The Chicago restaurant tax adds up to 10.75% on prepared food and drinks across most of the city, and 11.75% inside the Metropolitan Pier and Exposition Authority zone. That headline rate combines the 10.25% general sales tax collected by the state with a 0.50% city tax on food and beverages sold by any “place for eating.” Alcohol carries additional layers, and a scheduled transit-funding change will push every rate up a quarter point in mid-2026.
What the 10.25% Sales Tax Is Made Of
Every retail sale in Chicago starts with a combined sales tax of 10.25%, collected as a single payment but split among four taxing authorities:
- State of Illinois: 6.25% under the Retailers’ Occupation Tax
- Cook County: 1.75%
- City of Chicago: 1.25%
- Regional Transportation Authority: 1.0%
The Illinois Department of Revenue collects all four portions through a single return. This 10.25% is what applies to general merchandise a restaurant might sell alongside meals, such as branded merchandise, packaged snacks, or sealed beverages not intended for immediate consumption.
The City’s 0.50% Restaurant Tax
On top of the base sales tax, Chicago imposes a separate 0.50% tax on all food and beverages sold by a “place for eating.”1Municipal Code of Chicago. Chicago Municipal Code 3-30-030 Tax Imposed That’s what pushes the prepared-food rate to 10.75%. Dine-in, carryout, catering — the rate is the same. A hot sandwich, a plated dinner, and a cup of coffee all qualify.
Restaurants report and remit the 0.50% separately from the state sales tax. It goes to the Chicago Department of Finance on Form 7525, not to IDOR.2City of Chicago. Restaurant Tax (7525)
The MPEA Zone Surcharge
Restaurants inside the Metropolitan Pier and Exposition Authority boundaries pay an additional 1.0% food and beverage tax on gross receipts, bringing the total to 11.75%.3Illinois Department of Revenue. Metropolitan Pier and Exposition Authority (MPEA) Food and Beverage Tax The zone is much larger than the Loop. Its Lake Michigan boundaries run from Diversey Avenue on the north to the Stevenson Expressway on the south, and from Ashland Avenue on the west to the lake on the east. Separate zones cover areas around Midway and O’Hare.4Illinois Department of Revenue. IDOR-535 Metropolitan Pier and Exposition Authority Lake Michigan Area Boundaries Restaurants in Wrigleyville or the West Loop fall inside and owe the extra 1.0%.
The Mid-2026 Rate Increase
Legislation signed into law authorizes the RTA portion of the Cook County sales tax to rise from 1.0% to 1.25%. The RTA board must approve the increase within 60 days of June 1, 2026.5RTA Chicago. 2026 Regional Transit Budget Available for Public Comment Once it takes effect, the base combined rate climbs from 10.25% to 10.50%. Prepared food goes from 10.75% to 11.00%, and MPEA-zone restaurants go from 11.75% to 12.00%.
Prepared Food vs. Grocery Items
Not everything a restaurant sells counts as prepared food. Sealed packages of food meant for off-premises consumption have historically been taxed at a lower rate. Before 2026, the state taxed qualifying groceries at just 1.0% instead of the full 6.25%.
Effective January 1, 2026, Illinois eliminated the 1.0% state grocery tax entirely, and gave municipalities and counties the authority to impose their own local grocery tax of exactly 1.0% by ordinance.6Illinois Department of Revenue. Illinois Grocery Tax Changes Effective January 1, 2026 Whether packaged grocery items sold at a Chicago restaurant carry a local grocery tax depends on whether Chicago and Cook County adopt such ordinances.
The line between “prepared food” and “groceries” matters more than many operators realize. If a restaurant provides seating or any area for on-premises consumption, all food sales are presumed taxable at the higher prepared-food rate unless the restaurant physically separates its grab-and-go retail area from its dining space and keeps separate accounting for each.7Illinois Department of Revenue. Tax Rate Information for Retail Sales of Food and Medicine Without that separation, every sale defaults to the full rate. This trips up restaurants selling retail items like baked goods or bottled sauces alongside regular meals.
Alcoholic beverages, soft drinks, candy, and anything prepared to a customer’s individual order never qualify for the lower grocery rate, regardless of how they’re sold.
Taxes on Alcoholic Beverages
Alcohol is taxed from multiple directions. The full 10.25% combined sales tax applies to the retail price of every drink. On top of that, three levels of government impose per-gallon excise taxes at the wholesale level. Distributors pay them, but the cost is baked into what restaurants pay for inventory.
