Illinois has clarified how import tariffs should be treated for sales tax purposes. Whether or not tariffs are subject to sales tax depends on who is legally responsible for paying them—the seller or the customer.
Importers and Retailers in Illinois: Here’s How Tariffs Could Affect Your Sales Tax Bill
If your business imports goods into Illinois—or buys from someone who does—this update could impact how you calculate sales tax. Illinois has confirmed that tariffs paid on imported goods may be included in the taxable selling price, depending on who the official importer is. Understanding this distinction is crucial for staying compliant and avoiding unexpected tax liabilities.
What’s Changing: Illinois Sales Tax Guidance on Tariffs
The Illinois Department of Revenue issued a General Information Letter (GIL) clarifying the tax treatment of federal tariffs on imported products. Here's a breakdown of the key points:
Retailers' Occupation Tax (Sales Tax) and Tariffs
- If the seller is the importer of record (i.e., legally responsible for paying the tariff), and passes the tariff cost on to the customer, the tariff is considered part of the selling price.
- This means the tariff is subject to sales tax, even if it’s listed separately on the invoice.
- Tariffs are treated as a cost of doing business, and Illinois does not allow a deduction from gross receipts for these costs.
Use Tax Treatment for Customers
- If the customer is the importer of record—typically in cases like drop-shipping or direct international orders—they are responsible for paying use tax on the purchase if sales tax was not charged.
- In this case, the tariff is not included in the taxable amount for use tax purposes, since it was already paid by the customer directly.
- However, if the customer is charged Illinois sales tax by the seller (who has nexus and a permit), then the seller’s tax calculation should not include the tariff, because it was already paid and is not part of the seller’s taxable sale.
Quick Reference Summary
|
Scenario |
Tariff Included in Taxable Price? |
|
Seller is the importer |
Yes |
|
Customer is the importer |
No |
What Illinois Businesses Should Do Next
Determine who the importer is for your transactions.
- Review your purchase and shipping documentation to identify whether your company or your customer is listed as the consignee/importer.
- If your business is the importer and you’re passing tariffs through to customers, make sure you're including them in your taxable sales price.
- Don’t assume tariffs are tax-exempt just because they’re listed separately on an invoice.
Work with your tax advisor or provider to ensure that your systems are configured correctly to treat tariffs in line with this guidance.
How TaxValet Makes Sales Tax Compliance Easier
Navigating Tariff Tax Rules in Illinois with TaxValet’s Help
If you’re a TaxValet client, you don’t have to stress over fine-print tax rules like this. We’ll make sure your sales tax returns account for tariffs appropriately—based on whether your business or your customer is the importer. Our team monitors guidance like this from all 50 states, so you stay ahead of changes without the hassle.
Have questions or unsure if this applies to you? Reach out for a free consultation and we’ll help you figure it out.