Illinois Marketplace Tax Collection: What Amazon Sellers Need to Know About ROT and Use Tax
Illinois has unique marketplace tax rules where Amazon only collects use tax, not Retailers' Occupation Tax (ROT). Sellers may still owe ROT on Illinois orders, creating a split tax responsibility that requires professional tax guidance.
Overview
Illinois has unique marketplace facilitator tax rules that directly affect how Amazon handles sales tax on third-party seller orders shipped to the state. Unlike most states where Amazon simply collects and remits sales tax on behalf of sellers, Illinois distinguishes between Retailers' Occupation Tax (ROT) and state use tax — and Amazon only handles one of them. Sellers shipping to Illinois buyers need to understand this distinction to stay compliant and avoid unexpected tax obligations.
Key Points / What Sellers Need to Know
- Amazon collects state use tax, not ROT — As of January 1, 2021, Amazon calculates, collects, and remits state use tax on all third-party seller orders shipped to Illinois buyers, but it does not handle Retailers' Occupation Tax.
- Sellers may still owe ROT — If ROT is the appropriate tax for an order, sellers may have a continuing obligation to remit it, even though they cannot collect the full ROT rate through Amazon's platform.
- Tax settings were removed — Starting January 1, 2020, sellers' previous tax calculation options and selections for Illinois orders were disabled. Amazon took over use tax collection as the marketplace facilitator.
- Professional tax advice is essential — Because Illinois tax law creates a split responsibility between Amazon and the seller, consulting a tax advisor is strongly recommended to determine your specific obligations.
How Illinois Differs From Other States
Illinois marketplace facilitator legislation is unique among U.S. states because it creates a two-tax system for marketplace sales. Most states have a single sales tax that marketplace facilitators like Amazon collect on behalf of sellers. Illinois, however, has both the Retailers' Occupation Tax (ROT), which is imposed on the seller, and the state use tax, which is imposed on the buyer. Due to state legislation and regulation, Amazon collects and remits only the use tax component as the marketplace facilitator. This means sellers may still have ROT obligations on their Illinois orders that Amazon does not cover. The difference between the ROT rate and the use tax rate can vary, potentially leaving sellers responsible for the gap.
Analysis & Recommendations
Why This Matters
Illinois is the only state where Amazon's marketplace facilitator tax collection doesn't fully cover seller obligations. Sellers shipping to Illinois may owe additional ROT that Amazon doesn't collect, creating potential compliance risk and unexpected tax liability.
Key Takeaways
- Amazon collects only state use tax on Illinois orders — not Retailers' Occupation Tax (ROT)
- Sellers may still owe ROT on Illinois orders even though Amazon handles use tax
- Use the Tax Document Library in Seller Central to find Illinois order data for tax reporting
- Consulting a tax professional is essential due to Illinois' unique split-tax system
Recommended Actions
- →Review your Illinois orders in the Tax Document Library to understand your potential ROT exposure
- →Consult a tax advisor familiar with Illinois marketplace facilitator rules to determine your specific obligations
- →Monitor Amazon's tax calculation system updates for future ROT support enhancements
Comments
Join the discussion
Log in or create an account to share your thoughts on this update.
No comments yet. Be the first to share your thoughts!