Does a small out-of-state online retailer that sells below Illinois's $100,000/200-transaction threshold still have to register and collect Illinois sales tax, and can Illinois simplify its local-tax remittance rules for remote sellers?

Plain-English summary

An out-of-state online retailer wrote to the Illinois Department of Revenue explaining that its sales to Illinois residents fall well below the $100,000 nexus threshold (which it said translated to a much smaller effective figure, "$16,760 for Illinois in 2024"), and that complying with Illinois's requirement to calculate, collect, and remit sales tax at the correct local rate for dozens of different jurisdictions was too costly relative to the tax actually owed. The retailer asked whether Illinois could instead let it use a single, simplified tax rate and return, and said it was willing to collect and remit if that accommodation were granted.

The Department responded with a General Information Letter explaining the legal framework rather than granting the request. It confirmed that Illinois's Retailers' Occupation Tax (the state's sales tax) and Use Tax apply to remote retailers once they exceed $100,000 in cumulative gross receipts from Illinois sales, or complete 200 or more separate transactions with Illinois purchasers, under the economic nexus rules Illinois adopted in 2018 (mirroring the thresholds the U.S. Supreme Court upheld in South Dakota v. Wayfair, Inc.). A "remote retailer" is one with no office, warehouse, inventory, or other physical presence or representative in Illinois. 86 Ill. Adm. Code 131.105.

The Department also confirmed a newer rule: beginning January 1, 2025, retailers that do maintain a place of business in Illinois but ship from outside the state must use "destination sourcing" — remitting state and local tax based on where the property is shipped or delivered to the Illinois customer, per Public Act 103-983 amending 35 ILCS 120/2. Finally, the Department declined to offer a simplified single-rate alternative, explaining that it is an administrative agency with no legislative authority, and pointed the retailer to the Illinois General Assembly for any policy change.

What this means for you

Small out-of-state online retailers

If your cumulative Illinois sales hit $100,000 or you complete 200 or more separate transactions with Illinois purchasers in a year, you are treated as "engaged in the occupation of selling at retail in Illinois" and must register, collect, and remit both state and local Retailers' Occupation Tax — there is no de minimis carve-out or simplified single-rate option based on cost of compliance. You will need to determine the correct combined state-and-local rate for the destination where each shipment is delivered.

Remote retailers with no Illinois physical presence

You are a "remote retailer" under 86 Ill. Adm. Code 131.105 only if you have no office, warehouse, inventory, agent, or other representative operating in Illinois. If you fulfill any orders from Illinois-based inventory, you are not a remote retailer and different nexus rules (physical presence, found at 86 Ill. Adm. Code 150.801–.803) may already apply to you regardless of sales volume.

Retailers already registered with an Illinois location

As of January 1, 2025, if you maintain a place of business in Illinois but ship customer orders from an out-of-state location, you must now source those sales to the Illinois destination (where the customer receives the goods) rather than to your out-of-state shipping point, per the amendment to 35 ILCS 120/2 in Public Act 103-983.

Accountants and tax professionals advising remote sellers

This GIL is a useful summary citation for the current nexus and sourcing framework, but it breaks no new legal ground — it restates the Leveling the Playing Field Act (P.A. 101-0031, 101-0604), the 2018 nexus statute (P.A. 100-0587), and the 2025 destination-sourcing amendment (P.A. 103-983). If a client wants a binding answer on their specific facts (e.g., whether a particular arrangement counts as maintaining a "place of business"), a Private Letter Ruling under 2 Ill. Adm. Code 1200.110 is the appropriate vehicle, not a GIL.

Common questions

Q: Does Illinois exempt small remote sellers from collecting sales tax if the compliance cost outweighs the tax owed?
A: No. The Department told this taxpayer that once the $100,000 sales or 200-transaction threshold is met, the retailer is liable for all applicable state and local Retailers' Occupation Tax on Illinois sales — there is no cost-based exception, and no simplified single-rate return is offered.

