New Illinois Sales Tax Changes: What Local Business Owners Need to Know Before July 1, 2025

Beginning July 1, 2025, a new round of sales tax rate changes will take effect across Illinois, as announced by the Illinois Department of Revenue. While tax bulletins can feel like a distant government formality, this update is one that many business owners—especially retailers—can’t afford to overlook.

What’s Changing on July 1, 2025

The changes affect a wide range of local sales taxes, including:

• Business District Sales Tax

• County Public Safety, Public Facilities, and Transportation Sales Taxes

• County School Facilities Sales Tax

• Home Rule and Non-Home Rule Municipal Sales Taxes

• Mental Health and Substance Abuse Sales Taxes

These updated rates apply to general merchandise sold within impacted jurisdictions. That includes items reported on Line 4a of Illinois Sales Tax Forms ST-1 and ST-2. However, sales of qualifying food, drugs, medical appliances (reported on Line 5a), and items requiring state-issued titles or registrations remain exempt from these local changes.

Who Is Affected

If you operate a retail business or provide services involving the sale of general merchandise in Illinois, these changes likely apply to you. Even if you’re outside the jurisdictions implementing new rates, you may still need to update your records if you sell into those areas or operate multiple locations.

How This Impacts Your Business

If your business is located in a jurisdiction with a new rate, you’re required to update your point-of-sale systems and accounting software to reflect the correct tax amount starting July 1, 2025. Failing to do so could result in under-collected taxes, compliance issues, or even penalties.

You’ll also need to distinguish between sales made before and after the effective date. Pre-July transactions subject to the old tax rate should be reported on Line 8a of Forms ST-1 and ST-2. Sales after July 1 must use the new rates.

For businesses, this means potential shifts in customer pricing and the need to train staff on tax updates. Accuracy matters—especially if your business undergoes a state audit.

What You Should Do Now

Here are a few proactive steps to take:

• Check Your Local Rate: Use the MyTax Illinois Tax Rate Finder to confirm your jurisdiction’s updated rates.

• Update Your Systems: Ensure your cash registers, e-commerce platforms, and accounting software are updated before July 1.

• Consult Monotelo Advisors: Reach out to one of us at Monotelo for any questions you may have and to ensure you’re ready for these changes to maintain accurate reporting.

• Communicate with Your Team: Educate employees about the updates so they can accurately answer customer questions.

Tax changes often happen quietly, but their effects can be disruptive if ignored. By preparing now, your business can stay compliant, avoid unnecessary headaches, and continue operating smoothly when the new rates take effect.

At Monotelo Advisors, we help business owners stay ahead of policy changes like these. If you’re unsure how this sales tax update might affect your operations, reach out—we’re here to help you navigate the details with clarity and confidence.

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