Does paying Chicago's Personal Property Lease Transaction Tax on e-bike and e-scooter rentals exempt a micromobility company from Illinois sales and use tax, both before and after the state's new January 1, 2025 lease tax takes effect?

Plain-English summary

A shared micromobility company (e-bikes and e-scooters for rent, billed per minute) operating in Chicago asked the Illinois Department of Revenue to confirm that, because it already charges, collects, and remits Chicago's Personal Property Lease Transaction Tax on its rentals, it should be exempt from any additional Illinois sales or use tax on those same assets. The company worried that layering state tax on top of the city lease tax would amount to double taxation.

The Department's answer is really two answers stitched together, because the law changed right around the date of this letter. Through December 31, 2024, Illinois imposed no state Retailers' Occupation Tax or Use Tax on lease receipts at all. A "true lease" (one without a bargain purchase option) makes the lessor the end user of the property, so the lessor owes Use Tax on its own cost to acquire the property, but the lessee owes nothing on the rental payments themselves. So under 2024 law, the company's e-bikes and e-scooters generated no separate state sales/use tax liability on the lease receipts in the first place — there was no double taxation to prevent because there was only one tax (Chicago's) in play.

That changes on January 1, 2025. Article 75 of Public Act 103-592 amends the Retailers' Occupation Tax Act so that a "lease" is now itself treated as a "sale," making lessors liable for state and local retailers' occupation tax on lease receipts going forward (with carve-outs for registered motor vehicles, watercraft, aircraft, and semitrailers, which keep the old rules). But the same law builds in the answer to the company's actual worry: gross receipts from a lease that is already subject to a home-rule unit's own lease tax — like Chicago's Personal Property Lease Transaction Tax — are exempt from the new state and Department-administered local retailers' occupation taxes, as long as the home-rule ordinance was adopted before January 1, 2023. Chicago's tax predates that cutoff, so the Chicago-taxed leases stay exempt from the new state/local tax even after January 1, 2025. If that exemption applies, the retailer's own purchase of the property to be leased can also be made tax-free as a sale for resale.

In short, the Department did not simply "confirm" the taxpayer's blanket theory that paying a lease tax anywhere insulates it from all other taxes; instead it walked through the specific mechanics that happen to produce the no-double-tax result here, both under the law as it stood in 2024 and under the law that took effect on January 1, 2025.

What this means for you

Micromobility, shared-fleet, and other true-lease businesses in Chicago

If your leased property is already subject to Chicago's Personal Property Lease Transaction Tax and that ordinance predates January 1, 2023, your lease receipts remain exempt from the new state and local retailers' occupation tax that took effect January 1, 2025 — you don't have to add a second layer of state ROT on top of the city tax. You should also be able to purchase the tangible personal property you intend to lease tax-free as a sale for resale, provided you have an active registration/resale number and furnish it to your supplier.

Lessors operating outside Chicago or under newer home-rule lease taxes

The exemption only protects leases already subject to a home-rule lease tax adopted before January 1, 2023. If your municipality's lease tax was adopted on or after that date, or you're not subject to any home-rule lease tax, your lease receipts became newly taxable under state and local retailers' occupation tax as of January 1, 2025, per Article 75 of Public Act 103-592. Also remember the separate carve-outs: leases of registered motor vehicles, watercraft, aircraft, and semitrailers are not covered by the new lease tax and continue under the old dealer/lessor use-tax framework, while short-term automobile rentals and rent-to-own household goods have their own dedicated tax acts.

Accountants and tax professionals

Distinguish "conditional sales" (nominal buyout, taxed as a sale from day one under 86 Ill. Adm. Code 130.2010) from "true leases" (no bargain buyout, lessor is the end user). For true leases after January 1, 2025, the lessor collects ROT on lease receipts under 35 ILCS 120/2 and 120/1, but a purchase for the purpose of leasing can be a resale-exempt purchase under 35 ILCS 120/2c and 86 Ill. Adm. Code 130.1405, provided a Certificate of Resale is obtained. Watch the interaction between the general resale exemption and the specific home-rule carve-out in 35 ILCS 120/2-5(49)(2) — the resale exemption on the purchase side can still apply even when the home-rule exemption removes the lease receipts from state/local ROT.

