The following question was submitted to John Roska, an attorney/writer whose weekly newspaper column, "The Law Q&A," ran in the Champaign News Gazette.
I’m going to buy a car in Missouri and will have to pay Missouri sales tax on that sale. Somebody told me I have to pay tax in Illinois, too. Is that correct? Why should I have to pay tax twice? If I have to pay tax in Illinois, how do I do that?
Illinois residents who buy vehicles in states where the sales tax is lower must pay the difference to the Illinois Department of Revenue. For a Missouri sale, it appears that the difference is 2.025% (.02025). On a $20,000 vehicle, you’d owe Comptroller Dan Hynes $405.
But, if you live in Alton, Belleville, Edwardsville, and several other communities in the Metro-East area, you’ll owe slightly more. Their vehicle tax is higher, so you’d owe 2.275% (.02275) of your purchase price. That’s $455 on a $20,000 car.
You have to pay that tax because the Illinois Vehicle Code has a "Use Tax" for the privilege of using any motor vehicle in Illinois. Also the Illinois Revenue Code has a general Use Tax Act, for the privilege of using any personal property puchased from a retailer.
The general Use Tax Act gives you credit for any sales tax you’ve already paid out-of-state. So, you get a credit for the Missouri sales tax you pay on your vehicle purchase. Since the Missouri tax appears to be 4.225%, and the standard Illinois tax on vehicle sales is 6.25%, you must pay the 2.025% difference. That’s $20.25 per $1,000.
Unless, of course, you reside in those Metro-East communities with a 6.5% tax on vehicle sales. Then the difference is 2.275%.
You’re supposed to pay it when the vehicle gets registered in Illinois with our Secretary of State. You pay it by completing Illinois tax form RUT-25. It’s one page long, and pretty simple.
Out-of-state dealers who regularly make sales to Illinois residents may collect the required Illinois tax, and save you the trouble of having to file an RUT-25. You should ask your dealer if they can take care of the Illinois tax.
Several states don’t tax vehicle sales (Alaska, Delaware, Montana, New Hampshire, and Oregon). Only six states have higher vehicle sales taxes than ours, with California at 7.25%. Some Chicago area communities have 7.25% vehicle sale taxes, too.
Technically, you owe the difference in sales taxes on any “tangible personal property” you buy in a state with lower sales taxes. There are many exemptions, but the extra tax should be paid on purchases such as gas and cigarettes bought where taxes are lower.