Key figures
Illinois receivables
2026, with sources
Sales tax nexus
Illinois’s retailers’ occupation tax starts at 6.25%, with local taxes on top. Remote retailers have economic nexus once they make $100,000 or more in sales of tangible personal property to Illinois purchasers in the preceding 12 months, checked quarterly. The 200-transaction alternative was eliminated on January 1, 2026.
Since 2021 a remote retailer that crosses the threshold collects the state rate plus the destination’s local rate, so the rate depends on the customer’s address rather than yours.
Software: the state and the city disagree
Illinois taxes “canned” software that is transferred to the customer, however it is delivered, unless the license meets every condition of the state’s license exemption. Software the customer only accesses remotely and never downloads is not taxed by the state.
Chicago taxes it anyway. The Personal Property Lease Transaction Tax treats a nonpossessory lease of a computer — the city’s term for cloud software and infrastructure — as a lease, and the rate is 15% from January 1, 2026. A SaaS company with Chicago customers registers with the Chicago Department of Finance, collects the tax and files Form 7550, which also changes what an invoice to a Chicago customer must show.
An Illinois customer list in practice
Take a SaaS company in Austin with $80,000 a year of subscriptions to Illinois customers, a third of them in Chicago, and a $5,000 on-premise add-on that customers download. It is under the $100,000 state threshold, so it has no Illinois sales tax obligation on the add-on yet — and the 2026 rule change means its 400 small Illinois subscriptions no longer count toward nexus. Its Chicago subscriptions are a separate question under the city’s lease tax, which has its own rules on who must collect and does not borrow the state’s $100,000 threshold.
The same company’s Illinois receipts feed its Illinois income tax apportionment too: service receipts are sourced to Illinois when the customer receives the benefit there, so a remote seller with no Illinois office can still owe Form IL-1120 if it has Illinois nexus.
For the books, the city tax collected is a liability, not revenue: a $1,000 Chicago subscription billed with $150 of lease tax is $1,000 of revenue (deferred and recognized over the term under ASC 606) and $150 owed to the city.
The federal baseline
This page covers what Illinois adds. The federal rules underneath it apply here too.
Common questions
Is our SaaS taxable in Illinois?
At the state level, generally not: Illinois doesn’t tax software accessed remotely that the customer never downloads. Chicago is different. The city’s Personal Property Lease Transaction Tax, 15% from January 1, 2026, applies to nonpossessory computer leases used in Chicago, and the lessor is expected to collect it from Chicago customers.
Do we still count transactions for Illinois nexus?
Only the $100,000 test. From January 1, 2026, Illinois dropped the 200-transaction threshold for remote retailers, so a company with many small sales into Illinois and under $100,000 of gross receipts in the lookback period no longer has economic nexus on count alone.
Receivables next door
- INIndiana receivablesIndiana charges a flat 7% with no local rates, counts only $100,000 of sales toward nexus since 2024, and doesn’t tax remotely accessed SaaS.
- IAIowa receivablesIowa taxes SaaS but exempts it for commercial enterprises, so B2B sellers collect certificates rather than tax. Nexus is $100,000 of all Iowa revenue, exempt sales included.
- KYKentucky receivablesKentucky charges a flat 6% with no local sales tax, taxes SaaS as a prewritten computer software access service, and since August 1, 2026 requires remote sellers to register on $100,000 of gross receipts alone.
- MOMissouri receivablesMissouri’s economic nexus is $100,000 in taxable sales with no transaction test, and by regulation SaaS is not taxable. The state rate is 4.225% before local taxes.
- WIWisconsin receivablesWisconsin charges 5% plus county and Milwaukee city rates, counts only $100,000 of sales toward nexus, and doesn’t tax SaaS hosted on the vendor’s servers.
Founder guides on this
- 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.
- RevenueDeferred revenue for SaaS startups, explainedAn annual prepayment is cash today and revenue over a year. How deferred revenue works under ASC 606, why it’s a liability, and the schedule behind it.
- StripeHow to reconcile Stripe payouts to your booksA Stripe payout is charges less fees, refunds and disputes, batched across days. How to book it gross, tie it to the bank, and keep revenue right.
More of the Illinois guide
- AccountingAccounting and state tax in IllinoisCorporate tax, conformity to federal rules, apportionment and what it does to your books
- PayablesPayables and contractors in IllinoisPaying vendors and contractors: 1099 filing, use tax, contractor tests and withholding
- 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.