Illinois Enacts Economic Nexus Legislation

Effective Date: October 1, 2018

Threshold: Cumulative gross receipts are $100,000 or more or 200 or more separate transactions

Measurement Date: Preceding 12-month period

Includable Transactions: Retail sales

When You Need to Register Once You Exceed the Threshold: The retailer shall determine on a quarterly basis whether they meet the criteria for the preceding 12-month period (see details below)

Illinois has enacted legislation containing economic nexus provisions. Modifications have been made to the Use Tax and Service Use Tax provisions to the definitions of retailer or serviceman maintaining a place of business in the state or any like term. Effective October 1, 2018, remote sellers will be liable for collecting Illinois sales and use tax if they meet either of the following thresholds over a 12 month period:

  • the cumulative gross receipts from sales of tangible personal property or services to purchasers in Illinois are $100,000 or more; or
  • the retailer enters into 200 or more separate transactions for the sale of tangible personal property or services to purchasers in Illinois

Retailers and servicemen must determine on a quarterly basis, ending on the last day of March, June, September, and December, whether they meet either of the above criteria for the preceding 12-month period. If the retailer meets either of the criteria for a 12-month period, he or she is considered a retailer maintaining a place of business in Illinois and is required to collect and remit tax and file returns for one year. At the end of that one-year period, the retailer must determine whether they met either of the criteria during the preceding 12-month period, and if they do, they are required to collect and remit tax and file returns for the subsequent year. If at the end of a one-year period a retailer that was required to collect and remit the tax determines that he or she did not meet either of the criteria during the preceding 12-month period, the retailer shall subsequently determine on a quarterly basis whether he or she meets either of the criteria for the preceding 12-month period. This provision is currently in violation of the Commerce Clause and is pending the decision in South Dakota v Wayfair.  If the U.S. Supreme Court finds for South Dakota this provision will be effective.  If the Court finds for Wayfair, it is unlikely this provision will be enforced. (P.A. 100-587 (H.B. 3342), Laws 2018)

UPDATE: The Illinois Department of Revenue filed an emergency rule for remote retailers with the Secretary of State on September 11, 2018 in reaction to the South Dakota v. Wayfair decision. The emergency rule, Section 150.803 Wayfair Nexus – Nexus Without Physical Presence, expands upon the economic nexus legislation Illinois passed earlier in the year (see legislative provisions above). Emergency rules are effective immediately, and generally stay in place 150 days. The Department of Revenue plans to wait until after the wave of first-time registrations go through to begin the permanent rule-making process. The emergency rule still has an October 1, 2018 enforcement date. The emergency rule clarifies several key definitions, discusses which transactions should be included or excluded towards meeting the thresholds, and outlines what happens if a retailer stops exceeding the thresholds after it begins collecting. Read the full emergency rule here.

Posted on June 11, 2018