City of Chicago: Cloud computing tax increases as part of 2021 City budget

The 2021 City budget approved by Chicago Mayor Lori Lightfoot and the City Council includes certain tax increases as part of an overall plan to close $1.2 billion budget deficit. It was estimated that more than 65 percent of the budget gap was attributed to the revenue impacts of COVID-19. The tax increase likely of greatest interest to the business community is an increase in the Personal Property Lease Transaction Tax (PPLTT) rate from 7.25 percent to 9.0 percent as applied to nonpossessory leases of computer property. This rate increase will be effective on January 1, 2021.  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 has been 9.0 percent; therefore, this change aligns the tax rates applicable to leases of personal property.

Other tax increases adopted as part of the budget include a three-cent increase in the vehicle fuel tax rate and a property tax increase. Please contact Drew Olson at 312- 665-2897 with questions.