State Gallonage Tax
The Illinois Liquor Gallonage Tax varies by alcohol content:8Illinois Department of Revenue. Excise Tax Rates and Fees
- Beer (0.5%–7% ABV): $0.231 per gallon
- Wine and liquor at 14% ABV or less: $1.39 per gallon
- Wine and liquor at 14%–20% ABV: $1.39 per gallon
- Spirits at 20% ABV or more: $8.55 per gallon
Cook County Excise
Cook County adds its own per-gallon rates. Spirits at 20% ABV or above are taxed at $2.50 per gallon, wine up to 14% ABV at $0.24 per gallon, and beer at $0.09 per gallon.9City of Chicago. Liquor Tax Revenue Resource
City of Chicago Liquor Tax
Chicago layers on a third set of per-gallon taxes. As of March 1, 2026, the rates for on-premises consumption are:10City of Chicago. Liquor Tax (7573)
- Beer: $0.29 per gallon
- Liquor at 14% ABV or less: $0.36 per gallon
- Liquor at 14%–20% ABV: $0.89 per gallon
- Spirits at 20% ABV or more: $2.68 per gallon
Also effective March 1, 2026, the city introduced a separate 1.5% tax based on the retail purchase price of alcoholic beverages sold for on-premises consumption.11City of Chicago. Liquor Tax Changes Effective March 1, 2026 That percentage-based tax sits on top of the per-gallon excise taxes. Combined, the excise burden on a gallon of high-proof spirits in Chicago comes to roughly $13.73 before the customer sees a menu price.
Tips and Mandatory Service Charges
Voluntary tips a customer adds to the bill are never subject to sales tax. Mandatory service charges follow a different rule that catches many operators off guard.
A mandatory service charge or auto-gratuity is exempt from tax only if the full amount is passed through directly to the employees who prepared, served, or cleaned up the meal. The moment any portion funds wages, benefits, or other business costs rather than functioning as a tip, the entire charge becomes taxable gross receipts subject to the Retailers’ Occupation Tax.12Illinois Department of Revenue. Mandatory Service Charge – Letter Ruling ST24-0019-GIL What happens to the money after collection controls, not how the receipt labels it.
Bottled Water and Checkout Bag Taxes
Two additional city taxes affect most restaurants and aren’t captured in the headline prepared-food rate.
The Bottled Water Tax adds $0.05 per bottle on every retail sale of bottled water. Wholesalers collect it, but if they don’t, the retailer is responsible.13City of Chicago. Bottled Water Tax
The Checkout Bag Tax is $0.15 per bag as of January 1, 2026, up from $0.10 in 2025.14City of Chicago. Checkout Bag Tax Restaurants doing heavy takeout and delivery volume feel this one in particular. Both taxes are reported separately from the state sales tax and the city’s prepared food tax.
Registering and Filing
Tax compliance in Chicago starts with dual registration. A restaurant needs accounts with both the state and the city before it collects a dollar.
Every business making retail sales in Illinois must register with the Illinois Department of Revenue to receive a business tax number. Registration is electronic through the MyTax Illinois portal using Form REG-1.15Illinois Department of Revenue. Business Registration Separately, the restaurant registers with the Chicago Department of Finance for the restaurant tax and any other applicable municipal taxes.2City of Chicago. Restaurant Tax (7525)
Deadlines and Forms
The combined 10.25% sales tax is reported on Form ST-1, filed monthly or quarterly depending on sales volume. The return and any payment owed are due by the 20th of the month following the reporting period. When the 20th falls on a weekend or holiday, the deadline shifts to the next business day.16Illinois Department of Revenue. ST-1 Instructions The city’s restaurant tax is filed separately on Form 7525.
Restaurants that file ST-1 on time and pay in full qualify for a small vendor discount, essentially a commission for collecting the state’s tax. Since January 2025, the discount is capped at $1,000 per month regardless of how much tax the restaurant collects.17Illinois Department of Revenue. As a Retailer, Am I Allowed a Discount From the Sales Tax I Report Missing the deadline by even a day forfeits it.
Records supporting every return must be kept for three and a half years after filing. If IDOR has issued a notice of tax liability, records for that period must be retained until the matter is fully resolved.18Illinois Department of Revenue. Keeping Complete and Accurate Records
Penalties for Late Filing and Payment
Illinois runs two penalty tracks that can stack on top of each other.19Illinois Department of Revenue. Pub-103 Penalties and Interest for Illinois Taxes
For late filing, the first penalty is the lesser of $250 or 2% of the tax owed. If the restaurant still hasn’t filed within 30 days of receiving a nonfiling notice, a second penalty applies: the greater of $250 or 2% of the tax shown due, up to a $5,000 cap.
Late payment penalties scale with how far past due the payment is:
- 1–30 days late: 2% of the unpaid tax
- 31 or more days late: 10% of the unpaid tax
- After an audit begins: 15%
- After an audit-prepared return or waiver is issued: 20%
Interest also accrues daily starting the day after a payment is due. The rate is tied to the federal underpayment rate under Internal Revenue Code Section 6621 and is adjusted twice a year. These penalties apply to the state sales tax return. The City of Chicago imposes its own separate penalties for late payment of the restaurant tax and other municipal levies.