As we all are aware, each state differs in the way they handle taxes for businesses. In this post we will focus on Illinois tax law, starting at a high level and working down to some key details which may spark some creative thinking for what you can do to decrease your business’s tax contribution. I would like to keep things as simple as possible here, so for further detail please visit tax.illinois.gov.
As of 2016, the business income tax rate is 5.25% for corporations, and 3.75% for trusts and estates. Here is a 2017 update for filing your 2016 taxes. Visit tax.illinois.gov to keep up with tax law updates.
Corporation’s original filing and payment due date is the 15th day of the 9th month following the close of your taxable year.
How to register a business in Illinois
Should your business charge sales tax in Illinois?
Not all things require payment of a sales tax in Illinois (a rate of 6.25% currently). Many types of services are an example of this – if you’re, say, a massage therapist or a pet groomer, you do not need to worry about sales tax. However, if your services include manufacturing or creating a product, you will need to charge a tax on products sold.
The majority of tangible items are taxable, besides a few select pieces of machinery, equipment, and building materials used for specific projects. Any place where you have “nexus” – a presence in a state that requires you to comply with sales tax laws, including inventory storage – also requires a sales permit.
Click here for more details on how to register for a sales tax permit in Illinois.
There are many incentives the state of Illinois offers to businesses, including:
- Business development, loans, and grants: access to capital with affordable rates and minority entrepreneur opportunities.
- Financing: for farms, industries, businesses, local governments, hospitals, and other non-profits. This site has all the information you need to find access to the best funding.
- Grants and procurement opportunities (federal): search through over 20,000 federal opportunities that may help you in your business efforts!
- Grant Tracker: This site also has a search function to help you find the grant that you need, from coal grants (energy), technology grants, and tourism grants. Here’s another site specifically for local tourism grants.
- Entrepreneurship and small business assistance: this site is dedicated to small businesses, from just starting out, to helping with licenses and permits.
- Small business job creation tax credit: This site lists all the tax credits available for job creation, and other available programs.
- Tax incentive and assistance programs: And even more programs and information for how to take advantage of these programs!
- All the necessary registration, renewals, licenses, permits, and certifications are neatly listed here for convenience.
The SBA (small business administration) is always a great resource for small businesses as well.
Check out this great free resource which explains taxes in Illinois, as well as every US state – especially useful for those businesses selling in multiple states. https://www.salestaxhandbook.com/
Illinois Income Tax
For businesses, this is calculated by multiplying net income by a flat rate. This tax rate database will help you determine what your rate should be.
Owners of commercial, industrial, and agricultural property generally pay property tax directly. Read this guide to learn more.
In Illinois, you must be registered to withhold income tax from your employees, and once you are a “withholding agent” you are then liable for those taxes. Read more here for the exact percentages. If you need help with payroll or paycheck processing, or would like an accountant to check over your books, feel free to contact D&M Accounting and we will be happy to help.
Illinois Internet Sales Tax
State sales tax on internet sales has been a topic of debate for some time now, and each state’s laws vary and are updated frequently, so be aware and use this guide to stay informed. In a lawsuit against the state of Illinois, the state sided with Amazon, which allows residents NOT to pay the 6.25% sales tax on products bought on Amazon, so if you sell your products on the web retail giant, no need to worry about your internet sales. If however you make sales from your own site, and you are physically present in the state where the sale took place (if you are located in Illinois and an Illinois resident buys from you), you are liable for those sales taxes.
If you have any questions regarding your business taxes or payroll, please contact us and we will be happy to help!