The city of Chicago’s finance department recently passed the Personal Property Lease Transaction Tax Ruling, which states companies that deliver cloud-based services must collect taxes from Chicago customers, a statement from the Chicago Association of Realtors said.
In its current state, the association said the ruling may have implications on taxes on real estate databases such as the MLS.
According to the ruling, it applies to “transactions to obtain real estate listings and prices and similar information or data that has been compiled, entered and stored on the providers computer.”
Brian Bernardoni, senior director of government affairs with the Chicago Association of Realtors said in an interview with NPR that it's raised a lot of concern in the industry.
“We see this as akin to taxing a hammer each time we use it when you build a house,” said Bernardoni.
“Regardless, there are plenty of people bothered by Chicago’s approach. Tax policy is one of those things that not only people in the city of Chicago look at, but people across the country look at. And when we add new taxes we add another cloud around the city saying this is not a good place to do business,” Bernardoni continued.
NPR explained that the city said didn’t need to hold a public hearing over the ruling since the tax isn't new and is actually a clarification — not an expansion — of two taxes that have long been in effect.
The changes to the two taxes, the Personal Property Lease Transaction Tax, and the Amusement Tax, which has traditionally been tacked onto tickets for concerts and sporting events, will create a 9% tax on streaming entertainment like Netflix and Spotify.
However, the new changes are only expected to add about $12 million in revenue to a city struggling to fill a deep budget hole.
Right now, this ruling is exclusive to Chicago, but NPR brings up the question, “What are we going to tax next?”
The Chicago Association of Realtors said it “is working in coalition with other real estate trade groups and tech firms in assessing the full impact and applicability of this ruling on real estate listings. We will report on this issue frequently as the situation is extraordinarily fluid.”