In a recent bill signed by the governor, sales tax laws for leased equipment have changed drastically. Prior to this law change, Illinois differed from most other states by taxing tangible personal property at purchase rather than the lease payment streams. The recent legislation update has altered this approach.
Beginning January 1, 2025 lease transactions will be taxed. Lessors will now be allowed to claim a resale exemption when purchasing the equipment to re-lease to customers, and then they must collect tax on the lease stream. There are two exemptions to this tax law: property subject to the Chicago personal property lease transaction tax and software licenses meeting Illinois’ five-part test for licensed software.
It is important for lessors to update their systems to reflect these changes for taxing lease transactions. Please contact the DHJJ State and Local Tax Team at 630-420-1360 with any questions.
Article submitted by Meaghan Figg
