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Friday, April 26, 2024

Illinoisans will pay higher online sales tax starting in 2020

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Illinoisans will pay higher sales taxes on online purchases starting next year.

On Jan. 1, 2020, an expansion of the state’s sales tax will take effect, which will require online marketplaces that facilitate sales between third-party users, such as Etsy and eBay, to collect the 6.25% tax from online shoppers in Illinois.

A second sales tax expansion taking effect Jan. 1 will require out-of-state retail stores to begin collecting local sales taxes for online purchases, based on the location of packages delivered to Illinois shoppers. Retailers based out of state already collect the state sales tax from online shoppers in Illinois.

In April 2018, the U.S. Supreme Court’s ruling in South Dakota v. Wayfair Inc. allowed states to collect sales taxes on online purchases from out-of-state sellers. Illinois began collecting the state’s sales tax from those stores in October of that year.

The tax expansion will especially hit Chicago shoppers, who pay a combined state and local sales tax burden of 10.25%. Statewide, the average combined sales tax burden is 8.74%, according to the Tax foundation. That’s the highest in the Midwest and 7th-highest nationwide.

These changes come as part of 21 new tax and fee increases totaling $4.7 billion passed by the General Assembly to fund Pritzker’s infrastructure plan and the state’s operating budget for fiscal year 2020.

The expanded online sales taxes could bring in $210 million combined in their first year, and ultimately generate $420 million combined, according to long-run estimates.

While some brick-and-mortar store owners may view the new online sales taxes as leveling the playing field, Illinoisans shopping online will see another spike in what’s already one of the highest overall tax burdens in the nation.

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