Key figures
Illinois payables
2026, with sources
1099s and the new-hire report
Illinois does not require a separate state copy of every 1099-NEC. Publication 110 lets payers voluntarily file 1099s that show Illinois income tax withheld through MyTax Illinois or the FIRE program. What Illinois does require is that independent contractors be reported to the IDES new-hire directory alongside employees, which most payroll providers do only for W-2 staff unless asked.
Use tax and the Chicago lease tax on what you buy
When a vendor doesn’t charge Illinois tax on taxable goods — laptops, monitors, downloaded software — the company owes use tax at the same rate it would have paid in sales tax, reported to IDOR.
Chicago adds its own layer: the Personal Property Lease Transaction Tax, 15% from January 1, 2026, applies to nonpossessory computer leases, which the city reads to include cloud software used in Chicago. If the vendor doesn’t collect it, the lessee owes it, which makes a Chicago office’s accounts payable a tax question as well as a cash one.
What it looks like in a month’s payables
Consider a 12-person company in Chicago’s Loop paying for 15 SaaS tools. The large vendors charge the 15% lease tax on their invoices; three smaller ones don’t. The company owes the city 15% on those three subscriptions as lessee, and a laptop bought from an out-of-state reseller that didn’t charge Illinois tax carries 6.25% Illinois use tax. Booking the untaxed amounts as an accrued tax liability each month, rather than discovering them at audit, is the difference between a small line item and a penalty.
Illinois also asks for contractors on the new-hire report. When the same company engages a freelance designer in Evanston, it reports the engagement to IDES within 20 days alongside its employees, even though no Illinois 1099 filing is required.
The federal baseline
This page covers what Illinois adds. The federal rules underneath it apply here too.
Common questions
Do we file our 1099-NECs with Illinois?
Not as a general rule. IDOR’s Publication 110 makes filing 1099s with Illinois withholding voluntary, through MyTax Illinois or FIRE, and a startup paying contractors usually withholds no Illinois tax. Contractors still go on the IDES new-hire report.
Do we owe Chicago tax on the software we buy?
If your office is in Chicago and a cloud vendor doesn’t charge the Personal Property Lease Transaction Tax, the city treats the lessee as liable for it. Large vendors usually collect; small ones often don’t.
Payables next door
- INIndiana payablesIndiana reconciles W-2s and 1099s with Indiana withholding on the WH-3 by January 31 and charges 7% use tax on untaxed goods, but not on remotely accessed software.
- IAIowa payablesIowa wants 1099s only when they show Iowa withholding, filed electronically by February 15. Business SaaS purchases are generally exempt; computers are not.
- KYKentucky payablesKentucky asks for 1099s only when Kentucky tax was withheld; on the payables side, the issue is a flat 6% use tax that reaches SaaS subscriptions bought from vendors that do not collect.
- MOMissouri payablesMissouri wants its own copy of 1099s for Missouri-source payments of $1,200 or more, by February 28, filed directly with the DOR.
- WIWisconsin payablesWisconsin wants copies of 1099s of $600 or more paid to its residents, and charges use tax on untaxed goods and downloaded software — not on SaaS.
Founder guides on this
- PeopleContractor or employee? Classification for startupsContractor or employee depends on control, not the contract. The IRS test, state rules, 1099s, payroll registration and the cost of getting it wrong.
- Sales taxSales tax nexus for startups: when you owe tax in a stateSince Wayfair, selling into a state can create a sales tax obligation. How economic nexus works, why SaaS is taxable in some states and when to register.
More of the Illinois guide
- AccountingAccounting and state tax in IllinoisCorporate tax, conformity to federal rules, apportionment and what it does to your books
- ReceivablesReceivables and sales tax in IllinoisSales tax registration, economic nexus, whether SaaS is taxable, and collecting from customers
- PayrollPayroll taxes and employer rules in IllinoisWithholding, unemployment insurance, paid leave, minimum wage and the rules on paydays
- ComplianceCompliance and filings in IllinoisRegistering to do business, annual reports, franchise tax and the filing calendar
- AdvisoryAdvisory: credits and decisions in IllinoisCredits, incentives and the decisions that are cheaper to get right the first time
Sources
Checked against each agency’s own page on . Rates and thresholds change, usually on January 1.
General information for US companies, not tax, legal or accounting advice for yours. Rules and thresholds change; confirm the specifics with a CPA or the agency before you act on them.