas often sit at the 6.25% state rate alone or with minor county additions. Illinois Department of Revenue publishes a sales tax rate finder at tax.illinois.gov.
What's Illinois's economic nexus threshold?
Illinois requires out-of-state sellers to register and collect Illinois sales tax once they have $100,000 or more in Illinois sales OR 200 or more separate transactions in the previous calendar year. The 'OR' test means either threshold triggers nexus. Illinois retains the 200-transaction prong (some states have dropped it). The dual-prong design catches both high-dollar and high-volume sellers — a small-dollar product sold to 200+ Illinois customers triggers nexus even if total revenue is under $100K.
Is SaaS taxable in Illinois?
Generally no. Illinois treats SaaS, cloud computing, and most remotely-accessed software as nontaxable services. Prewritten software delivered via download is also generally not taxable in Illinois (unlike in Texas, NY, and PA). Tangible delivery of software (DVDs, USB drives) IS taxable as tangible personal property. This SaaS-friendly treatment puts Illinois in the same camp as California and Florida — three of the largest states by GDP all exempt SaaS, while many smaller states do tax it.
What's the difference between Illinois ROT and UT?
Illinois has a unique two-tier framework. ROT (Retailers' Occupation Tax) is the tax owed by Illinois sellers on their gross receipts from sales of tangible personal property — this is what Illinois businesses report and remit. UT (Use Tax) is the tax owed by Illinois buyers on out-of-state purchases (or by out-of-state sellers under economic nexus). Both rates are typically the same, but the two taxes are technically separate. Out-of-state sellers register for the Use Tax; in-state sellers register for ROT. From the buyer's perspective, the result is identical (sales tax shows up on the invoice), but the underlying compliance is structured differently.
Does Illinois tax services?
Generally no. Illinois exempts most professional and personal services — accounting, legal, consulting, design, freelance work, photography services, etc. are not taxed. Specifically taxable services in Illinois are limited: telecommunications, hotel occupancy (separate hotel tax), and a few others. Illinois has historically been one of the more service-friendly states, though there have been periodic legislative proposals to expand services taxation.
How do I claim an Illinois resale exemption?
B2B sales to Illinois-registered resellers can be exempt with a valid CRT-61 Resale Certificate on file. The seller retains the certificate and applies zero tax on qualifying sales. The invoice should reference the buyer's Illinois Account ID Number and note 'Sale for resale; CRT-61 on file.' Illinois also accepts the multistate Streamlined Sales Tax (SST) Exemption Certificate.
Where can I verify Illinois sales tax rates and rules?
Illinois Department of Revenue at tax.illinois.gov — the official tax authority. Look for: the Tax Rate Finder (for current combined rates by address), Publication 113 (Retailer's Overview of Sales and Use Tax and Prepaid Wireless E911 Surcharge), Form CRT-61 (resale certificate), and the MyTax Illinois portal for registration and filings.
Sources
This page is general information, not tax advice. For specific transactions, consult an Illinois-licensed CPA or request a private letter ruling from the Illinois DOR.