Illinois restaurant sales tax: how Chicago and Cook County rates stack

An Illinois restaurant collects state sales tax plus the local taxes that belong to its address, and a Chicago restaurant also collects the city's separate tax on food and drink sold for eating. The combined rate is not one number for the whole state, and websites that publish a single figure often disagree. The only safe rate is the one the Illinois Department of Revenue and, in Chicago, the city's Department of Finance publish for your address. This guide explains how the layers fit together and how to confirm the rate before you set the register.

What makes up the Illinois rate?

There is a state rate, and on top of it counties, cities and transit districts can add their own taxes. That is why a restaurant in Cook County pays a different combined rate from one in a downstate county, and why two restaurants in the same county can differ if one sits inside a special taxing district. Third-party guides add the layers up in different ways and some are out of date, so treat any single website as a starting point and nothing more. Ask the Department of Revenue for the combined rate for your exact address.

What is the Chicago restaurant tax?

Chicago imposes a tax of its own on food and drink sold by places for eating, which the Department of Finance lists among the taxes it collects. It is separate from the sales tax, and it is reported to a different government. A restaurant in the downtown area may also be inside a district that carries an additional tax tied to the city's exhibition and pier authority. Ask the Department of Finance whether your address falls in such a district and what the current rates are, and do not copy a rate from a guide that is more than a few months old.

How do you find your rate?

Do not rely on a single table. Use this routine:

1. Ask the Illinois Department of Revenue for the combined sales tax rate for your address.
2. For a Chicago address, ask the Department of Finance for the restaurant tax rate and for any district tax.
3. Compare both answers with the rates in your point of sale.
4. Save the result with the date and the name of the source.
5. Repeat the check at least twice a year and whenever you open or move a location, since local rates can change.

Why can two restaurants a mile apart differ?

Local taxes follow the address. A restaurant just inside the Chicago line pays the city's taxes, and one just outside, in a suburb, pays that suburb's rate instead, plus any home rule tax it has adopted. A restaurant inside a special taxing district can pay more again. When a location opens or moves, check the new address before the first sale, because a rate that was right at the old premises may be wrong at the new ones.

How should the check show tax?

Show tax as its own line, and if your system lets you show the restaurant tax separately from the sales tax, do so. Your bookkeeper will need the figures separately, since they go to different governments. If you take online orders, make sure the website rate matches the counter, and that a delivery order uses the rate for the delivery address, not only the restaurant's.

A worked example with made-up rates

Suppose an $80 dinner check is taxed at a combined 10 percent, which is $8.00 of tax. If a further 0.5 percent city tax also applies and your register leaves it out, you under-collect 40 cents on that check. At 30,000 checks a year that is $12,000 that the business must find from its own pocket. The rates here are invented to show the arithmetic. The point is that a small rate error becomes a large annual error, so confirm the real rates with the two departments.

What about tips and service charges?

A voluntary tip is not part of the sales price. A mandatory gratuity is treated differently, and Illinois has guidance on gratuities paid to staff, which the guide on mandatory gratuities for large parties explains.

What mistakes cost restaurants money?

• Using a downstate or suburban rate for a Chicago address.
• Leaving out the restaurant tax or a district tax.
• Setting the rate once and never reviewing it.
• Letting the delivery platform and the register run on different rates.
• Treating a third-party rate site as official.

How do you explain the total to guests?

Chicago guests are used to a high total, but visitors are not, and a server will hear the question about why the tax is more than they expected. Give the team a plain answer: the total includes the state tax, the county tax, the city tax and the transit tax, and the city also has a tax on restaurant meals. If your menu shows prices without tax, say so at the top, and if your point of sale prints the tax by name, guests can see where the money goes. A guest who understands the line rarely argues with it.

Keep a dated copy of each rate you confirmed, who confirmed it and how. If an auditor asks why a rate was applied, that record is your answer, and it is worth having before the question arrives.

More guides for your business:

• How to register and file Illinois sales tax for a restaurant
• Illinois mandatory gratuity and sales tax for large parties
• Illinois interchange fee law and card fees on tips and tax

More in the US guides for food businesses.