Common questions

Q: Did the Department confirm that paying Chicago's lease tax exempts a business from all Illinois sales and use tax?
A: Not as a blanket rule — the Department explained the actual mechanics instead. Through 2024, state law simply didn't tax lease receipts at all, so there was nothing to double up on. From 2025 forward, lease receipts are newly taxable under state law, but receipts already subject to a qualifying pre-2023 home-rule lease tax (like Chicago's) are specifically exempted from the new state and local retailers' occupation tax.

Q: What is the difference between a "true lease" and a "conditional sale" in Illinois?
A: A conditional sale usually has a nominal (e.g., $1) buyout at the end of the term, which makes the whole transaction taxable as a sale from the start. A true lease has no buyout, or only a fair-market-value buyout; under a true lease the lessor is treated as the end user and (through 2024) owed Use Tax on its own cost of the property, while the lessee owed nothing. See 86 Ill. Adm. Code 130.2010.

Q: What changes on January 1, 2025 under Article 75 of Public Act 103-592?
A: Illinois's definition of "sale" for retailers' occupation tax purposes now includes a "lease," so lessors owe state and local retailers' occupation tax on lease receipts received on or after that date for leases in effect, entered into, or renewed on or after that date. This does not apply to registered motor vehicles, watercraft, aircraft, or semitrailers, which continue under the pre-2025 rules, or to short-term auto rentals and rent-to-own household goods, which are taxed under their own separate acts.

Q: Can a lessor still buy the property it plans to lease tax-free?
A: Yes. Beginning January 1, 2025, a sale to a lessor who is subject to the new lease tax, made for the purpose of leasing that property, can be made tax-free as a sale for resale if the lessor has an active registration or resale number and furnishes it to the seller with the required resale certification. See 35 ILCS 120/2c and 86 Ill. Adm. Code 130.1405.

Q: Does the home-rule lease-tax exemption apply to any city that taxes leases, or only Chicago?
A: The statute is written generally — it exempts gross receipts from a lease subject to a home-rule unit's own lease tax, as long as that unit's ordinance was adopted before January 1, 2023. The Department applied it here specifically to Chicago's Personal Property Lease Transaction Tax because that's the tax at issue in the letter, but the underlying exemption in 35 ILCS 120/2-5(49)(2) is not limited by its terms to Chicago alone.

Citations and references

Statutes and rules:

• 35 ILCS 120/2 (Retailers' Occupation Tax Act, imposition of tax)
• 35 ILCS 120/1 (definition of "sale," amended to include leases effective 1/1/2025)
• 35 ILCS 120/2c (sale for resale to a lessor)
• 35 ILCS 120/2-5(49)(2) (exemption for leases already subject to a pre-2023 home-rule lease tax)
• 35 ILCS 105/3 (Use Tax Act, imposition of tax)
• 35 ILCS 155/1 et seq. (Automobile Renting Occupation and Use Tax Act)
• 35 ILCS 180/1 et seq. (Rental Purchase Agreement Occupation and Use Tax Act)
• 86 Ill. Adm. Code 130.101; 86 Ill. Adm. Code 150.101
• 86 Ill. Adm. Code 130.2010 (conditional sales vs. true leases)
• 86 Ill. Adm. Code 130.1401 (sale for use/consumption vs. sale for resale)
• 86 Ill. Adm. Code 130.1405 (Certificate of Resale)
• 2 Ill. Adm. Code 1200.110 (private letter ruling procedure); 2 Ill. Adm. Code 1200.120 (general information letters)
• Article 75 of Public Act 103-592 (2025 statewide lease-tax overhaul)

