Illinois Tax Changes Begin on July 1st: What to Know

Starting July 1st, Illinois is rolling out a wave of tax changes that will impact residents, businesses, and consumers alike. Signed into law as part of the state's $55.2 billion budget for fiscal year 2026, HB 2755 and its new measures aim to boost revenue, but not without sparking some extra taxes for a few consumers. Let’s break it down.

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Tobacco and Nicotine Products: Paying More to Puff or Pouch

One of the most talked-about changes is the sharp tax increase on tobacco and nicotine products. Items like vapes, cigars, chewing tobacco, and nicotine pouches and lozenges (like Zyn) will now be taxed at 45% of the wholesale price. That's a big jump from the previous 36%. This includes products with synthetic nicotine as well. The state hopes the tax hike will also help curb tobacco use. They also say it could bring in a projected $50 million in revenue.

Some critics argue it could backfire, leading people back to traditional cigarette use. It could even push consumers to travel across state lines, dropping the overall tax revenue on sales.

Corporate Tax Shifts: More on Global Profits

Illinois is also making businesses dig a little deeper. The state will now tax 50% of global intangible low-taxed income (GILTI). This was previously excluded from Illinois income tax. This targets large multinational companies and is part of a broader effort to close corporate tax loopholes.

Sales Tax and E-commerce: Remote Retailers, Take Note

For online sellers, a key change is the elimination of the 200-transaction threshold for sales tax nexus. Going forward, only sales revenue (over $100,000 annually) will determine whether a remote seller must collect Illinois sales tax. That means fewer small sellers will be caught in the tax web, but large e-commerce businesses still need to adhere.

A Fresh Start: Tax Amnesty Programs

Illinois is also launching tax amnesty programs, which include one for remote retailers. These amnesties forgive penalties and interest if businesses come clean on unpaid taxes from prior years. It’s a rare opportunity to wipe the slate clean and avoid legal headaches.

July 1st Illinois Tax Changes:

• Tobacco/Nicotine Products: Definition expanded to include all nicotine products (e.g., pouches, lozenges, gum). Tax rate increased from 36% to 45% of the wholesale price.
• Sports Wagering Tax: New tax of $0.25 per wager (first 20 million wagers), then $0.50 per wager after that. Applies to online/mobile sports betting operators.
• Short-Term Rentals: Hotel Operators’ Occupation Tax now applies to short-term rental platforms (e.g., Airbnb). Re-renters of hotel rooms must collect and remit hotel taxes.
• Telecommunications Tax: Intrastate telecom tax increased from 7% to 8.65%. Includes a new 1.65% 9-8-8 surcharge to fund the Suicide and Crisis Lifeline.

From nicotine to multi-national organizations, these changes touch nearly every corner and facet of the Illinois population. Whether you're a business owner, consumer, or just someone buying a hotel room (or making a sports bet), expect to see some price tags go up.