Illinois expands indirect tax rules for digital businesses and local grocery retailers with S.B. 3019

Illinois enacted Senate Bill 3019 (S.B. 3019) on June 16, 2026, as part of its fiscal year 2027 budget legislation. The bill creates new indirect tax considerations for businesses operating in several emerging digital markets and adds new local tax collection requirements for grocery retailers. Effective July 1, 2026, the changes affect targeted advertising services, social media platforms, digital asset business activities, prediction market wagering and fantasy contests, and local taxation of qualifying grocery sales.

For affected businesses, the changes create distinct compliance challenges. Companies operating in digital markets must determine whether their activities and revenue streams fall within the scope of the new taxes and whether their existing sourcing, transaction-tracking and reporting processes can support the new requirements. Retailers selling qualifying food products face a different issue: local governments may impost grocery occupation taxes, creating varying collection requirements across jurisdictions.

The following sections outline the principal changes and the considerations for affected businesses.

Key takeaways

• Targeted advertising services: Beginning January 1, 2027, Illinois will impose a 10% tax on Illinois gross receipts from targeted advertising services when receipts meet the $1 million threshold on a controlled group basis. Providers will need to source advertising services based on user location and comply with monthly registration, filing and payment requirements.
• Social media platforms: Beginning January 1, 2027, Illinois will impose a tiered monthly fee based on the number of Illinois users from whom a social media platform collects data. The Illinois Secretary of State will receive monthly reports.
• Digital assets: Beginning January 1, 2027, Illinois will impose a 0.2% tax on covered digital asset business activity received by Illinois customers. Digital asset brokers are responsible for collecting and remitting the tax.
• Prediction markets and fantasy contests: Illinois expanded its wagering tax to certain sports-related exchange wagers and imposed a 15% privilege tax on licensed fantasy contest operators.
• Grocery sales: Illinois eliminated the statewide reduced sales tax on qualifying grocery food effective January 1, 2026. Local governments may impose grocery occupation taxes, creating jurisdiction-specific collection obligations for retailers.

Targeted advertising services tax

Beginning January 1, 2027, Illinois will impose a 10% gross receipts tax on providers of targeted advertising services, including banner, search, interstitial and similar data-driven advertising that uses personal information about the recipient. Advertising on digital interfaces owned by news media entities and services to the U.S. government are exempt. The $1 million Illinois receipts threshold applies on a controlled group basis. Services are sourced based on the location of the user-consumer, with an Illinois home address, mailing address, IP address or place of primary use creating a rebuttable presumption. Providers bear the burden of establishing that a user is not located in Illinois when the presumption applies.

Providers must register with the Illinois Department of Revenue and file and pay monthly. They should establish systems that capture relevant user-location data at the impression level and apply a consistent sourcing methodology. Home rule units cannot impose their own targeted advertising services tax.

Social media platform fee

Beginning January 1, 2027, Illinois will impose a monthly fee on social media platforms based on the number of Illinois users from whom the platform collects data. Covered platforms permit registered users to create, share and view user-generated content and primarily facilitate user-to-user interaction. Nonprofit organizations are excluded.

Beginning January 1, 2028, the state will adjust fees annually to reflect changes in the Consumer Price Index . Monthly reports of average Illinois users are due to the Illinois Secretary of State by the 14th of the following month.

The statute does not establish a detailed methodology for determining who is an Illinois user. Platforms should therefore develop and document a consistent approach using available user-location data. The law also restricts platforms from varying access costs, features or in-app purchase pricing based on geographic origin for purposes of recouping the fee.

Digital asset privilege tax

Beginning January 1, 2027, Illinois will impose a 0.2% tax on covered digital asset business activity received by Illinois customers from digital asset brokers. The broker is responsible for collecting and remitting the tax, although the tax is imposed on the customer’s privilege of receiving the activity.

Covered activity includes exchanging, transferring or storing a digital asset as part of a business or on behalf of a customer. The tax applies to the full value of the digital asset at the time of the activity, rather than the gain.

Remote brokers must register once they reach $100,000 in Illinois receipts. Brokers with a physical Illinois location have no minimum threshold. For electronic transactions, an Illinois address, IP address or place of primary use creates a rebuttable presumption that the transaction is Illinois-sited, with the broker bearing the burden of proof.

Brokers should ensure their systems can identify Illinois customers and calculate the tax on each covered transaction. The treatment of staking-as-a-service, decentralized finance and NFT marketplace activity remains unclear and should be monitored as guidance develops.

Prediction market wagering and fantasy contest taxes

Effective June 16, 2026, Illinois expanded its wagering tax to cover exchange wagers tied to sporting contests or events. The tax is 1.75% per wager for a licensee’s first 5 million wagers during a fiscal year and 3.5% per wager thereafter, in addition to existing sports wagering privilege taxes.

The 5 million threshold is based on the number of wagers, not dollar volume. Operators should ensure their systems can accurately track covered wagers. The new provisions currently address sports-related prediction markets. Non-sports prediction markets are not included in the source material.

Beginning July 1, 2026, licensed fantasy contest operators are subject to a 15% privilege tax on adjusted gross fantasy contest receipts, generally calculated as Illinois entry fees less the in-state participant pro-rata share of cash prizes paid.

Local grocery occupation taxes

Illinois eliminated the statewide 1% reduced sales tax on qualifying grocery food effective January 1, 2026. Municipalities and counties subsequently began adopting local grocery occupation taxes to replace lost revenue.

Retailers may therefore face different rates, effective dates and taxable-food definitions depending on location. Because no single state-maintained registry exists for these taxes, retailers should review applicable local ordinances and state and local tax-rate information.

Point-of-sale and tax determination systems also should apply the appropriate local rates and correctly classify products, including distinctions among grocery food, candy and prepared food where applicable. Failure to do so could result in under- or over-collection.

Looking ahead

Illinois’ FY2027 tax changes expand indirect tax obligations for businesses operating in emerging digital markets while increasing local tax complexity for grocery retailers. Digital advertising providers, social media platforms and digital asset brokers should assess their registration, sourcing, transaction-tracking and reporting requirements before the new 2027 taxes take effect. Prediction market and fantasy contest operators should ensure their systems can track covered wagers and receipts under the new rules.

Retailers selling qualifying grocery food should map local tax requirements by location and update their tax determination systems accordingly. Businesses also should monitor Illinois guidance, particularly regarding user-location sourcing and emerging digital activities.

Sikich’s Illinois-focused tax professionals can help businesses assess Illinois tax obligations, evaluate compliance processes and address these evolving requirements.

Find more insights on S.B. 3019 here.