March 09, 2023
INTRODUCTION
This annual report lists and describes selected consumer taxes within the City of Chicago. For ease of use by non-specialists, the taxes in this report are grouped under the following categories: sales taxes, tobacco and nicotine-related taxes, cannabis-related taxes, beverage-related taxes, utility-related taxes, accommodations-related taxes, transportation-related taxes and other taxes. It is important to note for tax professionals that the groupings are not related to how the taxes are imposed or collected, but are simply for ease of use by the general public. The tax rates presented in this report are effective as of January 1, 2023.
The taxing authorities that impose taxes on consumers in the City of Chicago include the federal government, State of Illinois, Cook County, City of Chicago, Regional Transportation Authority, Metropolitan Pier and Exposition Authority, and Illinois Sports Facilities Authority. Many goods that are subject to specific excise taxes (e.g., alcohol tax and motor fuel tax, etc.) are also subject to the general sales tax.
City and County Tax Categorization
For the purposes of this report, taxes for Cook County and the City of Chicago have been organized into two categories: municipal or county and home rule.
Municipal or county refers to the taxing authority granted by the State of Illinois to all municipalities or counties and is distinct from taxes imposed by virtue of home rule status. For example, the State authorizes any municipality in Illinois to impose a tax on automobile rentals and limits the amount of the tax. Per this authority, the City of Chicago imposes a Municipal Automobile Rental Tax.
Taxes categorized as municipal and county can also include taxes imposed by the State of Illinois, where a portion of the tax revenue is distributed to municipalities or counties. For example, Illinois’ State sales tax rate is 6.25%, 5.0% of which goes to the State, 1.0% goes to all municipalities (including Chicago) and the remaining 0.25% goes to the counties. However, Cook County’s 0.25% share of the State sales tax is distributed to the Regional Transportation Authority.
Home rule refers to the taxing authority granted by the State of Illinois to home rule municipalities to impose taxes not otherwise prohibited by the Constitution (Article VII, Section 6). Both Cook County and the City of Chicago are home rule units of government. According to the Illinois Constitution, a municipality can qualify as home rule if it has a population of at least 25,000 or through referendum. A county with a chief executive officer elected by the county electorate may also become home rule. Cook County is the only home rule county in Illinois. An example of a home rule tax is the City of Chicago’s Bottled Water Tax, which the City can impose because it is a home rule unit of government and because the State has not prohibited it.