March comes in like a lion in Chicago, as starting March 1, 2026 the liquor tax system changes. Previously there was a gallonage tax remitted by wholesalers for the sale of liquor in Chicago.

The new system changes the status quo and makes it a bifurcated tax collection system.

Off-Premise/Package Goods

For off premise/package goods sales retailers are required to charge and collect a 1.5% retail sales tax at the point of sale. Retailers are required to begin monthly remittance by April 15, 2026 and payments are due the 15th of the following month.

Tax returns are required for the fiscal year (July 1-June 30) and are due August 17, 2026. The form for filing is Form 7573.

A retailer can take a credit on its return for previous amounts paid to the wholesaler under the gallonage tax system.

All package store owners will become automatically registered on March 1, 2026 for the liquor tax.

Direct-to-consumer (DTC) sales

All DTC sellers must change from charging a per gallon tax to the 1.5% retail tax starting March 1, 2026

On Premise Sales

On Premise retailers will maintain the status quo and the tax on liquor will still be based on a tax per gallon.

The wholesaler will still need to collect and remit the tax obligation.

Conclusion

Chicago makes unique changes to their rules. On-premise retailers see no changes with the new law, while off-premise retailers see a brand-new regime, which includes new responsibilities for collecting and remitting, making sure they file timely returns, and also ensuring that they take the proper tax credit amounts.

For DTC shippers it is a new way of calculating tax.

Many small retailers are hurting in Illinois with state liquor excise tax nearly three times that of neighboring Indiana, the city heaps on the pile and gives the small package goods retailer more responsibilities and higher costs!