The City of Chicago is pushing to raise the Personal Property Lease Transaction Tax (PPLTT), which is levied when borrowing goods or digital services, from the current 15% to 20%.
While Mayor Brandon Johnson argues the move will increase tax revenue from large tech companies, controversy is growing as it could actually increase cost burdens for small business owners who rent equipment, companies that use software, and general consumers.
The PPLTT is a tax paid when borrowing or using goods and services. Commonly referred to as the ‘Cloud Tax,’ its application range is much broader than the name suggests.
It applies to renting construction equipment, tools, tables and chairs for events, and tuxedos, as well as digital service usage fees such as online accounting programs, customer relationship management software, and cloud storage space. Even items rented outside of Chicago can become subject to taxation if they are used within the city.
The tax rate stood at 9% before Mayor Johnson took office, but rose successively to 11% in 2025 and 15% in 2026. If the new proposal goes through, it will increase by 5 percentage points to 20%.
For example, if the taxable rental fee is $100, the tax increases from the current $15 to $20.
Mayor Johnson estimated that the tax rate hike could secure an additional $234 million in annual tax revenue. The plan also includes maintaining the vehicle rental tax rate at 15% and lowering the film production equipment rental tax rate to 11%.
However, opposition voices are growing within the City Council. Twenty-eight city council members expressed their opposition to the PPLTT hike proposal in a letter on the 10th.
They pointed out that Mayor Johnson must keep his promise not to raise taxes further before 2028, which he made when raising the tax rate to 15% this year. Since 26 votes are required to pass the City Council budget, it remains unclear whether Mayor Johnson’s hike proposal will pass as is.
Under Chicago city ordinances, the entity that actually pays the tax is the customer who rents and uses the service, while rental companies play the role of collecting the tax from customers and remitting it to the city. Therefore, not only large corporations but also small and medium-sized enterprises using cloud services, self-employed individuals renting various equipment, and general consumers will be affected.
Chicago’s software rental tax rate is already among the highest of any major metropolitan area.
