Chicago Enacts Wayfair Economic Nexus Standard

The Chicago Personal Property Lease Transaction Tax (PPLTT) may be imposed on software-as-a-service (SaaS) providers, and historically Chicago has enforced a physical presence nexus standard. On January 21, 2021, Chicago issued guidance stating it will implement an economic nexus standard, effective July 1, 2021, for the PPLTT and the amusement tax.

Out-of-state businesses that receive $100,000 or more in revenue from Chicago sources in the most recent consecutive four calendar quarters have nexus for PPLTT and amusement tax and will be required to collect and remit tax. For periods preceding July 1, 2021, nexus is established through physical presence within the city. The new standard aligns with guidance enacted in the US Supreme Court’s South Dakota v. Wayfair (Wayfair).

What’s the PPLTT?

The PPLTT is imposed on:

  • The lease or rental of personal property within the city
  • Nonpossessory leases of computers or software to input, modify, or retrieve data supplied by a customer

The taxation of nonpossessory leases is important, because while Illinois may not impose its sales tax on SaaS at a state level, Chicago generally does. As a separate home rule jurisdiction incremental to the Illinois Department of Revenue, an out-of-state SaaS provider may need to file Chicago PPLTT returns even if it doesn’t need to file Illinois sales tax returns.

What’s the Amusement Tax?

The City of Chicago imposes an amusement tax on every amusement within the city, defining amusement as any exhibition, performance, presentation, or show for entertainment purposes.

The amusement tax can also extend to amusements that are delivered electronically, such as video streaming, audio streaming, and online video games.

As of January 1, 2021, the amusement tax rate is 9%.

We’re Here to Help

If you have questions about what these changes could mean for your business, please contact your Moss Adams state and local tax professional.

Special thanks to Cory Van Arnum, Senior, State & Local Tax Services, for their contributions to this article.

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