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HB 3261

USE/OCC TAX-SALES TAX HOLIDAY

104th Regular Session Introduced by Brad Halbrook

Illinois creates an annual August sales tax holiday, setting a 1.25% tax rate on qualifying school supplies (starting 2025) to cut costs for families buying back-to-school items.

Rule 19(a) / Re-referred to Rules Committee
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Bill Summary · HB 3261

HB 3261 — Use/Occ Tax: Sales Tax Holiday for School Supplies (2025)

Purpose

HB 3261 establishes an annual sales tax holiday in Illinois for qualifying school supplies. The goal is to reduce the state sales/use tax rate applied to eligible purchases during a defined August period to lower costs for families buying school supplies.

Key provisions

  • Amends the Use Tax Act and the Retailers' Occupation Tax Act (and makes conforming changes to the State Finance Act).
  • Creates a recurring sales tax holiday period:
    • August 1 through August 31, 2025, and
    • August 1 through August 31 of each year thereafter.
  • During the sales tax holiday period, qualifying tangible personal property (school supplies) is subject to a reduced tax rate of 1.25% (instead of the regular tax rate) for both sales and use tax purposes.
  • Defines “sales tax holiday item” for the new recurring periods to mean school supplies (see Definitions/Exclusions below).
  • Retains and references prior short-term holiday definitions from 2010 and 2022 for historical context; the new language applies specifically to the recurring August period starting in 2025.
  • Directs administration of the reduced rate by the Department of Revenue and includes administrative rules (examples in statute include treatment of bundled sales, coupons/discounts, splitting items, and rain checks — full administrative provisions appear in statute).

Definitions and exclusions (highlights)

  • “School supplies” are defined broadly to include binders, composition books, crayons, glue, highlighters, index cards, notebooks, paper, pencils, pens, rulers, scissors, markers, lunch boxes, backpacks, and similar items commonly used by students.
  • Explicit exclusions include many higher-cost and electronic items: school art supplies and school instructional materials (limited definitions apply), cameras, film and memory cards, videocameras/tapes, computers, cell phones, personal digital assistants (PDAs), handheld electronic schedulers, and most school computer supplies except a limited list (e.g., flash drives, printer cartridges for school computer use are treated under a limited definition).

Who is affected

  • Primary beneficiaries: students and families purchasing qualifying school supplies in Illinois during the holiday month.
  • Retailers: must identify qualifying items, apply the reduced 1.25% rate at point of sale, and follow administrative rules on bundled sales, coupons, and pricing.
  • State and local governments: will experience reduced tax revenues during the designated period (magnitude depends on retail activity).
  • Illinois Department of Revenue: responsible for guidance, enforcement, and administrative rules.

Procedural status / timeline (as provided)

  • Introduced (House) by Rep. Brad Halbrook: filed Feb 6, 2025; first reading Feb 18, 2025.
  • Referred to committees (Revenue & Finance; Tax Policy subcommittee) with hearings on April 2 and April 16, 2025.
  • Reported favorably as substituted April 16, 2025; placed on calendar and advanced in late April/early May.
  • Read 2nd time (May 6, 2025); read 3rd time and passed (May 7, 2025); reported engrossed and received from the House on May 7, 2025.
  • Additional procedural notation: Rule 19(a) / Re‑referred to Rules Committee (March 21, 2025) appears in the bill history.

Fiscal note / potential impacts

  • Near-term reduction in state and local sales/use tax receipts during the August holiday month(s). The precise fiscal impact depends on consumer behavior (shifting of purchases into the holiday month) and the volume/value of qualifying sales.
  • Administrative compliance costs for retailers to identify qualifying items and apply the reduced rate; offset by increased consumer traffic to retailers during the period.

For full implementation details, including the complete statutory definitions, exclusions, and the Department of Revenue’s administrative rules, consult the bill text and any subsequent revenue department guidance.

Compiled from official sources — confirm details with the bill’s official record.

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