Sales Tax Changes Impacting ROT and Use Taxes

4/30/2025

A March report by the Taxpayers Federation of Illinois highlighted a notable increase in sales tax revenue collected in January, driven by a 2023 law change that requires most out-of-state, or “remote,” retailers to pay Retailers’ Occupation Tax (ROT) instead of Use Tax. This change led to a 15.5% increase in special sales tax receipts for the Regional Transportation Authority (RTA) compared to the previous January. 

However, state officials and fiscal experts caution against premature optimism. A top official at the Illinois Department of Revenue noted that while ROT collections are up, Use Tax receipts are falling sharply, complicating the overall revenue picture. The Illinois Municipal League reported a net $29 million statewide gain in January sales tax collections after factoring in ROT increases and a decline in Use Tax revenue. Broader economic risks—including a possible recession and ongoing high tariffs—could erode the projected gains. While the additional revenue is welcome, its reliability as a long-term solution remains uncertain.

ISACo initially reported on this sales tax distribution change in our April 14 News and Views e-newsletter. The relevant content from that communication is below:

Changes in Use Tax and ROT Allocations

The following content is excerpted from the Illinois Department of Revenue's (IDOR) April Local Tax Allocation Division (LTAD) Newsletter regarding changes in Use Tax allocations.

Beginning January 1, 2025, Public Act 103-0983 mandated that all retail sales originating from outside of Illinois and made to Illinois customers by retailers with physical presence nexus with Illinois are now subject to destination-based Retailers’ Occupation Tax (ROT) rather than Use Tax (UT).

It is important to note that each unit of local government will be affected differently by this change in the law. Previously, Use Tax was collected statewide and allocated to local governments based on population, regardless of the shopping habits of residents. Now, ROT (sales tax) collections and allocations are determined by the jurisdiction where the item is shipped or delivered or at which possession is taken by the purchaser. As a result, local governments may experience fluctuations in allocations.  

Information on the first allocation affected by this law change was received this month. The table below illustrates the impact on Use Tax, along with the corresponding increases in ROT (sales tax).

Statewide Totals

  APRIL 2024 APRIL 2025
MT $184,413,134.58 $209,702,900.15
CT $6,443,917.24 $8,983,942.17
CST $23,039,087.71 $26,123,718.46
HMR $107,890,988.49 $123,048,602.08
NHMR $16,588,251.98 $19,888,407,.62
USE $24,978,107.02 $4,993,221.16

MT: Municipal Sales Tax
CT: County Sales Tax
CST: Countywide Sales Tax
HMR: Municipal Home Rule Sales Tax
NHMR: Municipal Non-Home Rule Sales Tax
USE: Local Use Tax

ISACo will share additional information about these changes to sales tax revenue distributions as new information becomes available.

See More News Posts