By Kate Russell, CPA, Senior Manager
If there’s one thing Chicago loves (besides deep-dish pizza and unpredictable weather), it’s taxes. And starting January 1, 2025, the city has again turned up the heat—this time on leases. The Personal Property Lease Transaction Tax (PPLTT) has increased from 9% to 11%, impacting businesses that lease equipment, use cloud-based services, or engage in lease-like transactions. If you are a lessor, you are responsible for collecting and remitting the tax. If you thought tax season couldn’t be any more fun, think again.
Key Considerations
- The PPLTT applies to businesses or individuals leasing personal property used in Chicago, including non-possessory computer leases where customers input, modify, or retrieve data from remote locations while present in Chicago.
- Intercompany lease transactions are facing increased scrutiny and may now be treated as retail sales for tax purposes.
- Lease agreements bundled with services may not be taxable, depending on the transaction’s “true object.”
Compliance Challenges
- The new tax 11% tax rate is imposed upon all applicable leases.
- Sourcing rules vary based on payment structure and delivery.
- Audit enforcement is increasing in 2025, requiring businesses to ensure proper tax treatment.
- Accurate recordkeeping is essential, particularly regarding possession location and payment frequency.
Next Steps
Business owners should review lease agreements, ensure proper tax collection, and stay informed on potential legislative changes.
Of course, tax changes like these make it tempting to pack up and move to a deserted island (preferably one without sales tax), but for those of us sticking it out in the Windy City, compliance is key. If you need guidance navigating these new rules, MichaelSilver is here to help—because figuring out tax law is way more fun when someone else does it for you. Our trusted advisors can be reached at 847-982-0333.
Kate Russell, CPA, Senior Manager, brings extensive experience in a wide range of tax matters, with a strong focus on developing strategic tax solutions for business clients. Since joining MichaelSilver in 2018, she has become an integral part of the Firm’s international team, assisting clients from around the globe as they expand into the U.S. market. Kate earned her Bachelor of Science in Business with a major in Accounting from Minnesota State University, Mankato. She is a member of the American Institute of Certified Public Accountants (AICPA) and serves on the International Subcommittee of the Illinois CPA Society (ICPAS).