Illinois – Amendments to the Chicago Personal Property Lease Transaction Tax

SALT Report 2897 – The Chicago Department of Finance issued guidance regarding amendments to the personal property lease transaction tax that will go into effect on September 1, 2013.  The amendments specifically address the application of the tax to certain transactions involving computers and computer software.

Time Sharing

Time-shared computers are those in which the user leases time on a computer that is shared with other users.  The amendments to this provision reflect that when possession of the time-shared computer is not transferred, a computer user is deemed to use the computer at the location of the computer’s access terminal. Therefore, if the user’s terminal is within the City, the lease tax will apply to all charges to use the computer and any software that is accessed by the user at the terminal.

Alternatively, charges for the user to store information on the shared computer for use at a later date will be deemed a nontaxable usage of the computer at the computer location.  This is because charges for storing information on a computer are not considered an actual use of the computer through an access terminal; rather, they are charges to store information at the computer location.  However, if at a later date, the user were charged to access the information stored on a terminal located in Chicago, the access charge would be taxable.


When actual possession, but not title or ownership, of a computer is transferred to the user for use in the City, the transaction is a lease subject to the lease tax.  Tax will be due on all lease or rental charges associated with the use of the computer and its software in the City. However, separately stated optional charges that are not for the use of the computer, its software, or other personal property used in the City are not be subject to the lease tax.  For example, maintenance charges, if optional, are not taxable.


Separately stated, optional charges for printing and other services are not taxable.

Computer Software

The Department has determined that if a transfer of software meets the five‐part test set forth in 86 Illinois Administrative Code Section 130.1935,the transfer is not considered a sale.  Therefore, pursuant to Code Section 3‐32‐020(I), any transfer of personal property that is not a sale, is a lease.  As a result, a transfer of software that meets the five‐part test is a lease subject to the lease tax.

For Further Information

Chicago Department of Finance – Personal Property Lease Transaction Tax Amended Ruling #5

City of Chicago – Personal Property Lease Transaction Tax