Guide

Why collecting and paying sales tax matters

Most sellers who get in trouble did not mean to. Here is what the law says, in plain words, and how to stay on the right side of it.

The tax you collect is not your money

When you charge a customer sales tax, you are collecting it for the state. Illinois law calls these "trust taxes," because you hold the money in trust until your return is due. For most sellers that is the 20th of the month after the period. Your sale price is yours. The tax on top of it is not.

What happens if you don't file or pay

• The Illinois Department of Revenue (IDOR) can add penalties and interest for late returns and late payments. I did not list the percentages here. Check IDOR for the current ones.
• You lose the vendor's discount (1.75% of the tax you collect, capped at $1,000 a month) if you file or pay late.
• If you stop filing altogether, the amount owed keeps growing.

Personal liability: an LLC does not shield you from this one

Illinois law (the Uniform Penalty and Interest Act, 35 ILCS 735/3-7) says a person who is responsible for filing returns and paying trust taxes, and who willfully fails to do it, can be personally liable for a penalty equal to the total unpaid tax, plus interest. The law says this covers managers and members of an LLC and partners in a partnership. The liability can continue after the business closes. Ask an attorney how this applies to you.

Criminal penalties exist, and they are there for serious cases

The Retailers' Occupation Tax Act (35 ILCS 120/13) lists these as felonies in Illinois:

• Failing to file a return, or filing a fraudulent return, when the amount due is under $300 (Class 4 felony) or $300 or more (Class 3 felony).
• Taking money from a taxpayer to pay the state and not sending it in.

Selling at retail after your registration has been revoked is a Class A misdemeanor, and each day can count as a separate offense. Failing to keep or produce required records can also be a misdemeanor.

I did not research how often these are enforced. The point is not to scare you. It is to show why registering, filing and paying are worth doing on time.

A mistake is not fraud

• A mistake is using the wrong rate, filing a day late, or missing a deadline once. These can usually be fixed by filing and paying as soon as you can.
• Tax evasion or fraud means deliberately hiding sales, collecting tax and keeping it, or filing a false return. Do not do any of these, and walk away from anyone who suggests it.
• Payment apps and marketplaces report sales to the IRS once they pass certain thresholds. Your income is taxable whether or not you receive a form.

Habits that keep you out of trouble

• Register before you make taxable sales.
• Charge the right rate. Chicago is 10.5% on general merchandise since Aug 1, 2026. Check your address in the Illinois Tax Rate Finder.
• Record every sale, including cash.
• Keep business money in a separate account, so the tax you collect is easy to see.
• Put the 20th on your calendar. File even when you had no sales.
• Keep every CRT-61 you receive from a buyer for 3.5 years.
• If you are behind, file and pay as soon as you can, do not ignore notices, and talk to a CPA or an attorney.

I am not a CPA or an attorney

This page is general information about what the law says. It is not legal or tax advice, and it does not tell you what to do in your situation. For that, talk to a CPA or an attorney.

Sources: 35 ILCS 735/3-7 (personal liability for trust taxes) and 35 ILCS 120/13 (Retailers' Occupation Tax Act penalties). Checked Oct 27, 2026. Laws change; confirm current text and rates with IDOR.