Q: Can the Department grant a simplified, single-rate remittance process instead of jurisdiction-by-jurisdiction local tax?
A: No. The Department explained it is an administrative agency that only enforces the law as written and has no legislative authority to create such an accommodation; it directed the taxpayer to raise the issue with the Illinois General Assembly instead.

Q: What counts as a "remote retailer" under Illinois law?
A: A retailer with no office, distribution house, sales house, warehouse, other place of business, or agent/representative operating in Illinois. A retailer that fulfills any orders from Illinois inventory is not a remote retailer. See 86 Ill. Adm. Code 131.105.

Q: What changed on January 1, 2025?
A: Retailers that maintain a place of business in Illinois but ship orders to Illinois customers from an out-of-state location must now remit state and local Retailers' Occupation Tax based on the Illinois destination where the property is delivered ("destination sourcing"), instead of sourcing those sales outside Illinois. See 35 ILCS 120/2, as amended by Public Act 103-983.

Q: Is this letter binding on the Department?
A: No. It is a General Information Letter issued under 2 Ill. Adm. Code 1200.120, meaning it merely points the taxpayer to the relevant regulations; it is not a statement of Department policy and is not binding, unlike a Private Letter Ruling.

Citations and references

Statutes and rules:

• 35 ILCS 120/2 (Retailers' Occupation Tax Act imposition; nexus threshold; destination sourcing, as amended by P.A. 103-983)
• 35 ILCS 105/2, 105/3 (Use Tax Act imposition and "retailer maintaining a place of business" definition)
• 86 Ill. Adm. Code 130.101; 150.101, 150.801, 150.802, 150.803 (Retailers' Occupation Tax and Use Tax regulations; physical-presence nexus)
• 86 Ill. Adm. Code 131, 131.105, 131.110, 131.115 (remote retailers and marketplace facilitators; definitions, sourcing, thresholds)
• 2 Ill. Adm. Code 1200.110 (Private Letter Ruling procedure); 2 Ill. Adm. Code 1200.120 (General Information Letter procedure)
• Public Act 100-0587 (2018 economic nexus standards); Public Acts 101-0031 and 101-0604 (Leveling the Playing Field); Public Act 103-983 (2025 destination sourcing)
• South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (2018)

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2025.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2025/st25-0015-gil.pdf

Original ruling text

ST 25-0015-GIL

03/18/2025

REMOTE RETAILERS

This letter provides information regarding Retailers’ Occupation Tax remittance
obligation of remote retailers. See 86 Ill. Adm. Code 131. (This is a GIL.)
March 18, 2025
NAME, TITLE
COMPANY
ADDRESS
EMAIL
Dear NAME:
This letter is in response to your letter dated February 11, 2025, in which you
requested information. The Department issues two types of letter rulings. Private Letter
Rulings (“PLRs”) are issued by the Department in response to specific taxpayer inquiries
concerning the application of a tax statute or rule to a particular fact situation. A PLR is
binding on the Department, but only as to the taxpayer who is the subject of the request for
ruling and only to the extent the facts recited in the PLR are correct and complete. Persons
seeking PLRs must comply with the procedures for PLRs found in the Department’s
regulations at 2 Ill. Adm. Code 1200.110. The purpose of a General Information Letter
(“GIL”) is to direct taxpayers to Department regulations or other sources of information
regarding the topic about which they have inquired. A GIL is not a statement of Department
policy and is not binding on the Department. See 2 Ill. Adm. Code 1200.120. You may
access our website at https://tax.illinois.gov/ to review regulations, letter rulings and other
types of information relevant to your inquiry.
The nature of your inquiry and the information you have provided require that we
respond with a GIL. In your letter you have stated and made inquiry as follows:
We are endeavoring to comply with Illinois’s requirement for businesses that
transact more than $100,000 or 200 transactions with Illinois residents to
register, collect, and remit sales tax. We
Regrettably, we are unable to file a return due to its complexity and burden
which requires that we assess, withhold, and report taxes for dozens of
jurisdictions within Illinois. In order to charge our customers the correct tax
rate, we must do this real-time. Although there are paid services that can
accomplish this, the subscription and integration costs far exceed the tax to
be collected on Illinois’s behalf. We contacted Illinois Taxpayer assistance
and they could not offer a less burdensome alternative. They recommended
that we seek answers from the Office of Legal Services or obtain a Private
Letter Ruling.

