Lease Transactions Now Subject to Tax in Illinois
Effective January 1, 2025, Illinois will begin taxing lease transactions. Prior to January 1, 2025, personal property was subject to tax at the time of purchase instead of during a lease term. Equipment purchased with the intention to re-lease to eventual clients will now be exempt from sales tax.
Additionally, property subject to Chicago’s personal property lease tax and software licenses meeting Illinois’ five-part test are also exempt.
Illinois leasing businesses must carefully review their tax systems and transactions in 2025 to ensure compliance with the new law. This includes verifying if purchased property qualifies for the resale exemption if it’s intended for future leasing.
Please note that this is only an overview. For specific guidance, connect with our sales and use tax team here.