Illinois will stop waiving penalties and interest on unpaid sales tax for out-of-state online sellers after Saturday, Oct. 31, according to the Illinois Department of Revenue.
If you ship $100,000 or more of physical goods a year to Illinois buyers and never collected the state’s tax, the Department’s bulletin offers a flat payment with the penalties and interest waived. At a $3,500 average order that threshold is about 29 orders (my arithmetic, $100,000 divided by $3,500), so a high-ticket store at Ecommerce Paradise scale can cross it without noticing.
This post covers who qualifies, why Illinois is pushing sellers to come forward, what a 9% payment versus a 15% audit assessment does to a high-ticket order, and a dated checklist. Everything below is reported information plus my read. I’m not a tax advisor or an attorney, so run your numbers past a CPA. If you’re new to the model, my guide on what high-ticket dropshipping is explains why these orders are so large.
Selling into fifty states starts with a clean entity, so form your LLC with Northwest Registered Agent, the best LLC formation service for ecommerce owners. Northwest has been in the registered agent business for 25 years, which is why I trust it over cheap formation sites that change hands and upsell you. Form your LLC with Northwest →
Illinois Remote Retailer Amnesty: Who Qualifies Before Oct. 31
The Illinois Department of Revenue released Informational Bulletin FY 2026-28 on June 5, 2026, announcing the 2026 Remote Retailer Tax Amnesty Program. The program runs from Aug. 1 through Oct. 31, 2026, according to the Department’s news release. WSIU Public Broadcasting reported the announcement on June 8.
The Department’s bulletin cites 35 ILCS 120/2-13, added by Public Act 104-0006, as the legal basis. It covers remote retailers that sell tangible personal property to Illinois purchasers and have no physical presence in the state. Eligible liabilities are sales made from Jan. 1, 2021 through June 30, 2026.
The threshold depends on the period, per the bulletin. For quarters ending after Jan. 1, 2021 through Dec. 31, 2025, you qualify with $100,000 or more in Illinois gross receipts over the four preceding quarters, or 200 or more separate Illinois transactions. For quarters starting on or after Jan. 1, 2026, the transaction count no longer applies and the test is $100,000 in gross receipts.
The payment is a simplified rate, not your actual state-plus-local math. The bulletin sets 9% for general merchandise and 1.75% for items normally taxed at the 1% state rate, such as food for off-site consumption, medicines and medical appliances. The rate blends the state tax with the average local rate. You need records to support any sales reported at 1.75%, and without them the Department presumes 9%. If you already collected tax at a rate above the simplified rate, you report and pay the higher amount.
Penalties and interest are waived if you pay all eligible liabilities in full during the program period, or complete an approved repayment plan. KBF Advisory, a CPA firm, wrote on Aug. 26 that the program also bars civil or criminal prosecution for covered periods. That detail comes from the firm’s summary and not from the bulletin text I read, so confirm it with your own advisor.
The mechanics run through MyTax Illinois only. You must be registered with the Department, and the bulletin says registration typically takes one to two business days. Inside your ST-1 sales and use tax account you open “Remote Retailer Amnesty Application,” pick the months or years you are claiming, and submit payment with the application by Oct. 31. Once the Department processes the application, the liability cannot be edited.
A payment plan exists, but only for financial hardship. You must request it by Oct. 31, choose 6, 12, 18 or 24 monthly installments, and put down a down payment with the application. Automatic withdrawals begin Dec. 1, 2026, and interest accrues from Nov. 1. Default on the plan and the amnesty is gone, with penalties and interest restored.
Some items are not waived. The bulletin lists lien filing and release fees, books and records penalties, bad check penalties, collection agency fees and certain non-tax penalties. Liability reported on paper returns does not qualify. Periods where you already remitted tax at the right rates do not need to be claimed. If you are under audit, the bulletin tells you to contact your auditor.
Why Illinois Is Pushing: Destination Sourcing and the 15% Rate
The amnesty is the carrot. The stick is a change in how Illinois sources sales. The bulletin says that if you cannot show enough information to determine where destination-based sales went, the Department will assess tax on those receipts at a 15% undetermined-location rate. It may apply that rate in any audited period, including periods before January 2026.
Withum, a tax and advisory firm, tracks the sourcing changes. Since Jan. 1, 2025, retailers with an Illinois place of business that sell to customers outside the state pay destination-based Retailers’ Occupation Tax at the combined state and local rate at the destination. A Nov. 25, 2025 update says remote sellers and marketplace facilitators must source the tax to the delivery location of Illinois customers. An Aug. 24, 2026 update, PIO-125, extends the guidance to servicepersons.
