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Sales tax on labor in Illinois: not taxed on building repairs and new construction; repairs to things and installation depend on the job
In Illinois, labor is not taxed on building repairs and new construction; for repairs to things and installation it depends on the job. Read from Illinois's own revenue pages, checked November 6, 2026, with every answer quoted below.
Repairing a thing in Illinois
It depends. Illinois does not tax the labor itself. A repair person (a 'serviceperson') owes Service Occupation Tax on the parts handed over with the repair. If the parts are not priced separately on the bill, the tax is figured on 50% of the whole bill.
- “If no charge is separately stated in the Serviceperson's billing, the Selling Price is 50% of the entire amount billed to the customer. In no circumstance can the selling price be less than the cost price.” — Illinois Department of Revenue Publication 113-SOT (Service Occupation Tax), page date: March 2026
- “SOT is only imposed if a Serviceperson transfers TPP as part of a sale of service.” — Illinois Department of Revenue Publication 113-SOT (Service Occupation Tax), page date: March 2026
- “While labor, in a service function, is generally not taxable, sublet repair may involve a taxable occurrence.” — IDOR Sales Tax Audit Manual, Chapter 5, page date: 05/2023
Repairing a home or building in Illinois
Not taxed. The contractor does not charge tax on labor or materials built in; instead the contractor pays use tax when buying the materials.
- “A construction contractor does not incur Retailers' Occupation Tax liability as to receipts from labor furnished and tangible personal property (materials and fixtures) incorporated into a structure as an integral part thereof for an owner when furnished and installed as an incident of a construction contract. The construction contractor incurs Use Tax on the cost price of the tangible personal property that is incorporated into real estate.” — 86 Ill. Adm. Code 130.1940 Construction Contractors and Real Estate Developers, page date: amended effective October 2, 2000
- “"Construct" means build, erect, construct, reconstruct, install, plant, repair, renovate or remodel.” — 86 Ill. Adm. Code 130.1940 (definitions), page date: amended effective October 2, 2000
Installation work in Illinois
It depends. Installing something that becomes part of the building is construction work: no tax on the bill, contractor pays tax on materials. Installing an item that stays personal property (a refrigerator and a washer) is a taxable sale of that item; the installation charge is not taxable only if it is agreed separately from the item's price. What it turns on: whether the item becomes part of the real estate, and for items that stay personal property, whether the installation charge is separately contracted from the item's price.
- “A construction contractor does not incur Retailers' Occupation Tax liability as to receipts from labor furnished and tangible personal property (materials and fixtures) incorporated into a structure as an integral part thereof for an owner when furnished and installed as an incident of a construction contract. The construction contractor incurs Use Tax on the cost price of the tangible personal property that is incorporated into real estate.” — 86 Ill. Adm. Code 130.1940 Construction Contractors and Real Estate Developers, page date: amended effective October 2, 2000
- “"Construct" means build, erect, construct, reconstruct, install, plant, repair, renovate or remodel.” — 86 Ill. Adm. Code 130.1940 (definitions), page date: amended effective October 2, 2000
- “gas or electric stoves, refrigerators, washing machines, portable ventilating units and other portable equipment of this kind ... is considered to remain personal property when installed, even if the contractor does install such equipment pursuant to a construction contract.” — 86 Ill. Adm. Code 130.1940 (appliances stay personal property), page date: amended effective October 2, 2000
- “Installation charges are not taxable when separately contracted for, between the buyer and the seller, apart from the selling price of the item being sold. ... If the installation is to permanently affix the tangible personal property to real estate, however, the retailer is acting as a construction contractor, and he incurs a Use Tax liability only on his cost price of materials.” — IDOR Sales Tax Audit Manual, Chapter 5, 5.11.3 Installation charges, page date: 05/2023
New construction in Illinois
Not taxed. No tax on the contractor's bill for labor and materials built into a structure; the contractor pays use tax on the cost of the materials.
- “A construction contractor does not incur Retailers' Occupation Tax liability as to receipts from labor furnished and tangible personal property (materials and fixtures) incorporated into a structure as an integral part thereof for an owner when furnished and installed as an incident of a construction contract. The construction contractor incurs Use Tax on the cost price of the tangible personal property that is incorporated into real estate.” — 86 Ill. Adm. Code 130.1940 Construction Contractors and Real Estate Developers, page date: amended effective October 2, 2000
Listing labor separately on the bill in Illinois
Changes the answer. For repairs of things, separately pricing the parts means tax only on the parts; without it, tax is on 50% of the whole bill. For a seller who installs an item that stays personal property, a separately agreed installation charge is not taxed.
- “If no charge is separately stated in the Serviceperson's billing, the Selling Price is 50% of the entire amount billed to the customer. In no circumstance can the selling price be less than the cost price.” — Illinois Department of Revenue Publication 113-SOT (Service Occupation Tax), page date: March 2026
- “Installation charges are not taxable when separately contracted for, between the buyer and the seller, apart from the selling price of the item being sold. ... If the installation is to permanently affix the tangible personal property to real estate, however, the retailer is acting as a construction contractor, and he incurs a Use Tax liability only on his cost price of materials.” — IDOR Sales Tax Audit Manual, Chapter 5, 5.11.3 Installation charges, page date: 05/2023
Materials on jobs in Illinois
Construction contractor is the consumer of materials built into real estate and pays Use Tax on their cost; a repair person (serviceperson) owes tax on parts transferred with the service.
- “A construction contractor does not incur Retailers' Occupation Tax liability as to receipts from labor furnished and tangible personal property (materials and fixtures) incorporated into a structure as an integral part thereof for an owner when furnished and installed as an incident of a construction contract. The construction contractor incurs Use Tax on the cost price of the tangible personal property that is incorporated into real estate.” — 86 Ill. Adm. Code 130.1940 Construction Contractors and Real Estate Developers, page date: amended effective October 2, 2000
Trade services Illinois taxes
Not checked here. No list of taxed trade services was checked for Illinois.
Check with the Illinois Department of Revenue
Before you bill: check with the Illinois Department of Revenue. As of November 6, 2026.
This is a plain-words summary of each state's own revenue guidance as of November 6, 2026, not tax advice. Rules have exceptions, and cities and counties can add taxes of their own. Check with the state's tax department, linked on every state's page, before you bill.
Compare Illinois with every state's answer, or with its neighbours just below.
Official sources for Illinois
- 86 Ill. Adm. Code 130.1940 (appliances stay personal property) — amended effective October 2, 2000
- Illinois Department of Revenue Publication 113-SOT (Service Occupation Tax) — March 2026
- IDOR Sales Tax Audit Manual, Chapter 5, 5.11.3 Installation charges — 05/2023
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