Chicago has issued a revised ruling providing guidance on the Chicago personal property lease transaction tax related to computer use and software. This revised ruling makes a significant change in city policy related to software licenses. Prior to the issuance of this revised ruling, perpetual leases of computer software were not subject to the transaction lease tax. However, the City’s new position is that any software license agreement that meets the 5-prong tests in Illinois Administrative Code Section 130.1935 and is considered an exempt transaction for Illinois sales tax purposes will be deemed taxable in Chicago if the software is licensed for use in Chicago. This could result in significant additional costs for software licenses in Chicago. Concern has been raised that Chicago has expanded the basis of the tax through a revised ruling rather than through the passage of an amendment to the Ordinance imposing the tax. We are monitoring this issue and will provide updates as they become available. For an update on this news item, click here. (Personal Property Lease Transaction Tax Amended Ruling #5, Chicago Department of Finance, August 6, 2013, effective September 1, 2013 )