All individuals, businesses and organizations in Illinois are subject to use tax on certain goods purchased out of state and used in Illinois, or goods delivered to you from businesses located outside Illinois. The use tax is a form of sales tax designed to distribute the tax burden fairly among consumers and assure fair competition between in-state and out-of-state businesses.
The most common purchases on which an Illinois Use Tax obligation arises are:
- Merchandise purchased in another state where the seller did not charge sales tax because the buyer directed the seller to ship the product to the buyer’s Illinois address
- Merchandise purchased in a foreign country that was either personally brought into Illinois or was shipped by the foreign retail seller to the buyer in Illinois
- Merchandise purchased from an out-of-state catalog or internet seller that did not charge the buyer Illinois sales tax
Beginning in 2010, use tax voluntary reporting and payment are required on the 2010 Form IL‑1040. The use tax rates are 6.25% of the purchase price of general merchandise and 1% of the purchase price of qualifying food, drugs and medical appliances. The 1% rate applies to:
- Food that has not been prepared for immediate consumption (such as most food sold in grocery stores, excluding hot foods, alcoholic beverages, candy and soft drinks)
- Prescription medicines and nonprescription items claimed to have medicinal value (such as aspirin and cough medicine, excluding nonprescription grooming hygiene products)
- Prescription and nonprescription medical appliances that replace a malfunctioning part of the human body (such as wheelchairs and hearing aids)
Illinois Use Tax may be paid in several different ways. Individuals, organizations and unregistered businesses must pay use tax directly to the Illinois Department of Revenue using either Form ST-44 (Illinois Use Tax Return) or Form IL-1040. If your annual use tax liability is $600 or less, you may pay use tax annually on or before April 15 of the year following the year in which you make your purchases. For individuals, starting in 2010, you can report any use tax due on your 2010 Form IL-1040.
If your annual use tax liability is greater than $600, you must pay the tax by the last day of the month following the month in which the purchase was made. For example, if you were to purchase an asset in February that required you to pay use tax of over $600, you must file the required form and pay the use tax by March 31st.
If you are a registered Illinois retailer or serviceperson, and currently file Form ST-1, you must report use tax on that form. Businesses that purchase items tax-free for use or consumption in Illinois should use the return whose liability period corresponds to the purchase date of the items for which use tax is due.
Illinois Bonus Depreciation
One of the elements of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 was to allow businesses to write off 100% of their new equipment and machinery purchases, effective for property placed into service after September 8, 2010–December 31, 2011. In the past, Illinois has not followed federal bonus depreciation allowances, but has made taxpayers add back the additional depreciation taken. Illinois announced that the 100% bonus depreciation allowed under the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 is allowed in Illinois, and no adjustments will be required.