Illinois: Upcoming Tax Amnesty Programs

Illinois has enacted legislation establishing three Illinois tax amnesty 2025 programs. The first begins October 1, 2025 and runs through November 17, 2025. This general tax amnesty applies to all taxes administered by the Illinois Department of Revenue for liabilities tied to returns due between July 1, 2018 and June 30, 2024. All penalties and interest will be waived for liabilities resolved during the program.

A second amnesty program will run from October 1, 2025 through November 15, 2025 for all franchise tax and license fees administered by the Illinois Secretary of State. The Department of Revenue has created a website with basic details for the first program, with more guidance expected soon.

The third program, known as the Remote Retailer Amnesty, is separate from the general Illinois tax amnesty 2025 and is only available to remote retailers.. It covers sales of tangible personal property delivered to Illinois from July 1, 2021 through June 30, 2026, and will run from August 1, 2026 through October 31, 2026. The state will abate all penalties and interest for liabilities resolved through this program. Illinois is simplifying the tax reporting for remote retailers to encourage participation in the program.

Simplified Rates for Remote Retailers

Illinois is providing a simplified rate for determining tax, rather than requiring calculation based on the destination rate of the sale. For property ordinarily subject to the full state rate of 6.25%, remote retailers will instead use a flat rate of 9%. For sales of property subject to the reduced state rate of 1%, the flat rate will be 1.75%. The reduced 1% state rate generally applies to qualifying drugs and groceries. Although Illinois will eliminate the 1% state tax on groceries beginning January 1, 2026, the 1.75% flat rate will still apply to grocery sales made after January 1, 2026 that are included in an amnesty application.

Simplified Reporting

Illinois will also simplify the reporting requirements under the Remote Retailer Amnesty program. Participants must be registered with the Illinois Department of Revenue and will only need to report statewide totals for taxable sales and tax due using the simplified rate. Location-specific reporting will not be required. All Illinois sales must be included unless the remote retailer can provide a valid exemption number or certificate, resale certificate, or direct pay permit issued by the Department of Revenue. In addition, remote retailers must maintain records for all sales taxed at the 1.75% simplified rate and make those records available for Department review.

Choosing Between the 2025 and 2026 Programs

Remote retailers should consider:

1. Whether or not a physical nexus has been, or could be, created with Illinois. Sellers with any connection to Illinois other than exceeding economic nexus thresholds are not eligible for the remote seller amnesty. If the seller leases space, hires an Illinois based employee, uses a third-party contractor in the state, or engages in similar activities, the remote seller will be disqualified from the program. Inventory at the location of a marketplace facilitator that is used solely to fulfill orders made over the marketplace does not create physical nexus, but any other inventory in the state does create physical nexus.
2. The risk of the Department of Revenue starting an audit or otherwise contacting the remote seller prior to the remote seller amnesty.
3. The ease of calculating the tax due using a single rate and reporting the tax at the state level under the remote seller amnesty versus detailed destination reporting under the general amnesty.
4. The availability of records to document exempt sales and sales of products subject to the reduced state rate of 1%.
5. Depending on when the remote seller started business, the seller should consider whether they want to remit all taxes back to July 1, 2018 under the general amnesty or limit the lookback to July 1, 2021 under the remote seller amnesty.
6. Whether Illinois’ voluntary disclosure program is more advantageous than the amnesty programs, if the voluntary disclosure program remains available during the amnesty.
7. There is litigation challenging the constitutionality of Illinois’ use of different sourcing rules for in-state and out-of-state sellers. The outcome of the litigation could substantially change the benefit of both amnesty programs, but waiting until 2026 might provide more clarity.
8. Whether other taxes are owed to Illinois that qualify for the 2025 amnesty programs but are not eligible for the remote seller amnesty.

Bottom line: Illinois’ amnesty programs offer valuable opportunities to resolve outstanding liabilities while avoiding penalties and interest. The right choice depends on your nexus, records, and overall tax position.

Need help deciding? Clarus Partners’ sales and use tax experts can evaluate your situation and guide you through the amnesty process for maximum benefit.