Illinois State Sellers' Use Tax Changes for 2025
Effective Date: January 1, 2025
As of January 1, 2025, Illinois retailers previously obligated to collect and remit Use Tax (UT) on out-of-state sales to Illinois customers must now calculate and remit destination-based Retailers' Occupation Tax (ROT). This update impacts businesses with a physical presence in Illinois conducting sales sourced outside the state.
While Avalara has already notified affected customers, we believe proactive communication on our end will help ensure seamless transitions and compliance.
Key Changes and Action Items for Zuora Customers:
1. Cohorts of Impacted Customers
- Small Cohort:
Customers must manually review and update their nexus settings in Avalara AvaTax. Changes will not be made on their behalf.
- Larger Cohort:
Avalara will automatically update nexus settings for these customers, but they are strongly encouraged to review the changes to ensure accuracy.
2. Customer Action Items
-
Review Nexus Settings:
On or after January 1, 2025, review your nexus settings in Avalara AvaTax.
- For customers required to collect ROT, update nexus selection to "Sales Tax on All Sales."
- If your business collects a 6.25% Voluntary Use Tax rate for Illinois, revert settings as needed.
-
Filing Requirements for Returns Customers:
- If Avalara files your returns, ensure your Illinois registration includes Form ST-2 for compliance.
- Update your returns settings in Avalara AvaTax to include the ST-2 form for multiple physical locations or changing location reporting.
3. Avalara's Updates
- The "Sales and Sellers Use" setting will expire on December 31, 2024.
- A new setting, "Sales Tax on All Sales," will be activated on January 1, 2025, to calculate ROT automatically.
4. Risks to Note
- Non-compliance: Failure to update nexus settings or align with the new requirements may result in incorrect tax calculations and potential penalties.
- Missed Updates: Customers relying solely on Avalara's updates without verifying accuracy risk discrepancies in tax filing.
5. Timeline and Next Steps
- Now: Prepare for the changes by reviewing your current nexus and returns settings.
- January 1, 2025: Update nexus settings in Avalara AvaTax as needed.
- Ongoing: Ensure Illinois filings are compliant, including the ST-2 form for returns customers.
Support Resources
- Avalara Knowledge Center: Visit Here
- Illinois Department of Revenue: Visit Here
- Contact Avalara Support: Open a support case through your Avalara account for personalized assistance.
By addressing these updates proactively, we aim to support your compliance and mitigate risks associated with these regulatory changes. For questions, please reach out to your Avalara representative or Zuora support team.
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Melissa McDonald
Zuora
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