Sales tax is complex for any business selling into multiple states. But there are specific states and jurisdictions that make it extra confusing for those trying to maintain compliance. One such location is Chicago, Illinois.
Chicago is a home rule city and taxes several items that are not taxable at the state level. One example is Software-as-a-Service (SaaS) which is not taxable at the state level but is taxable within the City of Chicago. To further complicate this, Chicago does not apply sales tax to SaaS rather they apply a personal property lease transaction tax which is currently 9%. This non-sales tax “tax” is just one of many tax types that the City of Chicago has implemented. These different taxes cover amusements (including streaming), boat mooring, bottled water and soda, checkout bags, cigarettes, electricity, emergency telephone systems, fire insurance, gas, liquor, parking, tires, etc.
If all of these specific taxes aren’t enough Chicago has been enforcing their own economic nexus threshold (separate from the economic nexus threshold of Illinois).. Luckily as of July 1, a threshold of $100,000 (same as the state of Illinois) has been included in this standard so that the local government can only go after a remote seller who has made sales into the city that meets or exceeds the threshold. Furthermore, as a home rule city, Chicago has its own enforcement capabilities – meaning that they audit businesses and have historically been aggressive within their audit program.
Got all that? Probably not, unless you’re an expert in sales tax and are continually following updates on a state and local level. If you’re having trouble keeping track of all the changes in Chicago, or anywhere else, get in touch, we can help. TaxConnex provides services to become your outsourced sales tax department. Get in touch to learn more.