COMPANY
Page 2
March 18, 2025
Our annual sales to Illinois residents are significantly below the $100,000
threshold mandated by most states ($16,760 for Illinois in 2024). The 200
transaction threshold, initially deemed reasonable by the Wayfair decision,
has been rescinded by most states recognizing that small business with low
average transactions are burdened disproportionately to much larger
businesses.
Illinois’s tax reporting requirements surpass those considered by the
Supreme Court. Unlike South Dakota at the time of the Wayfair decision,
Illinois requires businesses to report and remit sales tax not only to the state
but also to individual local jurisdictions (counties and cities) where sales
occur. This necessitates businesses to calculate and collect sales tax based
on specific rates applicable to each local jurisdiction.
Jurisdictional requirements imposed on out-of-state businesses present
significant feasibility challenges. The Wayfair decision provides the rationale
behind the $100,000 or 200 transaction threshold, which is intended to
balance the need for tax revenue with administrative feasibility. The court
correctly reasoned that administration costs would increase as businesses
were required to identify, assess, collect, remit and report taxes across
various jurisdictions. Given that each state, regardless of population, is
granted the same minimum threshold requirement, it was presumed that
each state would impose similar reporting requirements, act as a single
jurisdiction, designate a unified tax rate, and establish efficient means for tax
remittance. Ideally, the state would act as an agent for its localities and
distribute tax revenue accordingly. If businesses are compelled to assess
taxes based on individual jurisdictions, then it stands to reason that each
jurisdiction – not collectively the state – should be held to the $100,000 in local
sales or 200 transactions threshold.
A few states, including Illinois, remain fixated on systematically allocating tax
revenue to each county based on the precise location of each sale, without
considering that the distribution of sales tax revenue closely correlates with
population. Many states have acknowledged this and have adopted a single
tax rate, allocating revenue internally based on population. As a result, they
have increased tax compliance among out-of-state businesses while
simplifying administration.
While we strongly advocate for Illinois to eliminate the 200-transaction
threshold, we are prepared and willing to collect and remit Illinois sales tax –
provided that we can avoid the extreme administrative costs associated with
compliance.

COMPANY
Page 3
March 18, 2025
We respectfully request that Illinois accept our withholdings using a single tax
rate and a simplified return. Upon confirmation of this accommodation,
COMPANY will begin withholding and submitting sales tax collected from
Illinois residents.
With rising costs, COMPANY finds itself in a financially precarious position.
Our ability to continue providing goods and services to Illinois residents
depends on maintaining reasonable administrative costs. We appreciate
your attention to this request and look forward to your response.
DEPARTMENT’S RESPONSE:
The Illinois Retailers’ Occupation Tax Act imposes a tax upon persons engaged in this
State in the business of selling tangible personal property to purchasers for use or
consumption. See 35 ILCS 120/2; 86 Ill. Adm. Code 130.101. In Illinois, Use Tax is imposed
on the privilege of using, in this State, any kind of tangible personal property that is
purchased anywhere at retail from a retailer. See 35 ILCS 105/3; 86 Ill. Adm. Code 150.101.
These taxes comprise what is commonly known as “sales tax” in Illinois. If the purchases
occur in Illinois, the purchasers must pay the Use Tax to the retailer at the time of purchase.
The retailers are then allowed to retain the amount of Use Tax paid to reimburse themselves
for their Retailers’ Occupation Tax liability incurred on those sales. If the purchases occur
outside Illinois, purchasers must self- assess their Use Tax liability and remit it directly to
the Department.
Prior to October 1, 2018, out-of-State retailers had to have a physical presence in
Illinois before they could be required to collect Use Tax. The types of activities constituting
a physical presence are found in Section 2 of the Use Tax Act’s definition of a “retailer
maintaining a place of business in this State”. 35 ILCS 105/2. Any out-of-State retailer that
has a physical presence in Illinois will continue to be required to act as a Use Tax collector.
Regulations describing these types of retailers are found at 86 Ill. Adm. Code 150.801 and
150.802.
In South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (2018), the U.S. Supreme Court
upheld a South Dakota statute that imposed tax collection obligations on out-of-State
retailers that met specific selling thresholds but had no physical presence in the state. This
decision abrogated the longstanding physical presence requirement. Illinois P.A. 100-0587
enacted nexus standards, effective October 1, 2018, that are virtually identical to those
upheld in Wayfair. 35 ILCS 105/2. See 86 Ill. Adm. Code 150.803.

