- Illinois sales tax rates set in the statute
- Why Illinois calls it an occupation tax
- The local 1% grocery tax retailers are missing
- Origin and destination rates since 2025
- Two 2026 dates Illinois sellers need on file
- Practical steps for an Illinois seller
- Illinois sales tax verdict
- Frequently asked questions
The Illinois state sales tax rate is 6.25% of gross receipts, set in section 2-10 of the Retailers' Occupation Tax Act, with a lower 1% rate on medicines and medical appliances. From 1 January 2026, groceries are exempt from the state tax, but cities and counties can charge their own 1% grocery tax, and your total rate depends on where the sale happens.
Illinois runs its sales tax a little differently from most states, and the 2026 grocery change has caught out plenty of retailers. Here's what the statute and the Illinois Department of Revenue say, and what it means for your till and your returns.
Illinois sales tax rates set in the statute
| What's sold | State rate | Source |
|---|---|---|
| Most tangible personal property, including leases from 2025 | 6.25% | 35 ILCS 120/2-10 |
| Prescription and nonprescription medicines, drugs and medical appliances | 1% | 35 ILCS 120/2-10 |
| Insulin, blood sugar testing materials, syringes and needles for diabetics | 1% | 35 ILCS 120/2-10 |
| Grocery food for consumption off the premises, from 1 January 2026 | Exempt from the state tax | 35 ILCS 120/2-10 |
| Grocery food from 1 July 2023 to 31 December 2025 | 1% | 35 ILCS 120/2-10 |
The grocery exemption has limits. The statute keeps alcoholic drinks, soft drinks, candy, food infused with adult use cannabis, and food prepared for immediate consumption out of it. A sandwich made to eat now is still taxed at the full rate.
Why Illinois calls it an occupation tax
Illinois has two linked taxes. The Retailers' Occupation Tax is a tax on the seller for the business of selling at retail. The Use Tax is a tax on the buyer for using the item in Illinois. When you collect tax from a customer, you're collecting their use tax, and that reimburses your own occupation tax. In practice it works like a normal sales tax, but it explains why the forms and the law use the words they do.
The local 1% grocery tax retailers are missing
The Department of Revenue issued Compliance Alert CA-2026-01 because some registered retailers stopped collecting tax on groceries after 1 January 2026, even in places where the local government has imposed its own 1% grocery tax. The alert is clear about who carries the risk:
- Retailers must check whether the city or county where they sell has imposed a local grocery tax.
- Retailers inside those boundaries must set their tills and software to collect the 1% on grocery sales.
- The 1% has to be reported to the Department on Form ST-1 and remitted, even if you forgot to collect it from customers.
That last point is the expensive one. If you didn't charge it, you still owe it. The Department points retailers to the MyTax Illinois Tax Rate Finder, set to January 2026 rates, to check the combined state and local rate for each location.
Origin and destination rates since 2025
Where a sale is taxed depends on the kind of retailer you are. Illinois retailers with their inventory and headquarters in the state collect state and local tax at the origin rate, which is the rate where they're based. Since 1 January 2025, out-of-state sellers that used to collect Illinois Use Tax on sales shipped into the state now collect destination-based occupation tax instead, at the combined state and local rate of the address the goods are delivered to. If you ship across the state, you'll need address-level rates, and the Department publishes files for software that does this.
Also from 1 January 2025, a lease of tangible personal property counts as a sale at retail, apart from items that have to be titled or registered with a state agency. If you rent out equipment, that's now within the occupation tax. Rate changes generally take effect on 1 January or 1 July, so check twice a year.
Two 2026 dates Illinois sellers need on file
The Department of Revenue flagged two items this year. First, Illinois held a back-to-school sales tax holiday from 7 August to 16 August 2026. If you made sales in that window that qualified for the school supply rate, you have to complete Schedule K-12 and attach it to Form ST-1 to claim the credit against your occupation tax. Second, remote retailers have a limited-time tax amnesty running from 1 August to 31 October 2026. If you've been selling into Illinois without collecting, that window closes at the end of October, so it's worth checking the Department's amnesty page now rather than after the deadline.
Another state filing worth knowing about is covered in our Maryland sales tax walkthrough.
Practical steps for an Illinois seller
- Register with the Department of Revenue before your first taxable sale.
- Look up your combined rate for each location, or for each delivery address if you ship into the state.
- Split your product list into general merchandise, medicines at 1%, groceries, and prepared food, because they're taxed differently.
- Check whether your city or county charges the local 1% grocery tax and set your till to match.
- File Form ST-1 on time, and keep exemption records for any sale you don't tax.
If you're comparing states, our California sales tax guide and Florida sales tax guide show how differently other states handle rates and local add-ons, and our roundup of sales tax software covers tools that calculate destination rates.
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Illinois sales tax verdict
The headline 6.25% is only the starting point. Your real rate depends on what you sell and where, and the 2026 grocery change moved the risk onto retailers who don't check local rules. Look up each location, separate groceries from prepared food, and don't stop collecting a local grocery tax just because the state one has gone.
If your business is registered elsewhere, see the Colorado sales tax guide.
Related: sales: guidelines and how to pitch.
Frequently asked questions
What is the Illinois sales tax rate?
The state rate is 6.25% of gross receipts under 35 ILCS 120/2-10. Local taxes are added on top, so your combined rate depends on the location of the sale.
Are groceries taxed in Illinois in 2026?
Groceries are exempt from the state tax from 1 January 2026, but cities and counties can impose their own 1% grocery tax, and retailers there must collect it.
What's the Illinois sales tax rate on medicine?
Prescription and nonprescription medicines, drugs and medical appliances are taxed at 1% under the statute.
Is prepared food covered by the Illinois grocery exemption?
No. Food prepared for immediate consumption, soft drinks, candy and alcoholic drinks stay outside the exemption.
Do leases count as sales in Illinois?
Yes. From 1 January 2025, a lease of tangible personal property is treated as a sale at retail, except items that must be titled or registered with a state agency.
What if I didn't collect a local grocery tax?
The Department of Revenue says retailers must still remit the 1% to the Department even if they didn't collect it from customers in a location that imposed it.
