January 2021 Marketplace Facilitator Law: How Illinois' Late Start Reshaped the $100K Nexus Obligation for Amazon FBA and Shopify Sellers

The 2018–2020 Gap: Why Illinois FBA Sellers Carried Full Liability

When the Supreme Court decided South Dakota v. Wayfair in June 2018, it cleared the way for states to impose sales tax collection obligations on remote sellers based on economic activity alone. Most states moved quickly: by the end of 2019, roughly 40 states had enacted marketplace facilitator laws requiring Amazon, Etsy, and similar platforms to collect and remit on behalf of third-party sellers.

Illinois was not among them. The state enacted its economic nexus threshold ($100,000 in revenue or 200 transactions) through SB 690, effective October 1, 2018. But the companion marketplace facilitator law — the Leveling the Playing Field for Illinois Retail Act — did not take effect until January 1, 2021. For 27 months, every FBA seller exceeding the economic nexus threshold had a direct, personal obligation to register with the Illinois Department of Revenue, collect tax on Illinois deliveries, and file returns.

Most FBA sellers did not do this. Amazon was not collecting on their behalf. Many sellers assumed (incorrectly) that marketplace facilitator laws were already in effect nationwide. The result: a gap period where significant Illinois sales tax went uncollected, and the liability rested entirely on the sellers.

If you had FBA sales exceeding the $100K threshold delivered to Illinois between October 2018 and December 2020, and you never registered or filed, that liability has not expired. The Illinois Department of Revenue can still issue an assessment. Voluntary disclosure agreements (VDAs) through the Illinois Department of Revenue or the Multistate Tax Commission may limit the lookback period and waive penalties, but they require proactive action on the seller's part.

ROT vs. Use Tax: Why the Distinction Matters for FBA and Shopify Sellers

Illinois does not technically have a "sales tax." It has a Retailers' Occupation Tax (ROT) imposed on the seller and a complementary Use Tax imposed on the buyer. In practice, sellers collect ROT from buyers at the point of sale, but the legal distinction creates real differences in rates and filing:

When Amazon collects as a marketplace facilitator, it remits ROT at the full combined rate (state + local) based on the buyer's delivery address. The total rate can range from 6.25% in areas with no local component to over 10% in Chicago and some suburban jurisdictions.

When you sell directly through Shopify and have Illinois nexus, you collect and remit ROT yourself. The rate you charge depends on whether you're an in-state or out-of-state seller — which brings us to Illinois' origin-based sourcing rule.

Illinois Origin-Based Sourcing: The Shopify Seller's Complication

Most states use destination-based sourcing: the tax rate is determined by where the buyer receives the goods. Illinois splits the rule based on where the seller is located:

• Out-of-state sellers with economic nexus only: Destination-based sourcing. You charge the rate at the buyer's delivery address. This is the standard approach and applies to most remote sellers.
• In-state sellers (physical presence in Illinois): Origin-based sourcing. You charge the rate at your business location, regardless of where the buyer is in Illinois. A home office in a suburb with a 7.5% combined rate means all Illinois orders are taxed at 7.5%, even if the buyer is in Chicago where the rate is 10.25%.

This distinction matters for Shopify sellers who work from home in Illinois. If you run a Shopify store from your apartment in Springfield and ship to a customer in Chicago, the tax rate is based on Springfield — not Chicago. That same seller's Amazon FBA orders to Chicago customers are taxed at Chicago's rate because Amazon, as the facilitator, sources to the destination.

The origin-based rule only applies to the seller's own direct sales. It does not apply to marketplace-facilitated sales where the platform is the deemed retailer. This means a single Illinois-based seller can have two different tax rates on the same product going to the same buyer — one rate on the Amazon FBA order, a different rate on the Shopify order.

$80K FBA + $30K Shopify vs. $110K Pure FBA: What Each Seller Owes

The practical impact of Illinois' marketplace facilitator law becomes clear when you compare two sellers who both exceed the $100K threshold but through different channel mixes:

Both sellers have $110,000 in Illinois revenue. Both exceed the $100K economic nexus threshold. But their compliance obligations are dramatically different:

• Seller A (pure FBA): Amazon collects and remits ROT on every order. The seller has economic nexus in Illinois, but no direct collection obligation because 100% of revenue flows through a marketplace facilitator. However, the seller should still register — if they add a Shopify store or any non-marketplace channel later, collection obligations begin immediately.
• Seller B (FBA + Shopify): Amazon collects on the $80K in FBA orders. The seller must register with the Illinois Department of Revenue, collect ROT on every Shopify order delivered to Illinois, and file returns. At a blended rate of roughly 8–10%, the $30K in Shopify revenue represents $2,400–$3,000 in tax that the seller is personally responsible for collecting and remitting.

The critical point: the $80K in FBA revenue counts toward the threshold even though Amazon collected on it. Without those FBA sales, Seller B's $30K in Shopify revenue would be well below $100K and no nexus would exist. The FBA sales push the seller over the line, creating an obligation on the Shopify sales where no facilitator is involved.

Registration Requirements for Shopify-Only Sellers in Illinois

If you sell exclusively through Shopify (or any other direct channel) and exceed Illinois' $100,000 or 200-transaction threshold, you carry the full compliance burden:

1. Register with the Illinois Department of Revenue. File Form REG-1 to obtain a Certificate of Registration. Out-of-state sellers register as remote retailers; in-state sellers register as standard retailers.
2. Determine your sourcing rule. Out-of-state: destination-based (charge the rate at the buyer's Illinois address). In-state: origin-based (charge the rate at your Illinois business location).
3. Collect ROT on every Illinois order. Configure Shopify's tax settings to charge the correct rate. Illinois has over 6,000 taxing jurisdictions — using Shopify's built-in tax engine or a third-party tax calculation service is essential.
4. File returns on the assigned schedule. Monthly if you collect more than $20,000/year in tax. Quarterly if between $2,400 and $20,000. Annually if under $2,400. The Illinois Department of Revenue assigns your filing frequency upon registration.
5. Track the $100K/200-transaction threshold continuously. Illinois uses a rolling 12-month lookback period. Your nexus status can change every month as old months drop off and new months are added.

What Illinois Amazon FBA and Shopify Sellers Need to Do Now

Your action items depend on your channel mix and history. Work through them in order:

• Assess 2018–2020 back-period exposure first. If you had FBA sales exceeding $100K delivered to Illinois between October 2018 and December 2020 and never registered, consult a tax advisor about a voluntary disclosure agreement. The statute of limitations has not run for non-filers.
• Calculate your current threshold across all channels. Pull Illinois-addressed revenue and transaction counts from Amazon, Shopify, Etsy, eBay, and any other channel. FBA revenue counts toward the $100K threshold even though Amazon collects. If combined revenue exceeds $100K or combined transactions exceed 200, you have nexus.
• Determine your sourcing rule. If you have any physical presence in Illinois — including a home office — origin-based sourcing applies to your direct (Shopify) sales. If you are purely out-of-state, destination-based sourcing applies.
• Register and configure collection on direct channels. Amazon handles FBA orders. You handle everything else. Set up Shopify's tax collection for Illinois with the correct sourcing logic. Verify that your rates account for Illinois' local ROT components — the 6.25% state rate alone is not sufficient.
• Monitor the rolling 12-month window. Illinois' lookback is a rolling 12 months, not a calendar year. Your nexus status can change monthly. If you're close to the $100K line, track it in real time rather than discovering the obligation at year-end. Sellers approaching the threshold should review their exposure against marketplace facilitator coverage gaps across all states where they sell.