Illinois Use Tax on Imports

If you are a company or individual doing business in Illinois, they require payment of a use tax of 6.25 percent of the purchase price of general merchandise and 1.00 percent of the purchase price of qualifying food, drugs and medical appliances.

We’ll bet you didn’t even know that such a thing existed.  Well, maybe your accountant does.  We hope.

From the state’s FAQ:

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. Illinois, like most other states, imposes use tax on the privilege of using goods within their borders as a complement to sales taxes. This tax applies to individuals, businesses, and organizations. Illinois law requires you to pay tax at Illinois rates on purchases you make for use or consumption in Illinois

• when you buy goods from businesses located outside Illinois and bring them into Illinois or
• when you have the goods delivered to you from businesses located outside Illinois.

We have seen instances where clients had not allocated or considered the payment of the use tax to the state of Illinois as part of their landed costs.  Considering the massive hole in the state’s budget and their overall financial health (or lack thereof), the state is aggressively pursuing new and existing revenue streams in addition to attempting to rein in costs.

Illinois is getting information directly from CBP at the entry summary level to identify and collect unpaid use tax.  In some instances, the bills from the state have been in the tens of thousands of dollars.

The State of Illinois has posted a court decision adverse to an individual who filled out their Customs declaration indicating that they had purchased $4,175.00 of property while out of the country and in addition to the duties and taxes due the federal government at the time of importation, he is also liable to pay use tax to the State of Illinois.

You can read that ruling here.

We suggest that if you are a corporation or individual headquartered in the State of Illinois and do not currently have a structured plan for paying your use tax that you consult your tax professional to assess potential past or future liabilities and applicability.