Starting January 1, 2025, does Illinois still charge state sales tax on leases already subject to Chicago's Personal Property Lease Transaction Tax?

Plain-English summary

Illinois' Retailers' Occupation Tax Act was amended by Article 75 of Public Act 103-592 to bring leases of tangible personal property into the state and local sales tax base for the first time, effective January 1, 2025. This General Information Letter, sent to a tax-software company that tracks sales tax rules nationwide, explains how that new lease tax interacts with local home-rule lease taxes that already existed — specifically Chicago's Personal Property Lease Transaction Tax.

Starting January 1, 2025, a lessor's gross receipts from leasing tangible personal property in Illinois become subject to state and local retailers' occupation tax, the same way a sale would be, because the law's definition of "sale" now includes a "lease." The tax reaches lease receipts received on or after that date for leases in effect, entered into, or renewed on or after that date, and the lessor remits it with each return period. The change does not apply to motor vehicles, watercraft, aircraft, and semitrailers required to be registered with the state (those keep their pre-2025 tax treatment), but it does reach trailers that are not semitrailers.

The Department's answer to the specific question asked: gross receipts from a lease that is already subject to a home-rule unit's own tax on lease receipts — if that local ordinance was adopted before January 1, 2023 — are exempt from the new State and Department-administered local retailers' occupation tax on leases. Chicago's Personal Property Lease Transaction Tax qualifies, so leases already taxed by Chicago are exempt from the new state-level lease tax. And if, apart from that exemption, the lease would otherwise have been taxable under the new Article 75 regime, the lessor can also purchase the leased property tax-free as a sale for resale (rather than paying tax on its own purchase and again collecting tax on the lease).

What this means for you

Lessors operating in Chicago (or other home-rule cities with pre-2023 lease taxes)

If you lease tangible personal property and your leases are already subject to a home-rule lease tax adopted before January 1, 2023 — such as Chicago's Personal Property Lease Transaction Tax — you do not also owe the new Illinois state/local retailers' occupation tax on those same lease receipts once Article 75 takes effect January 1, 2025. You should also be able to buy the property you intend to lease out tax-free as a sale for resale, using your registration or resale number, in that situation.

Lessors and dealers of vehicles, watercraft, aircraft, and trailers

The new lease tax carves out motor vehicles, watercraft, aircraft, and semitrailers required to be registered with an Illinois agency — those keep being taxed the old way (dealers owe retailers' occupation tax, lessors owe use tax, lessees owe nothing). Non-semitrailer trailers, however, are pulled into the new lease tax starting January 1, 2025.

Tax professionals and software teams tracking multi-jurisdiction rules

This GIL is Illinois' own explanation of how the January 1, 2025 statewide lease tax (Article 75, P.A. 103-592) is meant to coexist with local home-rule lease taxes, so it's a useful reference point when configuring lease-tax logic for Illinois, but remember it is non-binding guidance, not a formal Department policy statement.

Common questions

Q: Does Illinois tax leases the same way it taxes sales now?
A: Yes, starting January 1, 2025. Article 75 of Public Act 103-592 redefines "sale" to include a "lease," so lessors owe state and local retailers' occupation tax on gross receipts from leases the same way a retailer would owe it on a sale, based on receipts received on or after that date for leases in effect, entered into, or renewed on or after that date.

Q: If Chicago already taxes my lease under its Personal Property Lease Transaction Tax, do I also owe the new Illinois state lease tax?
A: No. Gross receipts from a lease already subject to a home-rule unit's lease tax adopted before January 1, 2023 — which includes Chicago's tax — are exempt from the State and Department-administered local retailers' occupation tax under 35 ILCS 120/2-5(49)(2).

Q: If my lease receipts are exempt because of the Chicago tax, can I still buy the equipment I'm leasing out tax-free?
A: Yes. If the lease would otherwise be taxable under the new Article 75 regime but for the home-rule exemption, the purchase of that property by the lessor, for the purpose of leasing it, can still be made tax-free as a sale for resale under 35 ILCS 120/2c.

Q: Does the new lease tax apply to vehicle leases?
A: No, not to motor vehicles, watercraft, aircraft, or semitrailers required to be registered with an Illinois agency — those continue to be taxed under the pre-2025 rules. It does apply to trailers that are not semitrailers.

Q: Is this letter binding on the Department?
A: No. It is a General Information Letter under 2 Ill. Adm. Code 1200.120, meaning it points the requester to the relevant statutes and rules but is not a statement of Department policy and does not bind the Department, unlike a Private Letter Ruling.

Citations and references

Statutes:

• 35 ILCS 120/1 (definitions, including "sale" and "lease," as amended)
• 35 ILCS 120/2 (imposition of retailers' occupation tax; lessor remittance obligations)
• 35 ILCS 120/2c (sale for resale to a lessor)
• 35 ILCS 120/2-5(49)(2) (exemption for property subject to a pre-2023 home-rule lease tax)
• 65 ILCS 5/8-11-1 (home rule municipal retailers' occupation tax)
• 625 ILCS 5/1-187 (Illinois Vehicle Code definition of "semitrailer")
• Public Act 103-592, Article 75 (adds leases to the Retailers' Occupation Tax Act, effective January 1, 2025)

Regulations:

• 2 Ill. Adm. Code 1200.110 (Private Letter Ruling procedure)
• 2 Ill. Adm. Code 1200.120 (General Information Letter procedure)

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2024.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2024/ST24-0040-GIL.pdf

