Important Update: Changes to Illinois Retailers' Occupation Tax (ROT) Effective January 1, 2025

Significant changes to the Illinois Retailers' Occupation Tax (ROT) will take effect on January 1, 2025. These changes will impact both out-of-state retailers and certain Illinois retailers. Below, we provide a summary of the key points from the Illinois Department of Revenue's recent bulletin.

Overview of Changes

Effective January 1, 2025, retailers who were previously required to collect and remit Illinois Use Tax (UT) on sales sourced outside of Illinois and made to Illinois customers will now be subject to a destination-based Retailers' Occupation Tax (ROT).

What is Destination-Based ROT?

The destination-based ROT means that the total state and local ROT rate will be calculated based on the location in Illinois where the item is shipped, delivered, or where possession is taken by the purchaser. This approach ensures that the tax rate applied is specific to the destination of the goods within Illinois.

Registration Requirements

Retailers must take note of the following registration requirements:

• ‍Out-of-State Retailers: The Illinois Department of Revenue (IDOR) will change your registration status from UT to ROT if applicable. You will need to register new tax sites for each jurisdiction where you make sales after December 23, 2024.
• ‍Illinois Retailers: If you are already registered to remit ROT, your registration status will remain unchanged. However, you must register new tax sites for any sales sourced outside of Illinois.  

For example, if Company ABC in Wood Dale, IL makes a sale to a customer located in Downers Grove, IL and the product is being shipped to Downers Grove is from outside of Illinois, Company ABC would use destination-based ROT therefore charging Downers Grove sales tax rate. However, if Company ABC had the product shipped from their Illinois inventory to Downers Grove, then origin-based sourcing would apply (Wood Dale sales tax rate).‍

Actions Required

To comply with the new regulations, retailers must:

1. Determine the Correct Tax Amounts: Calculate the state and local tax amounts based on the destination of the tangible personal property.
2. Register New Tax Sites: Ensure all new tax sites are registered with IDOR for sales made to different jurisdictions within Illinois.
3. Marketplace Facilitators: If all your sales are made through a marketplace facilitator that meets the tax remittance threshold, you may close your Sales Tax account with IDOR. The marketplace facilitator will be responsible for collecting and remitting the appropriate ROT.‍

Conclusion

We understand that these changes may require adjustments to your current processes. Our team is here to assist you in navigating these new requirements and ensuring compliance. Please do not hesitate to reach out to us with any questions or for further assistance.

Please refer to the bulletin issued by IDOR - Illinois Department of Revenue, FY 2025-10, Retailers’ Occupation Tax Guidance for Out-of-State Retailers and Certain Illinois Retailers, Effective January 1, 2025.