Understanding Sales Tax Accounting in Chicago
The Department of Revenue is, in essence, your silent business partner. They hold a share in your business worth the sales tax rate. Their contribution to your business is the ability to do business in their state. For this reason, you are collecting sales tax on their behalf, which is normally 40% of the state’s revenue in a given year.
How is Sales Tax Accounting Different?
How is sales tax accounting any different than filing an individual income tax return or a corporate tax return?
- Not all sales are taxable, whereas all income is taxable.
- Your business location alone will not trigger a sales tax liability.
- You are holding money in escrow for the government, not paying a part of the money as a tax after it has been earned.
These are just a few basic differences in sales tax obligations versus income tax obligations.
Factors to Consider When Hiring a Sales Tax Accounting Firm

Consider the following factors when deciding whether to hire a sales tax accounting firm:
- Nexus
- Selling services in conjunction with sales
- Having business locations in different counties with differing sales tax rates
- Selling at retail and wholesale
- Selling high tax and low or no tax items
Why Choose Our Firm for Sales Tax Accounting?
Having managed hundreds of sales tax audits, our firm has seen what improper bookkeeping and sales tax collection and reporting can do to a business. For this reason, we offer sales tax bookkeeping on an ongoing basis for our clients.
Our Expertise
We are well-versed in sales and use tax law, which helps us:
- Keep our clients up to date with changes in the law
- Ensure clients meet their obligations for monthly reporting
Call us to get your company going in the right direction.
Frequently Asked Questions
What is sales tax accounting and why is it important for businesses?
Sales tax accounting refers to the process of collecting, recording, and remitting sales tax collected from customers to the appropriate tax authorities. It’s important because businesses act as intermediaries, holding the tax in trust before transferring it to the government.
How do I know if my business has a sales tax obligation in Chicago?
Sales tax obligations depend on factors like business location, nexus (physical or economic), the type of goods or services sold, and whether sales occur in jurisdictions with different tax rates. Simply being located in Chicago doesn’t automatically trigger a liability.
How often must I file sales tax returns in Illinois?
Sales tax returns in Illinois are typically filed monthly, quarterly, or annually depending on the business’s total tax liability. Most businesses in Chicago file monthly to remain compliant and avoid penalties.
What are common mistakes in sales tax bookkeeping?
Common mistakes include failing to register for a sales tax permit, not charging the correct rate, neglecting to track exempt sales, and missing filing deadlines. Poor recordkeeping can also lead to costly audits and fines.
Why should I hire a professional sales tax accounting firm?
A specialized firm understands the complexities of sales and use tax laws, stays updated on changes, and ensures accurate filing and compliance. This helps prevent errors, reduces audit risk, and saves time and resources for the business.