What Online Sellers Need to Know About the IDOR Crackdown
“I run an Etsy shop from Portland. How could I owe taxes in Illinois?”
That’s a question we hear a lot — and it’s exactly how online sellers end up with unexpected audits, penalties, and back taxes.
The Illinois Department of Revenue (IDOR) is cracking down on out-of-state sellers. And thanks to a major Supreme Court decision, it doesn’t matter where you are — only where your customers are. If you sell online and ship to Illinois, here’s what you absolutely need to know.
The Turning Point: South Dakota v. Wayfair Changed the Game
Before 2018, states could only enforce sales tax collection if your business had a physical presence — like a store, warehouse, or employees — within their borders.
But the Supreme Court’s South Dakota v. Wayfair ruling changed everything. It gave states the power to enforce tax laws based on economic nexus instead.
Now, your sales volume alone can trigger tax obligations—even if you’ve never set foot in the state.
Illinois’ Economic Nexus Rules (And Why They Matter to You)
Illinois adopted its own version of the Wayfair standard almost immediately. As of October 1, 2018, if you:
- Make $100,000 or more in sales to Illinois customers OR
- Have 200 or more separate transactions with Illinois buyers in a single year…
…you’re required to:
- Register with IDOR
- Collect Illinois sales tax on those transactions
- Remit that tax to the state
Miss that threshold—even unknowingly—and you may owe back taxes, interest, and penalties.
“But I Didn’t Know…” Won’t Stop an Audit
Illinois is stepping up enforcement—and they’re not relying on guesswork. IDOR is pulling data from:
- Payment processors (like Stripe and PayPal)
- Marketplaces (Amazon, Etsy, Shopify)
- 1099-K forms
- Shipping records and marketplace reports
This data allows the state to retroactively assess your sales activity and determine if you crossed the economic nexus threshold—even years ago.
If you did? They can initiate an audit. And they will demand what’s owed.
Real-World Scenario (and What You Can Learn from It)
Let’s say you sell custom dog collars through Shopify. You’re based in Arizona. In the past 12 months, you’ve completed 243 orders to customers in Illinois totaling $93,000.
You think you’re under the $100,000 threshold—but remember: either sales volume or number of transactions can trigger nexus.
In this case, you’ve passed 200 transactions. That means you’re required to collect and remit Illinois sales tax—even if you didn’t realize it.
What Should Online Sellers Do Right Now?
- Check Your Numbers
Run a report. How many orders and how much revenue came from Illinois? - Register with IDOR
If you’ve crossed the threshold, don’t wait for a notice. Get registered and compliant now. - Talk to a Tax Pro About Back Years
If you’re already out of compliance, you may qualify for a Voluntary Disclosure Agreement (VDA). This can reduce penalties and limit how far back the state can look. - Automate Your Sales Tax Collection
Platforms like TaxJar, Avalara, or Shopify’s built-in tools can help you collect the correct tax in every state you do business.
Bottom Line: Don’t Let a Surprise Tax Bill Derail Your Business
The Wayfair decision gave Illinois teeth—and IDOR is biting. Whether you sell t-shirts, tech accessories, or digital goods, if you’re selling into Illinois, you’re on their radar.
Online sellers used to think state lines protected them. That’s no longer true. Today, your sales activity defines your tax liability—not your ZIP code.
Need help reviewing your exposure or managing compliance? A qualified tax professional can help you navigate next steps—and possibly save you thousands.
Have questions about Illinois sales tax or economic nexus?
Drop us a message, or schedule a consultation. Compliance doesn’t have to be scary—but ignoring it definitely is.