COMPANY
Page 4
March 18, 2025
Beginning October 1, 2018, a retailer making sales of tangible personal property to
purchasers in Illinois from outside of Illinois must register with the Department and collect
and remit Use Tax if:
A)

The cumulative gross receipts from sales of tangible personal property to
purchasers in Illinois are $100,000 or more; or

B)

The retailer enters into 200 or more separate transactions for the sale of
tangible personal property to purchasers in Illinois.

Leveling the Playing Field Public Acts 101-0031 and 101-0604 implemented a series
of structural changes to the Illinois sales tax law that are intended to “level the playing field”
between Illinois-based retailers and remote retailers by imposing State and local retailers’
occupation taxes on Illinois retailers, remote retailers and marketplace facilitators alike.
The regulations at 86 Ill. Adm. Code 131 implement the new requirements for remote
retailers and marketplace facilitators.
A remote retailer is a retailer that does not maintain within this State, directly or by a
subsidiary, an office, distribution house, sales house, warehouse or other place of business,
or any agent or other representative operating within this State under the authority of the
retailer or its subsidiary, irrespective of whether that place of business or agent is located in
Illinois permanently or temporarily or whether the retailer or subsidiary is licensed to do
business in this State. A retailer that fulfills any orders from its inventory in Illinois is not a
remote retailer. See 86 Ill. Adm. Code 131.105.
On and after January 1, 2021, a remote retailer that meets either of the above
thresholds (also set out in 86 Ill. Adm. Code 131.115(a)) is considered a retailer engaged in
the occupation of selling at retail in Illinois for purposes of the Retailers’ Occupation Tax Act
and is liable for all applicable State and local retailers’ occupation taxes administered by
the Department on all retail sales shipped or delivered to Illinois purchasers. Remote
retailers are deemed to be engaged in the business of selling at the Illinois location to which
the tangible personal property is shipped or delivered or at which possession is taken by the
purchaser. State and local retailers’ occupation taxes are incurred at the rate in effect at
this location. 86 Ill. Adm. Code 131.110.
Finally, beginning January 1, 2025, all retailers maintaining a place of business in this
State making retail sales of tangible personal property to Illinois customers from a location
or locations outside of Illinois must remit State and local retailers’ occupation tax at the
Illinois location to which the tangible personal property is shipped or delivered or at which
possession is taken by the purchaser (“destination sourcing”) for sales that would otherwise
be sourced outside of this State. See 35 ILCS 120/2 as amended by Public Act 103-983.

COMPANY
Page 5
March 18, 2025
We understand your concerns. However, the Department of Revenue is an
administrative agency charged with administering the laws enacted by the legislature; it has
no legislative authority. You may consider approaching your legislators or members of the
Illinois General Assembly with your concerns.
I hope this information is helpful. If you require additional information, please visit
our website at https://tax.illinois.gov/ or contact the Department’s Taxpayer Information
Division at 800-732-8866.
Very truly yours,

Alexis K. Overstreet
Deputy General Counsel
AKO:sce