What Is the Sales Tax Rate in Chicago?

Sales tax is a consumption tax applied to the purchase of goods and services. In Chicago, understanding the sales tax is relevant due to its layered structure, which combines rates from various governmental entities. This taxation contributes to public services and infrastructure, impacting the final cost consumers pay for many everyday items.

Calculating the Sales Tax Rate in Chicago

Chicago’s sales tax rate is a composite of several distinct tax rates levied by different governmental bodies. This multi-layered approach results in one of the higher sales tax rates in the United States. The total effective sales tax rate in Chicago is 10.25%.

The 10.25% rate is comprised of four components: the State of Illinois (6.25%), Cook County (1.75%), the City of Chicago (1.25%), and the Regional Transportation Authority (RTA) (1.00%). These rates can change, so checking official sources provides the most current information.

What Goods and Services Are Taxed

Sales tax in Chicago primarily applies to the retail sale of tangible personal property. This includes a wide array of physical goods that consumers typically purchase. Common examples of taxable items are clothing, electronics, home furnishings, and general merchandise found in retail stores.

Prepared food, such as restaurant meals and hot foods, are also generally subject to the full sales tax rate. While Illinois generally does not tax most services, there are specific exceptions. For instance, certain digital products, telecommunication services, hotel stays, and car rentals are subject to sales tax or other specific taxes.

Common Sales Tax Exemptions

Illinois law provides various exemptions from sales tax, particularly for items considered necessities. Most unprepared groceries, intended for consumption off the premises where sold, are taxed at a reduced state rate of 1% rather than the full sales tax rate. This reduced rate applies to essential food items like milk, bread, and fresh produce.

Prescription medicines and medical appliances are fully exempt from sales tax. Over-the-counter drugs, however, are typically taxed at a reduced rate. Other common exemptions include certain manufacturing machinery and equipment, as well as goods purchased for resale by businesses. It is important to distinguish between unprepared food, which often qualifies for a lower tax rate, and prepared food or candy and soft drinks, which are generally subject to the full sales tax rate.