Understanding sales tax compliance for SaaS companies is difficult. Some states tax it, some don’t. But what about cities?
Although Illinois doesn’t tax SaaS at the state level, Chicago’s Personal Property Lease Transaction Tax (or Chicago lease tax) is one that these types of businesses need to know about. While it’s not a sales tax, it’s applicable to any entity leasing personal property – including cloud services – to customers in the city.
What Is The Chicago Lease Tax?
Chicago’s lease tax applies to businesses or individuals that either have a lease or lease out personal property that’s used in the city.
Why not just charge a sales tax like other jurisdictions? As the Chicago Bar Association’s Samantha Breslow explains on BloombergTax.com, “Chicago is barred from taxing services, causing it to develop tax rules capturing transactions for the usage of property through a lease or license.”