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Illinois Tax Changes Effective January 1, 2025
Illinois will increase its franchise (capital stock) tax exemption from $5,000 to $10,000, effective January 1, 2025. Notably, however, Illinois had once been on track to eliminate this tax altogether, a policy that has since been paused.
Illinois will also broaden its sales tax base to include retail leases of tangible personal property except motor vehicles, watercraft, aircraft, and semitrailers. Additionally, sales tax assessed on acquisitions by retailers who lease tangible personal property will be paid over the lease term by the final lessee of the TPP, rather than by the business at the time of acquisition of the TPP. This moves Illinois’ state sales tax into conformity with the majority of other states’ sales tax structures as it applies to leases of TPP. This change will also ensure that sales tax is paid by the final consumer of the eligible products, moving Illinois’ sales tax closer to that of a well-structured consumption tax.
Additional changes to Illinois’ sales tax include changes made under SB 3362, enacted August 9, 2024. Under this new law, Illinois will transition to destination-based sourcing for retailers that are responsible for remitting sales taxes on retail sales of tangible personal property that occur outside of Illinois but that are made by a business with a physical presence in Illinois.
Further, to partially offset the costs to retailers of complying with sales tax collection and remittance laws, Illinois allows retailers to retain 1.75 percent of sales taxes collected. However, beginning January 1, Illinois will cap the retailers’ discount on sales due at $1,000 per month.
Finally, effective January 1, 2025, the General Assembly is commissioning a study of the state’s property tax system, with recommendations for improvement due July 1, 2026.