Accounting Articles > Illinois Sales and Use Tax Audit:
What is sales tax?
Sales tax, or what Illinois tax law calls Retailers Occupation Tax, is imposed on persons engaged in selling tangible personal property at retail. The tax is measured by the gross receipts of a business.
The state determines how frequently this tax must to be paid. Some retailers are required to file and pay this tax monthly, some quarterly, and some annually. This depends upon the amount of retail sales generated by the business.
The tax is due on the 20th day of the month which follows the end of the taxation period. For example, if you are responsible for filing and paying your sales taxes monthly, then the return for each month is due on the twentieth of the following month.
Sales tax is due only on tangible personal property. It is not due on intangible personal property, such as a service or freight. Nor is it due on real property, such as an apartment building or a strip mall.
Sales tax is only due on sales that are delivered inside the state of Illinois. If a customer from Milwaukee orders a bracelet from one of the jewelers on South Wabash, and the item is shipped to Wisconsin, the jeweler is not required to collect or remit an Illinois Sales Tax, as this is considered an interstate transaction. In this transaction, the customer is responsible for Wisconsin's use tax.
Further, the tax is due only on “Gross Receipts”, not on “Sales.” If you deliver a tangible, and payment is not made until the following month, the sales tax for that individual transaction will not be due until the following month's sales tax return is completed. Sales taxes are cash basis returns rather than accrual. They're based on money collected, rather than on what is billed. This doesn't mean that if you're basing your sales taxes on Accounts Receivable, rather than on collections, you're doing it correctly. You're just paying your taxes sooner than is required.
Unsatisfied with your current accountant? We can get you back on track.
Call us for a free consultation: (773) 267-7500