Chicago’s Personal Property Lease Transaction Tax, Explained
- Jul 8, 2015 | Gail Cole
The City of Chicago, Illinois, imposes a Personal Property Lease Transaction Tax on 1) the lease of rental in the city of personal property, or 2) the privilege of using in the city personal property that is leased or rented outside of the city. It is the responsibility of the lessee to pay the tax. If the lessor fails to collect it, the lessee must file a return and pay the tax directly to the department.
Effective July 1, 2015, but applying to periods on or after September 1, 2015, the 9% Personal Property Lease Transaction Tax applies to numerous nonpossessory computer leases. See below for details.
Taxable under the Personal Property Lease Transaction Tax
When a customer pays a provider for the ability to use the provider’s computer to input, modify or retrieve data or information, the charge is considered a taxable nonpossessory computer lease.
Taxable transactions include the following:
- Performing on‐line searches of legal research databases
- Obtaining consumer credit reports
- Obtaining real estate listings and prices, car prices, stock prices, economic statistics, weather statistics, job listings, resumes, company profiles, consumer profiles, marketing data, and similar information or data that has been compiled, entered, and stored on the provider's computer
- Performing cloud computing services such as word processing, calculations, data processing, tax preparation, spreadsheet preparation, presentations and other applications available through access to a provider's computer and its software.
Not Taxable under the Personal Property Lease Transaction Tax
Charges not subject to the lease tax include the following:
- Charges to write a report, article or similar document
- Charges for the creation of a database, even if accessed electronically
- Charges for storing customer data on provider's computer if the provider's computer is outside the City of Chicago and the charges are “solely for storage.”
- Exemption 11, where “ a) the customer's use or control of the provider's computer is de minimis, and b) the related charge is predominantly for information transferred to the customer rather than for the customer's use or control of the computer."
As the Chicago Department of Finance also reminds, “Entertaining materials such as copyrighted books, musical and other sound recordings, feature length and episodic films are not ‘data or information’ as those terms are used in the definition of a ‘nonpossessory computer lease.’” Read more about the Chicago Amusement Tax here.
Please see Chicago Municipal Code Chapter 3-32 and Personal Property Lease "Transaction Tax Ruling #12 for additional information.
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