Buying a car out of state can sometimes lead to confusion, especially when it comes to sales tax. If you’re an Illinois resident purchasing a vehicle from a dealer in another state, you might be wondering if you’ll be taxed twice. The answer is nuanced, particularly if you buy from a state with a lower sales tax rate than Illinois. This article clarifies Illinois’ sales tax regulations for out-of-state vehicle purchases, ensuring you understand your obligations and how to fulfill them.
Illinois Use Tax: Paying the Difference
Illinois law requires residents to pay a use tax on vehicles purchased out of state when the sales tax paid in the originating state is lower than Illinois’ rate. Currently, Illinois has a state sales tax of 6.25%. If you buy a vehicle in a state with a lower sales tax, such as Missouri with its 4.225% state rate, you will owe the difference to Illinois.
This difference isn’t just based on the state rate. Local sales taxes also factor in. For instance, in Cook County, which has a 1% local sales tax, the combined rate to consider is higher. Let’s illustrate with an example: if you purchase a $20,000 vehicle in Missouri and register it in Cook County, you would calculate the additional tax due to Illinois. The combined sales tax difference becomes 3.025% (Illinois total of 7.25% for Cook County vs. Missouri’s 4.225%). This means you’d owe an additional $605 (3.025% of $20,000) in Illinois use tax.
For residents in other counties, the local tax rates vary. In DuPage, Kane, Lake, McHenry, and Will counties, a 7% sales tax is used for calculation. For Madison and St. Clair counties, it’s 6.5%, except outside the Metro East Transit District where it aligns with the state rate at 6.25%.
Filing Form RUT-25 and Payment
When you register your out-of-state vehicle in Illinois with the Secretary of State, you must pay this additional sales tax. The appropriate form for this payment is Form RUT-25, Vehicle Use Tax Return for Out-of-State Purchases. This form is crucial for declaring and paying the tax difference. It’s important to note that Form RUT-25 is due within 30 days of bringing the vehicle into Illinois. You can access and download this form directly from the Illinois Department of Revenue website to ensure compliance.
Private Party Purchases: Form RUT-50
The above information pertains to purchases from out-of-state dealerships. If you buy a vehicle from a private individual or receive it as a gift or transfer, the process is slightly different. In these cases, you will pay Private Party Vehicle Use Tax using Form RUT-50.
Instead of paying the sales tax difference, the Private Party Vehicle Use Tax is a fixed amount based on the vehicle’s purchase price or fair market value. These fixed amounts are detailed in the Private Party Vehicle Use Tax Chart, available on the Illinois Department of Revenue website. Remember that local municipality and county taxes may also apply in addition to the state Private Party Vehicle Use Tax. Similar to Form RUT-25, Form RUT-50 is also due no later than 30 days after the vehicle purchase date.
In conclusion, while purchasing a vehicle out of state might seem like a way to save on sales tax, Illinois law ensures that residents pay the equivalent Illinois sales tax rate. By understanding the use tax and utilizing the correct forms (RUT-25 or RUT-50), you can navigate these regulations smoothly and avoid any complications when registering your vehicle in Illinois.