The bulletin also says remote retailers meeting the $100,000 threshold must register, collect and pay Illinois tax, and starting with the July 2026 period, due Aug. 20, 2026, they must file Form ST-1 to avoid penalties and interest. So the amnesty settles the past while the filing obligation for the present is already running.
Illinois is not alone. Pennsylvania began enforcing destination-based local sales tax on remote sellers on Oct. 1, and I covered it in my Pennsylvania local sales tax post. Texas is moving the other way on one narrow item, and my Texas marketplace fee tax post has the details.
Avalara’s October 2026 tax updates list local rate and boundary changes effective Oct. 1 in 15 states. That is the kind of churn that breaks an unmaintained tax setup.
There is a counterpoint worth stating plainly. Relief covers penalties and interest, not the underlying tax, per the compliance firm 1stopVAT, which also says to confirm the qualifying-items details with the Department. The CPA firm Porte Brown notes the program is limited to registered remote retailers with an active MyTax Illinois account, and the KBF summary warns that gathering 2021 to 2026 sales data and calculating liability can take real time. And registering as a remote retailer means filing every period from here on. None of the sources I read says what happens to a seller who crosses the threshold, skips the amnesty and is never audited. The Department’s stated position is audit, penalties and interest.
What 9% vs 15% Does to a High-Ticket Illinois Order
My read is that this is the best deal on the table for any seller who crossed $100,000 and has messy records. Here is hypothetical math, not a reported figure. A store ships 100 Illinois orders at $3,500 between 2021 and 2025 and collects nothing. That is $350,000 in gross receipts.
Under the amnesty at 9%, the bill is $31,500 with no penalties or interest. In an audit where the seller cannot document delivery locations, the Department’s 15% undetermined-location rate puts the tax at $52,500 before penalties and interest. The gap is $21,000, and it grows with every month of interest.
Per order, that is $315 at 9% versus $525 at 15%. High-ticket stores run roughly 20% to 30% gross margin, so a $3,500 order carries $700 to $1,050 of gross profit. A $315 tax hit eats 30% to 45% of that profit, and $525 eats 50% to 75%. If you absorbed the tax you should have charged, the margin on those sales was never what your dashboard said. That is the same trap I walked through in my post on why your payout is not your profit.
Here is how I would sort sellers by threshold.
Under $100,000 in Illinois gross receipts over any four-quarter stretch since 2021 and under 200 transactions before 2026: the bulletin gives you no obligation. Keep a running count anyway, because the 2026 test is $100,000 in receipts and a few big orders move it fast.
Over the threshold, but a marketplace collected and remitted the tax: those periods are already paid, and the bulletin says you need not claim them. Check your marketplace reports before assuming.
Over the threshold and you collected nothing: this is the amnesty case. Pull the data, register, and apply before Oct. 31.
Over the threshold and you collected at a rate above 9%: the bulletin says you report and pay the greater amount.
The simplified rate is flat, so it will undershoot your true liability where local rates run high and overshoot it where they run low. The sources I read describe no option to use actual rates instead. If your records are clean and your Illinois sales skew to low-rate areas, ask your CPA whether the math favors another route. If your records are patchy, 9% is a safer ceiling than 15%.
The bigger lesson is operational. Destination sourcing means your tax stack needs the ship-to address at checkout, a tax engine that maps it to a rate, and books that reconcile payouts to orders.
What I’d do is keep your Shopify tax settings current and review them after every platform change. Shopify also changes what it taxes on its side, as my post on taxing US return shipping fees from Oct. 23 shows.
For the books, A2X pushes order and payout data into your accounting software. Synder does a similar job.
If you’re still picking software, my breakdown of the best accounting software for dropshipping compares the options. Finaloop is one ecommerce-focused choice worth a look.
Multi-state compliance is the unglamorous work that stalls solo operators. If you’d rather spend your week on Google Shopping and supplier relationships, my team builds and runs high-ticket stores through the turnkey done-for-you service, and the foundation we set up includes the checkout and tax settings that keep you out of this hole.
Multi-state tax is where solo store owners stall. Want my team to build and run your high-ticket store so compliance stops eating your week? See the turnkey done-for-you service →
Illinois Amnesty Checklist: What to Do Before Oct. 31
Friday, Oct. 30 is the last business day, and registration alone takes one to two business days. Here are five moves, in order.
