Why Every Vehicle Sale—Even Tax-Exempt—Must Be Reported to the Illinois Department of Revenue

When you sell a vehicle in Illinois, compliance means more than just collecting taxes. It means reporting every transaction, even if no sales tax is due. The Illinois Department of Revenue (IDOR) requires all vehicle sales to be reported, including tax-exempt transactions. Here’s what Illinois dealerships need to know to stay compliant and avoid unnecessary penalties.

The Reporting Requirement: No Exceptions

Illinois law requires all vehicle sales—taxable or not—to be reported to the Department of Revenue within 20 days of the sale date.

This includes:

• Retail sales (sales tax collected)

• Wholesale transactions (sales to other licensed dealers)

• Tax-exempt sales (e.g., to government entities, non-profits, or under statutory exemptions)

• Auction sales

  
  

Why is this required?

Reporting helps the IDOR track vehicle movement, prevent tax evasion, and maintain accurate records for regulatory oversight.

What Counts as “Tax-Exempt”?

A sale may be tax-exempt if:

• The buyer is a licensed dealer (wholesale)

• The buyer is an out-of-state customer from a Reciprocal Tax State

• The buyer is a qualifying government or charitable entity

• The transaction qualifies for a statutory exemption

  
  

Important:

Even if the sales tax due is $0.00, you must still file a report for the sale.

How to Report

• Form ST-556: Used for reporting both retail and tax-exempt transactions.

• Wholesale Exemption: Collect and record the purchasing dealer’s Illinois Business Tax (IBT) number.

• Auction Sales: Select the appropriate exemption and note “AUCTION” as the purchaser on the form.

  
  

Penalties for Late or Missed Reporting

• $100 Penalty: Failure to report any sale—taxable or exempt—within 20 days results in a $100 penalty, even if no tax is due.

• Additional Penalties: Ongoing non-compliance may trigger further fines and audits.

  
  

Compliance Checklist for Illinois Dealerships

Stay on track with this quick checklist:

• Log every vehicle sale, including tax-exempt and wholesale transactions.

• Collect buyer information and, for wholesale, the purchasing dealer’s IBT number.

• Complete and file Form ST-556 for each sale within 20 days.

• Indicate the correct exemption on the form for tax-exempt or wholesale sales.

• Retain copies of all submitted forms and supporting documents.

• Set calendar reminders for timely reporting.

• Audit your records bi-monthly to ensure no sales were missed.

  
  

Vehicle Sale Reporting Flowchart

Not sure if you need to report a sale? Use this flowchart:

1. Did you sell a vehicle?

   
   

   ⬇️

2. Is the buyer a retail customer, another dealer, or a tax-exempt entity (e.g., government, charity)?

   
   

   ⬇️

3. Regardless of buyer type or tax status:

   
   

   ➡️ Complete Form ST-556

   
   

   ➡️ Indicate exemption if applicable

   
   

   ➡️ File with IDOR within 20 days

   
   

   ➡️ Retain documentation

   
   

Remember: All sales must be reported—even if no tax is due!

Frequently Asked Questions (FAQ)

Q: Do I have to report sales to other dealers or auctions?

A: Yes. All vehicle sales, including wholesale and auction transactions, must be reported using Form ST-556. Indicate the appropriate exemption and include the purchasing dealer’s IBT number or note “AUCTION.”

Q: What if the sale is tax-exempt?

A: You still need to report it. Mark the correct exemption on Form ST-556 and submit it within 20 days.

Q: What happens if I miss the 20-day deadline?

A: The IDOR will assess a $100 penalty for each late or unreported sale, even if no tax was due.

Q: How do I document a $0.00 tax transaction?

A: Complete Form ST-556 as usual, indicate the exemption, and ensure all supporting documents are attached.

Q: Do I need to keep records of reported sales?

A: Yes. Retain copies of all submitted forms and supporting documentation for your records and in case of audit.

Q: Where can I get Form ST-556 and more information?

A: Forms are not readily available for dealerships. ST-556 forms are files electronically through the State's website www.mytax.gov and paid through the dealership's business tax account online.

B: Used a third-party vendor such as CVR or VITU to process Illinois taxes electronically.

Need Help with Compliance?

Illinois Title Services is here to help your dealership with accurate, timely transaction processing and reporting across Illinois.

Have questions about sales tax reporting or need help streamlining your documentation? Contact us or call (888) 558-ILTS.

Understanding the Importance of Compliance

Compliance with vehicle sale reporting is crucial for every dealership. It ensures that you are following state laws and regulations. Not only does it protect your business from potential fines, but it also contributes to the integrity of the vehicle sales industry in Illinois.

The Role of the Illinois Department of Revenue

The IDOR plays a vital role in overseeing vehicle sales. Their goal is to maintain transparency and accountability. By requiring all sales to be reported, they can effectively monitor the market and prevent fraudulent activities.

The Benefits of Timely Reporting

Timely reporting of vehicle sales can lead to several benefits. It helps in building a good reputation with the IDOR. Additionally, it can streamline your dealership's operations. When you keep accurate records, you can easily track sales and manage inventory.

Common Mistakes to Avoid

Many dealerships make common mistakes when reporting vehicle sales. One frequent error is failing to report tax-exempt sales. Another is not retaining proper documentation. Avoiding these mistakes can save you from penalties and audits.

Conclusion

In conclusion, every vehicle sale in Illinois must be reported to the IDOR, regardless of tax status. Understanding the requirements and adhering to them is essential for all dealerships. By following the guidelines outlined above, you can ensure compliance and avoid unnecessary penalties.

Remember, staying informed and organized is key to successful vehicle sale reporting.