City of Chicago: Bulletin establishes safe harbor revenue thresholds for amusement, lease tax

Recently, the City of Chicago issued a bulletin establishing safe harbor revenue thresholds for the amusement tax and personal property lease transaction tax (PPLTT). According to the City, the bulletin is intended to address “numerous questions” the City has received in the wake of the U.S. Supreme Court ruling in Wayfair with respect to nexus for the amusement tax (imposed on sales of streamed music and video) and the PPLTT (imposed on certain sales of SaaS, cloud computing, and other computer services). The safe harbor established in the bulletin is effective beginning July 1, 2021. It applies to out-of-state entities that received less than $100,000 in revenue from Chicago customers during the most recent consecutive four calendar quarters for activities subject to the amusement tax and PPLTT. Entities that do not exceed the threshold will not be expected to collect either tax, but the bulletin is clear that the consumer of such service remains obligated for the tax due. To qualify for the safe harbor, the out-of-state entity must not have other “significant contacts” with Chicago; such contacts may be established through physical presence, advertising directed at Chicago customers, or activities performed by employees in Chicago. If an out-of-state business initially qualified for the safe harbor, but no longer does, it must (1) register with the Chicago Department of Finance within 60 days, (2) begin collecting taxes within 90 days, and (3) continue collecting Chicago taxes for at least twelve months. Please contact Drew Olson at 312-665-2897 with questions.