Illinois (city of Chicago): Council Approves Tax Increases as Part of 2020 City Budget

The 2020 city budget approved by Chicago Mayor Lori Lightfoot and the City Council includes several tax increases as part of an overall plan to eliminate an estimated $850 million budget gap. Among the tax increases of widespread interest to the business community is an increase in the Personal Property Lease Transaction Tax (PPLTT) rate from 5.25 percent to 7.25 percent as applied to nonpossessory leases of computer property effective January 1, 2020. Chicago has interpreted the PPLTT, which specifically applies to “the nonpossessory lease of a computer primarily for the purpose of allowing a customer to use the provider’s computer and software to input, modify or retrieve data or information,” to apply also to transactions involving access to cloud-based services, remotely hosted software, and certain online services if the lessee/user is located in Chicago. The tax rate applied to leases other than those involving computers remains at 9.0 percent.

Other tax measures adopted as part of the budget include an increase in the rate applied to food and beverages sold at retail by the place for eating from 0.25 percent to 0.50 percent of the selling price of the food, effective January 1, 2020. In addition, the budget includes an increasing in the ground transportation tax as applied to ride services arranged by a transportation network service company. The tax on a single ride (i.e., one where a shared ride is not requested) will increase from $.60 to $1.13 per vehicle per ride accepted, and the rate on a shared ride will be $.53 per vehicle per ride accepted. Higher rates will apply to both single and shared rides in the “Downtown Zone” during certain periods. The increased tax on rides takes effect on January 6, 2020. Please stay tuned to TWIST for additional tax changes.