- Export your Illinois orders today. Pull every order shipped to an Illinois address from Jan. 1, 2021 through June 30, 2026, with ship-to ZIP, order total, tax collected and fulfillment channel. A Shopify order export gets you most of it. Supplier order feeds, including those from Inventory Source, help fill gaps on drop-shipped orders.
- Test the threshold quarter by quarter. Sum Illinois gross receipts for each four-quarter stretch. Use $100,000 or 200 transactions through 2025, and $100,000 only from 2026. Strip out sales a marketplace already taxed.
- Register with the Department now. Create your MyTax Illinois logon and confirm your legal entity name matches your records. If you are still selling as a sole proprietor, my guide to how long an LLC takes before you launch shows the timeline. The business formation page lays out the options.
- Price it and call your CPA. Multiply eligible receipts by 9%, and apply 1.75% only to items you can document as qualifying. If cash is tight, request the hardship payment plan by Oct. 31. My walkthrough of how to file taxes as an ecommerce seller helps you organize what the CPA will ask for.
- Fix collection going forward. File Form ST-1 each period, set Illinois collection in your tax settings, and reconcile payouts monthly. QuickBooks works for ecommerce books. My guide to reconciling Shopify payouts in QuickBooks keeps revenue from double counting.
If you want a second set of eyes on how this fits your store, Explore Turnkey Builds and bring your Illinois order count. If you’re still choosing what to sell, the free high-ticket niches list is the place to start before compliance becomes a problem.
Frequently Asked Questions
Does the amnesty waive the sales tax itself?
No. The bulletin waives penalties and interest on eligible liabilities, and you still pay the simplified tax. 1stopVAT’s summary makes the same point.
What if I only sell through Amazon or another marketplace?
Periods where tax was already remitted at the applicable state and local rates do not need to be claimed, per the bulletin. Check your marketplace tax reports, and see my post on 3PL fulfillment in the USA if inventory moves between warehouses.
Can I use my real local rates instead of 9%?
The sources I read describe only the simplified rates of 9% and 1.75%. Ask the Department or your CPA before assuming an alternative exists.
What happens if I miss Oct. 31?
The Department says non-participants may face audit, additional penalties and interest, and a 15% rate on receipts with undetermined delivery locations. Nothing I found describes a second window.
Do I have to file returns after the amnesty?
Yes. Remote retailers meeting the $100,000 threshold must register, collect and file Form ST-1 starting with the July 2026 period, per the bulletin.
Does my entity type matter?
The bulletin works off your registration with the Department, so your legal name and account setup need to match. A clean LLC with a registered agent makes that simpler, and my comparison of Northwest Registered Agent versus Registered Agents Inc covers the choice.
Could debt financing or a sale of my store change this?
Buyers and lenders generally want unresolved tax liabilities cleared before a deal, so cleaning this up helps either path. My post on SBA acquisition loan rule changes covers the lending side.
Want to work through multi-state tax questions with other store owners and me inside the community? Join the Skool community →
Check the Department’s page before you pay, because details can change. Subscribe to the YouTube channel for daily breakdowns. More breaking news coming through the day.
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If this was useful, these go deeper:
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- How to Open a Mercury Account
- How to Get a Business Address Without Renting an Office
- High-Ticket Niches List
Trevor Fenner is an ecommerce entrepreneur and world traveler from Seattle, Washington, and the founder of Ecommerce Paradise, a platform focused on helping entrepreneurs build and scale profitable high-ticket ecommerce and dropshipping businesses. With over a decade of hands-on experience, Trevor specializes in high-ticket dropshipping strategy, niche and product selection, supplier recruiting and onboarding, Google & Bing Shopping ads, ecommerce SEO, and systems-driven automation and scaling. Through Ecommerce Paradise, he provides free education via in-depth guides like How to Start High-Ticket Dropshipping, advanced training through the High-Ticket Dropshipping Masterclass, and fully done-for-you turnkey ecommerce services for entrepreneurs who want a faster, more hands-off path to growth. Trevor is known for emphasizing sustainable, real-world ecommerce models over hype-driven tactics, helping store owners build scalable, sellable, and location-independent brands.
He maintains homes in Seattle and Bali, spends most of the year overseas, and usually returns to Seattle for about a month each summer.
