Illinois Remains Among the Nation’s Highest Sales Tax States

Illinois continues to rank among the states with the highest combined state and local sales tax rates in the nation. According to the Tax Foundation’s Midyear Report released on July 1, 2026, Illinois has a statewide sales tax rate of 6.25% and an average combined state and local sales tax rate of approximately 8.98%, placing it among the ten highest-taxed states in the country. Because counties, municipalities, and other local taxing authorities may impose additional sales taxes, consumers and businesses in certain Illinois communities, including Chicago, pay combined rates exceeding 10%.

Illinois’ ranking is largely driven by the layering of local sales taxes on top of the statewide rate. While the State’s base sales tax has remained unchanged, local governments continue to rely on sales tax revenue to fund public services, infrastructure improvements, public safety, and other governmental operations. As a result, businesses operating throughout Illinois often face varying tax rates depending on where a transaction occurs, requiring them to stay informed about changing local tax rates and compliance obligations.

Illinois’ relatively high sales tax burden continues to generate discussion among lawmakers, business organizations, and tax policy groups. Supporters of the current system argue that sales taxes provide a reliable source of revenue needed to fund essential state and local government services while allowing local governments flexibility in addressing community needs. Critics, however, contend that higher combined sales tax rates increase the cost of doing business, place additional financial burdens on consumers, and may encourage residents to make purchases in other jurisdictions with lower tax rates. Although no significant statewide sales tax increase is currently pending, Illinois’ overall tax climate remains an active topic of public policy and economic debate. Notably, lawmakers recently approved a temporary back-to-school sales tax holiday as part of the fiscal year 2027 budget. From August 7 through August 16, 2026, the State’s portion of the sales tax on qualifying clothing, footwear, and school supplies will be reduced from 6.25% to 1.25%, although applicable local sales taxes will continue to apply. The measure is intended to provide temporary tax relief to Illinois families during the back-to-school shopping season.

For Illinois businesses, particularly small businesses, the State’s relatively high sales tax burden is more than just a ranking. Higher combined sales tax rates may discourage consumer spending, encourage shoppers to purchase goods in neighboring states or through online retailers, and increase pricing pressures for local businesses competing in an already challenging economic environment. Small businesses may be especially affected, as they often operate with tighter margins and fewer resources to absorb rising costs or declining consumer demand. Businesses should continue monitoring state and local tax developments as policymakers consider future revenue measures that could further affect operating costs, consumer spending, and long-term business planning.

For more information regarding Illinois tax laws or sales tax compliance, please contact the qualified attorneys at Rock, Fusco & Connelly.