In a recent General Information Letter (ST 25-0022-GIL), issued April 07, 2025, the Illinois Department of Revenue (Department) reaffirmed that the federal tariffs are not deductible when computing Retailers’ Occupation Tax (ROT) liability. This is particularly relevant to Illinois retailers who import tangible personal property (TPP) and pass tariff costs to their customers. Under the Retailers’ Occupational Tax Act, Illinois imposes a tax on businesses selling TPP at retail for use or consumption. The law prohibits deductions from gross receipts for any business expenses, including labor, materials, transportation, or tariffs, when calculating the ROT liability.
In the General Information Letter, the Department specifically addresses whether separately stated tariffs on an invoice could be excluded from taxable gross receipts. If the seller is the legally responsible party for the tariff (consignee) and includes the tariff in the retail price, then the tariff is considered part of the selling price and therefore not deductible from taxable gross receipts. Even when separately stated on an invoice, the tariffs are treated as part of the seller’s cost of doing business and must be included in the gross receipts when calculating ROT liabilities.
There is one exemption to this rule. When the consignee is the end customer and directly imports the goods, the tariff is not included in the seller’s gross receipts and not subject to ROT. However, the customer may owe Use Tax for the purchase price of the TPP, but the tariff amount would not be part of the taxable base.
This guidance is useful to businesses importing TPP. Business owners should plan their pricing and tax reporting accordingly. This guidance can help businesses accurately compute ROT liabilities and ensure they are in full compliance with Illinois tax law.
(General Information Letter ST 25-0022-GIL, Illinois Department of Revenue, April 07, 2025)