Sales tax is one of the largest sources of state revenue and is crucial to basic government operations. Although Illinois currently only applies sales tax to goods, such as tangible personal property, Chicago Mayor Lori Lightfoot is considering broadening the sales tax base to include services. Many, many states like Delaware, Hawaii, New Mexico, South Dakota, and Washington already tax most services, and the City of Chicago, and potentially the entire state, may follow the trend. Governor JB Pritzker and City of Chicago Mayor Lori Lightfoot, have indicated that a broadened sales tax base in Illinois would most likely include “luxury” services such as yachting and accounting, but exclude services such as barber shops and beauty salons.
As more states expand taxability on services, the potential for sales tax calculation errors and audit risk rises. In addition, companies currently doing business in states which tax services may be liable for taxing its own services.
For information on how changes in sales taxation may affect your business and for best practice procedures, contact the attorneys at Rock Fusco & Connelly, LLC.