Supplement to “The Technology Sales Tax Footprint”

In our recently published white paper titled “The Technology Sales Tax Footprint” we described the constantly changing environment related to the applicability of sales tax to various technology related “services”. As state and local jurisdictions continue to push the boundaries of sales tax nexus and expand the definition of what’s taxable, businesses need to monitor the situation proactively. Two recent updates in Chicago are interesting:

1. Amusement Tax – The city of Chicago assesses an amusement tax on various forms of entertainment. On the surface, you may wonder what this has to do with technology delivered services. One of the definitions in the Amusement Tax includes “any paid television programming regardless of the form of transmission”. The definition is meant to capture streaming videos and movies such as those delivered by Netflix. It is not intended to apply to the purchase of videos and movies – only the streaming. Provided the service provider has nexus in the city, then the service provider is responsible for collecting the amusement tax on these streaming services. The current applicable tax rate is 9%.

2. Personal Property Lease Transaction Tax – The Personal Property Lease Transaction Tax can be confusing and often catches technology businesses off guard. It has been clarified previously to include “non-possessory computer leases including time sharing”. What exactly does that mean? The latest ruling further clarifies the Transaction Tax as applying to legal research databases, databases that provide credit reports, programs that provide compiled data, data processing, and specifically SaaS. Like the Amusement Tax, if the service provider has sales tax nexus in the City then they are responsible for collecting the applicable Transaction Tax. The current applicable tax rate is 9%.

Stay tuned for continued introduction of similarly obscure taxes and their applicability for technology service providers.