Original ruling text

ST 24-0040-GIL 12/06/2024 LEASING
Gross receipts from the lease of property that is subject to Chicago’s Personal
Property Lease Transaction Tax are exempt from the State and Departmentadministered local retailers’ occupation tax, as amended by Article 75 of Public Act
103-592. However, if the lease of this property would, but for this exemption, be
subject to the tax on leases implemented by Article 75 of Public Act 103-592, then a
sale to the lessor of this tangible personal property, for the purpose of leasing that
property, shall be made State and local retailers’ occupation tax-free as a sale for
resale. See 35 ILCS 120(2-5)(49)(2) and 35 ILCS 120/2c. (This is a GIL.)
December 6, 2024
NAME
EMAIL
Dear NAME:
This letter is in response to your letter dated September 24, 2024, in which you
requested information. The Department issues two types of letter rulings. Private Letter
Rulings (“PLRs”) are issued by the Department in response to specific taxpayer inquiries
concerning the application of a tax statute or rule to a particular fact situation. A PLR is
binding on the Department, but only as to the taxpayer who is the subject of the request for
ruling and only to the extent the facts recited in the PLR are correct and complete. Persons
seeking PLRs must comply with the procedures for PLRs found in the Department’s
regulations at 2 Ill. Adm. Code 1200.110. The purpose of a General Information Letter
(“GIL”) is to direct taxpayers to Department regulations or other sources of information
regarding the topic about which they have inquired. A GIL is not a statement of Department
policy and is not binding on the Department. See 2 Ill. Adm. Code 1200.120. You may
access our website at https://tax.illinois.gov/ to review regulations, letter rulings and other
types of information relevant to your inquiry.
The nature of your inquiry and the information you have provided require that we
respond with a GIL. In your letter you have stated and made inquiry as follows:
Hello,
I represent a sales and use tax software company based in STATE. My team
monitors state and local sales and use tax, as well as various other indirect
taxes for all taxing jurisdictions across the COUNTRY. We strive to maintain
the most accurate and up-to-date information in our tax database.

NAME
Page 2
December 6, 2024
We would like to inquire about the Illinois Department of Revenue’s position
on the upcoming tax on lease stream payments, effective January 1, 2025. In
light of changes imposed by HB 4951, a new exemption is included for
property subject to a tax on lease receipts imposed by a home rule unit of local
government.
For transactions that meet this exemption, such as leases subject to the
Chicago Personal Property Lease Tax, does the State of Illinois fully exempt
the state’s portion of tax? Additionally, when a transaction is subject to the
Chicago Personal Property Lease Tax, will the existing Illinois upfront tax
apply?
We appreciate your assistance in providing clarification on this matter.
DEPARTMENT’S RESPONSE:
Effective January 1, 2025, in accordance with the provisions of Article 75 of Public Act
103-592, persons engaged in the business of leasing tangible personal property at retail
(“lessors”) in Illinois are subject to State and local retailers’ occupation tax on the gross
receipts from leases of tangible personal property made in the course of business. See 35
ILCS 120/2 and see, e.g., 65 ILCS 5/8-11-1. A “lease” is defined as a transfer of the
possession or control of, the right to possess or control, or a license to use, but not title to,
tangible personal property for a fixed or indeterminate term for consideration, regardless of
the name by which the transaction is called, but does not include a lease entered into merely
as a security agreement that does not involve a transfer of possession or control from the
lessor to the lessee. On and after January 1, 2025, for purposes of State and local retailers’
occupation taxes, the term “sale” includes a lease. See 35 ILCS 120/1. The tax applies to
lease receipts received on or after January 1, 2025 for leases in effect, entered into, or
renewed on or after that date. The lessor must remit for each tax return period the tax
applicable to lease receipts received during that tax return period. See 35 ILCS 120/2.
The inclusion of leases in the tax imposed under the Retailers’ Occupation Tax Act by
Article 75 of Public Act 103-592 does not, however, extend to motor vehicles, watercraft,
aircraft, and semitrailers, as defined in Section 1-187 of the Illinois Vehicle Code, that are
required to be registered with an agency of this State. The taxation of these items continues
as prior to January 1, 2025 (i.e., dealers owe retailers’ occupation tax, lessors owe use tax,
and lessees of these items are not subject to retailers’ occupation or use tax). On and after
January 1, 2025, the tax on leases does, however, extend to trailers that are not semitrailers
as defined in Section 1-187 of the Illinois Vehicle Code.
On and after January 1, 2025, a sale to a lessor of tangible personal property who is
subject to the tax on leases implemented by Article 75 of Public Act 103-592, for the purpose

NAME
Page 3
December 6, 2024
of leasing that property, shall be made tax-free on the ground of being a sale for resale if the
purchaser has an active registration number or resale number from the Department and
furnishes that number to the seller in connection with certifying to the seller that the sale to
such purchaser is nontaxable because of being a sale for resale. See 35 ILCS 120/2c.
Gross receipts from the lease of property that is subject to a tax on lease receipts
imposed by a home rule unit of local government are exempt from the State and
Department-administered local retailers’ occupation tax if the ordinance imposing the
home rule tax was adopted prior to January 1, 2023. See 35 ILCS 120/2-5(49)(2) as added by
Article 75 of Public Act 103-592. Specifically, gross receipts from the lease of property that
is subject to Chicago’s Personal Property Lease Transaction Tax are exempt from the State
and Department-administered local retailers’ occupation tax. However, if the lease of this
property would, but for this exemption, be subject to the tax on leases implemented by
Article 75 of Public Act 103-592, then a sale to the lessor of this tangible personal property,
for the purpose of leasing that property, shall be made State and local retailers’ occupation
tax-free as a sale for resale.
I hope this information is helpful. If you require additional information, please visit
our website at https://tax.illinois.gov/ or contact the Department’s Taxpayer Information
Division at (217) 782-3336.
Very truly yours,

Samuel J. Moore
Associate Counsel
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