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/ST24-0046-GIL.pdf

Original ruling text

ST 24-0046-GIL 12/27/2024 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 taxes, 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 27, 2024
COMPANY
EMAIL
Dear Taxpayer:
This letter is in response to your letter dated October 9, 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:
We are writing to you to better understand the application of use tax on our
fleet of assets. For background, our company ("Taxpayer") is a shared micromobility provider which provides e-bikes and e-scooters for rent. Customers
are able to pay up front or after the end of their rental period for a
predetermined per-minute fee.
The Taxpayer operates within the City of Chicago. The Taxpayer charges,
collects, and remits the Chicago Lease Transaction Tax on all of its lease
transactions. For calendar year 2024, the state of Illinois does not impose
Retailers' Occupation Tax ("ROT") on lease or rental transactions, and

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December 27, 2024
therefore the Lease Transaction Tax is the only transaction tax applicable to
the Taxpayer.
Because the Taxpayer has been collecting transaction taxes in the form of the
Lease Transaction Tax, it is our belief that our e-bikes and e-scooters are
exempt from any additional transaction taxes. It is our belief that imposition
of additional taxes, such as use tax, would constitute double taxation.
Question: Can the Illinois Department of Revenue kindly confirm our
understanding above, that is, Illinois sales and use taxes would not apply to
our assets?
Thank you in advance for your time and advice in the matter.
DEPARTMENT’S RESPONSE:
The Illinois Retailers’ Occupation Tax Act imposes a tax upon persons engaged in this
State in the business of selling tangible personal property to purchasers for use or
consumption. See 35 ILCS 120/2; 86 Ill. Adm. Code 130.101. In Illinois, Use Tax is imposed
on the privilege of using, in this State, any kind of tangible personal property that is
purchased anywhere at retail from a retailer. See 35 ILCS 105/3; 86 Ill. Adm. Code 150.101.
These taxes comprise what is commonly known as “sales” tax in Illinois. If the purchases
occur in Illinois, the purchasers must pay the Use Tax to the retailer at the time of purchase.
The retailers are then allowed to retain the amount of Use Tax paid to reimburse themselves
for their Retailers’ Occupation Tax liability incurred on those sales. If the purchases occur
outside Illinois, purchasers must self-assess their Use Tax liability and remit it directly to the
Department.
For Illinois Retailers’ Occupation Tax and Use Tax purposes, there are two types of
leasing situations: conditional sales and true leases. A conditional sale is usually
characterized by a nominal or one dollar purchase option at the close of the lease term.
Stated differently, if lessors are guaranteed at the time of the lease that the leased property
will be sold, this transaction is considered to be a conditional sale at the outset of the
transaction, thus making all receipts subject to Retailers’ Occupation Tax. See 86 Ill. Adm.
Code 130.2010.
A true lease generally has no buyout provision at the close of the lease. If a buyout
provision does exist, it must be a fair market value buyout option in order to maintain the
character of the true lease. Lessors of tangible personal property under true leases in Illinois
are deemed end users of the property to be leased. As end users of tangible personal
property located in Illinois, lessors owe Use Tax on their cost price of such property. Through

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December 27, 2024
December 31, 2024, the State of Illinois imposes no tax on lease receipts. Consequently,
lessees incur no State tax liability. See 86 Ill. Adm. Code 130.2010.
The above guidelines are applicable to all true leases of tangible personal property in
Illinois except for automobiles leased under terms of one year or less, which are subject to
the Automobile Renting Occupation and Use Tax found at 35 ILCS 155/1 et seq. and
merchandise rented for personal, family, or household purposes that is subject to tax under
the Rental Purchase Agreement Occupation and Use Tax Act found at 35 ICLS 180/1 et seq.
Changes Effective January 1, 2025
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. 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.
A person who sells tangible personal property to a purchaser who may use or
consume such property within the meaning of the Retailers’ Occupation Tax Act, but who
also may resell such property, must determine, at the time when he sells the property to
such purchaser, whether the purchaser is buying the property “for use or consumption”
within the meaning of the Act or whether the purchaser is buying the property “for resale”.
86 Ill. Adm. Code 130.1401. Beginning 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-

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December 27, 2024
592, for the purpose 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. See 86 Ill. Adm. Code 130.1405 for Certificate of Resale requirements.
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 taxes 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 taxes. 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 800-732-8866.
Very truly yours,

Samuel J. Moore
Associate Counsel
SJM:sce