Illinois’ online shoppers face full local sales tax rates this holiday season

Sales tax revenue is up from pre-pandemic levels, in part because Illinois is now forcing online retailers to charge local sales tax rates as high as 10.25%. No tax breaks this Cyber Monday.

With the holidays around the corner, sales tax revenue in Illinois is up 17% from January to September this year compared to the same period before the pandemic in 2019.

Some of the boost is because more people are shopping as the pandemic eases, but there was also a change in state law Gov. J.B. Pritzker pushed as one of 24 tax and fee hikes collecting $5.2 billion more since he took office. Online retailers now must charge the sales tax rate collected where the shopper lives. That’s 10.25% for a Chicago resident.

Before this year, online retailers such as Amazon and Ebay only had to charge the 6.25% state sales tax. Before that, they were not required to charge sales taxes if they didn’t have a physical presence in the state.

Now they must charge the full local rates, including the local taxes cities and counties have imposed on the brick-and-mortar retailers.

The change was called the “Leveling the Playing Field for Illinois Retail Act.”

State sales tax revenue took a nosedive when COVID-19 hit in March 2020. Rob Karr, head of the Illinois Retail Merchants Association, sees the new law as a silver lining to the pandemic.

“We all rather would not have had a pandemic to prove a point, but good timing,” Karr said. “Is it not over the top to say that retail literally saved state and local governments’ budgets as a result of those laws.”