Lena Savoie
Alcoholic beverages like wine, beer, and liquor are subject to excise taxes on both the Illinois state and federal levels. In Chicago, an alcohol purchase is subject to four separate taxes: city, county, state, and federal. The combined federal, state, county, and city taxes on alcohol result in a 28% effective tax rate on a bottle of spirits bought in Chicago.
| Characteristics | Values |
|---|---|
| Type of Tax | Excise Tax, Sales Tax, "Sin Tax" |
| Taxed Entities | Alcohol Vendors, Licensed Direct Wine Shippers, Wholesale Alcoholic Beverage Dealers |
| Tax Rate | Wine: $1.39/gallon (state) + federal tax; Beer: $18/barrel (31 gallons); Spirits: $13.50/gallon |
| Tax Collection | Excise taxes are collected from merchants and usually passed on to the consumer |
| Taxing Bodies | City, County, State, and Federal |
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What You'll Learn
Excise taxes on alcohol
In Illinois, wine vendors are responsible for paying a state excise tax of $1.39 per gallon, plus additional federal excise taxes. The federal tax on wine falls somewhere between $0.226 and $3.40 per gallon, depending on the percentage of alcohol by volume and whether it is sparkling. Beer is taxed at a single federal rate of $18 per barrel (31 gallons), and spirits are taxed at $13.50 per gallon, with credit given for wine and flavor content.
The state of Illinois last increased its alcohol tax in 2009, and the city of Chicago's total effective tax rate on liquor as of 2017 was 28%. This includes federal, state, county, and city taxes. For example, a 750ml bottle of Absolut Vodka (40% alcohol by volume) costs $21.99 in Chicago, but the total taxes amount to $7.11, with state and federal taxes contributing $1.69 and $2.14 respectively.
On top of regular sales tax, excise taxes are also due on direct-to-consumer (DTC) shipments of alcohol in Illinois. These are usually factored into the price of the item and not passed on to the consumer. However, in some cases, these excise taxes must be paid by the consumer.
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Wine, beer, and liquor taxes
Wine, beer, and liquor are subject to excise taxes on both the Illinois state and federal levels. Excise taxes are applied per unit, typically per gallon for liquids, and are collected from the merchant, who usually passes the cost on to the consumer in the form of raised alcohol prices.
In Illinois, wine vendors pay a state excise tax of $1.39 per gallon, plus federal excise taxes. Wine is taxed at six different rates depending on its percentage of alcohol by volume or whether it is sparkling, ranging from $0.226 to $3.40 per gallon. Beer is taxed at a single rate of $18 per barrel (31 gallons). Spirits are taxed at $13.50 per gallon, with credits given for wine and flavor content.
Chicago's total effective tax rate on liquor is 28%, including federal, state, county, and city taxes. For example, a 750ml bottle of Absolut Vodka (40% alcohol by volume) costs $21.99 in Chicago, but the total taxes (seen and unseen) amount to $7.11. State alcohol taxes add $1.69, the federal government adds $2.14, city and county alcohol taxes add $1.03, and the city's sales tax adds $2.25. At the register, the consumer will pay $25.27 for that bottle of vodka.
In addition to excise taxes, Illinois also has "markup" taxes, where the retail value of the alcohol is multiplied by a percentage rate. These markup taxes are often passed on to the consumer. Liquor manufacturers or importing distributors must register with the Illinois Liquor Control Commission and may be subject to additional taxes and requirements.
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Chicago's liquor tax
The total effective tax rate on liquor in Chicago is 28%. To put that into context, a 750ml bottle of Absolut Vodka (40% ABV) costs $21.99, but the total taxes on that bottle amount to $7.11. State alcohol taxes add $1.69, federal taxes are $2.14, city and county alcohol taxes are $1.03, and the city's 10.25% sales tax adds another $2.25. That means the consumer will pay $25.27 for that single bottle of vodka.
Chicago's alcohol tax has been increased several times, with the most recent hike occurring in 2007. The tax is calculated based on alcohol by volume, with different rates for wine, beer, and spirits. Wine is taxed at six different rates, ranging from $0.226 to $3.40 per gallon. Beer is taxed at a single rate of $18 per barrel (31 gallons). Spirits are taxed at $13.50 per gallon, with credits given for wine and flavor content.
In 2020, Chicago amended its liquor tax to include online and remote sales. This change aimed to equalize the treatment of online purchases with physical purchases in the city and capture tax revenue from remote sellers.
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Federal alcohol tax
Alcoholic beverages such as wine, beer, and liquor are subject to excise taxes on both the Illinois state and federal levels. Excise taxes are applied on a per-unit or per-gallon basis and are typically collected from the merchant, who generally passes the cost on to the consumer in the form of raised alcohol prices.
In Illinois, wine vendors are responsible for paying a state excise tax of $1.39 per gallon, plus additional federal excise taxes, for all wine sold. The federal alcohol tax rate varies depending on the type of alcohol. For example, at the time of writing, wine is taxed at $1.07 per gallon, sparkling wine at $3.40 per gallon, and spirits at $13.50 per gallon.
The combined federal, state, county, and city taxes on alcohol in Chicago result in an effective tax rate of 28% on a bottle of spirits. For example, a 750ml bottle of Absolut Vodka (40% ABV) costs $21.99, but the total taxes amount to $7.11, with federal taxes accounting for $2.14 of that amount.
Illinois ranks 14th in the nation for its spirits tax rate, according to a 2014 study by the Tax Foundation. The state has not increased its alcohol tax since 2009, but Chicago and Cook County have followed the federal government's lead and have increased alcohol taxes several times since then.
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State alcohol taxes
Alcoholic beverages like wine, beer, and liquor are subject to excise taxes on both the Illinois state and federal levels. Excise taxes on alcohol are applied on a per-unit or per-gallon basis and are collected from the merchant, who usually passes the cost on to the consumer in the form of raised alcohol prices.
In Illinois, wine vendors are responsible for paying a state excise tax of $1.39 per gallon, plus federal excise taxes, for all wine sold. The federal tax on wine is between $0.226 and $3.40 per gallon, depending on the percentage of alcohol by volume and whether it is sparkling. Beer is taxed at a single federal rate of $18 per barrel (31 gallons), while spirits are taxed at $13.50 per gallon, with credit given for wine and flavor content.
According to a 2014 study by the Tax Foundation, Illinois ranks 14th in the nation for its spirits tax rate. The state alcohol tax in Illinois adds $1.69 to the price of a bottle of spirits, while the federal government adds $2.14. In Chicago, the total effective tax rate on liquor is 28%, including city and county taxes of $1.03 and a sales tax of $2.25 for the city's 10.25% sales tax.
In addition to excise taxes, Illinois also has "markup" taxes on alcohol, where the retail value of the alcohol is multiplied by a percentage rate. These markup taxes are often passed through to the consumer and are in addition to traditional "gallonage"-based excise taxes, which are usually factored into the price of the item.
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Frequently asked questions
Alcohol in Illinois is subject to both state and federal excise taxes. The state excise tax for wine vendors is $1.39 per gallon, plus Federal excise taxes. The federal tax on wine is $1.07 per gallon, $3.40 per gallon for sparkling wine, and $13.50 per gallon for spirits.
The total effective tax rate on liquor in Chicago is 28%. This includes city, county, state, and federal taxes.
Excise taxes are applied on a per-unit basis, generally per gallon for liquids. Excise taxes are collected from the merchant who sells the alcohol, but they are usually passed on to the consumer in the form of raised alcohol prices.
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