Chicago’s Personal Property Lease Transaction Tax (PPLTT) is one of the city’s more confusing local taxes. The municipal tax is imposed by the City of Chicago on leased or rented personal property used in Chicago. Whether the property is tangible, like equipment or machinery, or an intangible good, such as software and digital goods, the tax still applies. This would include Software-as-a-Service (“SaaS”), which is not subject to sales tax in the State of Illinois, making this local tax even more unique.

PPLTT Tax Rates: Significant 2026 Changes

In the last five years, the rates have spiked in a consistent trend year over year. The most current tax rate as of January 2025 was 11% for most leases, but this increased to 15% starting January 1, 2026.

You might be wondering how this rate increase could affect your business. If you’re in the SaaS or digital services industry, you’re still on the hook for PPLTT if your intangible property is leased or rented by a business or consumer in Chicago. With such a major rate increase, seeking help from an expert sooner rather than later is essential. Please reach out to us at info@milesconsultinggroup.com and we can help.

What’s Unique about this 15% Lease Tax?

Chicago’s tax is unusual because it applies to both tangible and intangible property; few cities in the U.S. take such an expansive approach. The PPLTT is unique to Chicago, and no other local jurisdictions tax both tangible and intangible goods in this manner. For industries like cloud computing platforms and data processing, the tax is often referred to as Chicago’s, “cloud tax,” because digital services or remote access to data that function like the rental of a resource will be liable for the tax.

While it functions like a use tax, it’s actually a lease tax on rental property, which makes the concept all the more confusing. The tax applies when the lessee uses the property, tangible or intangible, in Chicago. Even if the lender is outside the city. The lender is then responsible for collecting and remitting the tax from the lessees.

January 2026 Rate Increase

From an 11% tax rate in 2025 increased to 15% in 2026, Chicago will be hunting down those not in compliance with the PPLTT rule. This affects machinery and equipment operators along with digital goods and cloud services, who are remote sellers of otherwise nontaxable services.

The rate change creates a strong incentive for Chicago’s Department of Finance to tighten its enforcement of this rule. This would mean a surge in audits, where Chicago would formally examine company financial records beyond the scope of just the PPLTT, for those affected industries. Chicago may evaluate whether your business activities created nexus, either through physical or economic presence, which requires the business to register, collect, and remit tax in a state. The businesses playing catch-up haven’t evaluated their Chicago exposure in the past year. For further questions about nexus or audit defense, please contact Miles Consulting Group to schedule your complimentary nexus review at info@milesconsultinggroup.com.

To add insult to injury, for companies that provide digital access to Chicago customers, you may already owe tax, and perhaps even penalties. The common misconceptions that only physical presence triggers the rule, like a location or employees in Chicago, is just not true. If your business sells software, not leases, they may still be held liable for the tax depending on facts and the nature of the sale.

Chicago Keeps 100% of the Revenue

Because Chicago retains the full revenue of the tax, the higher revenue at stake the more enforcement pressure from the jurisdiction. Therefore, more aggressive audit activity, narrowed interpretation of facts, and overall risk for the companies not in compliance.

It’s important to note that no other U.S. city imposes a broad 15% tax that it keeps entirely. Even among major cities with complex municipal tax rules like New York City, Seattle, or Los Angeles, Chicago is the only jurisdiction with a PPLTT tax and of such a high rate. For businesses operating in the complex municipal tax arena of Chicago, you’re facing an increased cost of doing business, several years of audit assessment, and an overall financial disadvantage if you’re competing in your industry while remaining out of compliance with Chicago’s PPLTT laws.  Being proactive about your tax strategy protects your business from the negative impact of non-compliance.

How Businesses Can Protect Themselves

Partnering with a sales tax specialist is essential for achieving compliance in Chicago. Companies should reassess whether they have nexus, determine the taxability of their products, and plan accordingly. Options for voluntarily disclosing tax liability and back filing in the jurisdiction may be the next steps necessary for compliance – and this is where expert guidance pays for itself. The worst-case scenario is finding out that the tax PPLTT applies to your business, after the fact, in an audit.

Get Ahead of the PPLTT Rate Increase Today

The PPLTT affects businesses leasing both tangible and intangible goods in Chicago. Even if your business transactions don’t seem like the lease of goods, you may still be affected under the extremely broad guidelines for activity covered in this rule. For businesses that sell software or digital goods, or lease property or machinery in Chicago, consulting with an expert to review your company’s tax exposure can save a lot of money in the long run.

SaaS Companies and the Chicago PPLTT

While we said it at the beginning…it bears repeating that one of the most confusing aspects of the PPLTT is that it impacts Software as a Service (SaaS) companies because the City deems the software subscription essentially to be the lease of property within the City.  Almost every SaaS client we’ve worked with has been blindsided by this tax before consulting with us.  So, if you’re a SaaS company with customers in Chicago…this tax is for you! This update is for you!  And assistance is for you as well. Check out our interactive SaaS map here to see which other jurisdictions may also tax the SaaS revenue stream.