What is the Chicago Lease Tax and why am I being charged for it?
Chicago customers who use cloud-based software will be subject to pay a Chicago Personal Property Lease Transaction tax as of January 2017. The Lease Tax is imposed by and remitted to the City of Chicago. It is like a sales tax but instead of applying to items you purchase like clothes and electronics, the Lease Tax applies to your use of software that is accessed through cloud services.
How much tax will be applied to my Sprout bill?
Sprout is using the City of Chicago required rate of 5.25% to calculate the tax. For example, if your invoice is $59 pre-tax, the tax due would be ($59 x 0.0525) or $3.10. Your total invoice post tax will be ($59 + $3.10) or $62.10.
How is this tax being charged?
If you are a Chicago customer, you will see a separate line item on your invoice
When does this tax start?
Sprout Social has implemented the tax beginning January 2017.
How does Sprout decide if I’m a City of Chicago customer?
Your taxability is determined using your billing zip code.
Is this because Sprout is located in Chicago as well?
No, the Lease Tax is solely determined by the customer’s billing zip code and not the location of the provider. In other words, all cloud based software companies with Chicago customers will be required to collect the Lease Tax.
What should I do if I think I should be exempt from this tax?
The City of Chicago has provided this information bulletin which may help you determine if you are eligible to apply for an exemption such as a small business application. There are also classes of exempt leases such as those being used by governmental bodies, charitable, educational, religious organizations and insurance companies listed by the City of Chicago.
If you believe you should be exempt or not subject to this tax, please contact firstname.lastname@example.org forward any support available for your exemption (e.g. Tax Exemption Certificate, Small Business License).