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ST-556 sales tax rate errors seen

November 15, 2010

Illinois Revenue Department auditors said they are seeing more errors in sales tax calculated by dealerships that sell to customers who live in another Illinois county.

As a reminder, vehicle sales tax is due at the rate of the county in which the dealership is located, not the customer.

The only time a customer can be charged less that the rate preprinted on the revenue department’s Form ST-556 is when the customer is not an Illinois resident. In that case, sales tax is collected at various rates from customers in eight states with which Illinois does not have a reciprocal tax exemption agreement; tax is not collected from residents of 41 other states.

On the flip side, an Illinoisan would pay more than the sales tax rate of his home county if he shops in a county with a higher tax rate. And if the customer lives in a county or city in Illinois where the sales tax rate is greater than in the dealership’s, then the higher rate should be collected and submitted to Springfield.

Dealerships that must collect a Use Tax report that fee on a separate line and do not include it in the tax rate.