Effective August 1, 2026, businesses across six northern Illinois counties began collecting a higher Northern Illinois Transit Authority (NITA) occupation and use tax. The increase itself is only 0.25%, but restaurant operators and retailers with mixed product lines should pay particular attention: whether an item qualifies as prepared food or a grocery affects which rate applies, especially for the Cook County sales tax increase.
The Illinois Department of Revenue announced the change in Informational Bulletin FY 2026-34 this past June. Here’s what’s actually changing, and what to check to ensure you’re in compliance with the new rates.
What’s Changing
NITA — formerly the Regional Transportation Authority — raised its occupation and use tax rate by 0.25% starting August 1, 2026. This rate stacks on top of the statewide rate and any other local taxes already collected by the Illinois Department of Revenue.
| County | Rate Before Aug. 1 2026 | Rate After Aug. 1 2026 |
|---|---|---|
| Cook — general merchandise | 1.00% | 1.25% |
| Cook — qualifying groceries & qualifying drugs/medical appliances | 1.25% | 1.50% |
| DuPage, Kane, Lake, McHenry, Will — all categories | 0.75% | 1.00% |
Key Takeaway: Don’t assume all food sold at your business qualifies for the lower grocery rate. In Cook County, a restaurant selling prepared food is subject to the 1.25% general merchandise rate, not the 1.50% grocery rate — but a business selling both prepared food and unprepared packaged items may legitimately owe both rates within the same location.
Prepared Food vs. Groceries: The Illinois Restaurant Sales Tax Issue
This is the piece that matters most for restaurant operators. “Qualifying groceries” is a defined category under Illinois law, and it excludes food prepared for immediate consumption. Food is generally treated as prepared — and taxed at the higher general merchandise rate — when it’s sold heated, heated by the seller, sold with utensils provided by the seller, or made from two or more ingredients combined by the seller.
Commonly taxed as prepared food (general merchandise rate):
- Dine-in meals
- Hot sandwiches, pizza, and other made-to-order hot food
- Coffee drinks and fountain beverages
- Any food sold with a fork, spoon, or other utensil provided by the seller
May qualify for the grocery rate instead:
- Unopened bottled beverages sold cold, without preparation
- Packaged bread, snacks, or other unheated, unmixed items
- Grocery items sold as-is, with no service or combination involved
In practice, nearly everything sold in a traditional restaurant falls into the first category. The distinction matters most for businesses with a mixed product line — a bakery-café selling both made-to-order sandwiches and grab-and-go packaged grocery items, for example — where both NITA rates can legitimately apply within the same location. If your point-of-sale system separates revenue by category, this rate change is a good moment to confirm each category is mapped to the correct rate, not defaulting to a single blanket rate across all sales.
Key Takeaway: One common issue is that POS systems were configured correctly at some point but never updated as menus or product mixes evolved. A rate change like this one is a natural trigger to check that configuration rather than assume it’s still accurate.
What Business Owners Should Do: A Quick Checklist
- Confirm your POS software has received the August rate update. Check with your vendor directly rather than assuming it happened automatically.
- Verify your exact combined rate using the MyTax Illinois Tax Rate Finder at mytax.illinois.gov, since local taxes stack on top of the NITA rate and vary by address.
- Run a few test transactions after the update goes live to confirm your system is actually charging the new rate on each category before your next filing period closes.
The Real Risk Isn’t the Rate Change
Rate changes themselves rarely create audit problems. Classification mistakes do. For restaurant operators especially, prepared food classification is a recurring source of Illinois sales tax exposure, and a rate change is as good a reason as any to double-check it.
Our related piece on sales tax classification for Illinois restaurants gets into this in more detail and will be useful if you haven’t reviewed your own categorization recently.
If you’d like a second set of eyes on your POS tax configuration or want to confirm the correct combined rate for your location, Ahlbeck & Cook can help you check it. Contact us to set up a time to talk.
