A Consumer’s Guide to the Illinois State Sales Tax Increase

September 01, 2009

Starting today, increases in the taxation rates on soft drinks, personal grooming and hygiene products, and candy will take effect to help pay for improvements to Illinois’ infrastructure. The tax base of these three categories of merchandise will change from the low food and medicine rate of 1% to the higher general merchandise rate of 6.25%. Many municipalities add an extra tax to the base State rate. Please click here to find your local tax rate. The State sales tax on liquor will also increase for the first time since 1999.

The tax increase on soft drinks is on all non-alcoholic beverages containing natural or artificial sweeteners. This includes soda, sports or energy drinks, sweetened tea, water containing sweeteners, and drinks containing 50% or less of fruit or vegetable juice. Exceptions are made for any beverages that contain milk or milk products, soy milk, rice milk, unsweetened tea, drinks made with 50% or greater of fruit or vegetable juice, and unsweetened carbonated or uncarbonated water. As before, any beverages sold in a restaurant are taxed at the higher general merchandise rate and may also be subject to food and beverage taxes as found in a number of communities across Illinois.

The tax increase on personal grooming and hygiene products includes any product for human use, even if it makes a medicinal claim. Products only available by prescription are exempt. Taxable products now include shampoo, toothpaste, mouthwash, body soap and cleansers, antiperspirant and deodorant, and suntan lotion and sunscreens.

There is some confusion about the State sales tax increase that is largely attributable to the tax increase on candy and the State’s definition of “candy.” The Illinois Department of Revenue says that candy is “a preparation of sugar, honey, or other natural or artificial sweeteners, in combination with chocolate, fruits, nuts or other ingredients, or flavorings in the form of bars, drops, or pieces.”

That seems simple enough – chocolate bars, honey covered nuts, and lollipops all fall under the “candy” umbrella. However, exceptions are made for any products that contain flour or require refrigeration. This means that pretzels with a sweet yogurt coating, chocolate covered cookies, and candy such as Twix or Twizzlers that both contain flour are all taxed at the low 1% food base tax rate.

Taxes on liquor and spirits are also increasing to 23.1 cents per gallon of beer or cider with alcohol content of .5%-7%, $1.39 cents per gallon of wine other than cider with an alcohol content of less than 20%, and $8.55 per gallon for liquor with an alcohol content of 20% or more.

In addition to revenue from these tax increases, the State also expects to contribute to its infrastructure budget with revenue earned from increasing the driver’s license and license plate renewal fees, implementing video gaming, and possibly expanding the State lottery program with new games, better management, and online sales.

For further information on tax revenue and other proposed FY2010 tax changes, please read the IIFS’ analysis of Illinois’ proposed FY2010 operating budget, pages 35-50.