Month-end close: sales tax in Illinois

Illinois's state rate is 6.25%, and the Department of Revenue sets your filing frequency from your average monthly liability.

This is part of the sales tax checklist. Illinois sales tax is filed with the Illinois Department of Revenue (IDOR) on Form ST-1.

Rate. 6.25% state rate (1.00% for qualifying drugs and medical appliances), plus local tax, so the rate may be higher where the client sells.

Filing. IDOR may notify a client to file monthly if its average monthly liability is over $200, quarterly if it is $50 to $200, and annually if it is under $50. It also tells clients who must pay on an accelerated schedule.

Due. The 20th of the month after the reporting period, or the next business day if the 20th falls on a weekend or holiday.

The trap. Filing on time earns a discount of 1.75% of the tax due or $5 a year, whichever is greater. A payment 1 to 30 days late costs 2%, and 31 or more days costs 10%.

The month-end steps

1. Confirm the filing frequency. IDOR sets it, and may change it from the average monthly liability: monthly over $200, quarterly from $50 to $200, annual under $50 [1]. Use the frequency in the client's IDOR account. Done when the frequency on file matches the account.
2. Check the rate. The state rate is 6.25%, and 1.00% for qualifying drugs and medical appliances. Local tax is added, so the rate may be higher [1]. Done when each taxable sale carries the state rate plus the local rate that applies.
3. File and pay on time. The return and any payment are due on or before the 20th of the month after the end of the reporting period. If the 20th falls on a weekend or holiday, they are due the next business day [1]. A client entitled to the discount takes 1.75% of the tax due or $5 a year, whichever is greater [1]. IDOR notifies a client that must pay on an accelerated schedule [1]. Done when each return's due date is on the client's calendar.
4. Know what late costs. A payment 1 to 30 days late carries a 2% penalty, and 31 or more days late carries 10% [2]. A late return carries a first-tier penalty of the lesser of $250 or 2% of the tax due on the return, reduced by timely payments or credits. If the return is still not filed 30 days after a notice of nonfiling, a second tier of the greater of $250 or 2% applies, to a maximum of $5,000, even if there is no tax due [2]. Done when each return and payment went in by its due date, or the late ones are flagged for the client.
5. Tie the liability. Done when the sales tax payable account is at zero after the month's payment, or equals the tax not yet due.