What is Use Tax?
- Did you recently visit a state that doesn’t have sales tax and purchase items for use back home in Illinois?
- Have you purchased something online without paying sales tax?
- Were you charged sales tax from a vendor in another state but at a rate lower than Illinois’ rate?
You likely have created a tax liability with the Illinois Department of Revenue (IDOR). This liability is called use tax. Use tax is a self-assessed liability that Illinois residents must pay to IDOR for the tax that would have been charged if the items were purchased in Illinois.
Why does IDOR make us pay use tax? When we save money by avoiding sales tax on purchases, we are putting Illinois-based companies (who are compelled to charge sales tax) at a disadvantage. This helps state businesses compete with out-of-state and online vendors. With the exception of large purchases, use tax can be paid on your IL-1040 individual tax return (line 23 on the 2015 version). If your use tax liability is greater than $600 you must pay the tax with Form ST-44 by the last day of the month following the month of the purchase.
The use tax rate is 6.25% on general merchandise and 1.00% on certain foods, medicine, and medical appliances. You are allowed to reduce your use tax liability for any sales tax you did pay to another state.
If you can’t calculate your use tax liability because you don’t have receipts for all the purchases that didn’t include sales tax, there is also a table prepared by IDOR to estimate your use tax liability based on your adjusted gross income.
Please contact us if you have any questions!