As technology evolves to offer new services that were unthinkable even a decade ago, state and local taxing authorities struggle to keep up. All too often, the will or ability to amend tax laws to address novel industries and technologies is lacking; instead revenue administrators aggressively interpret existing tax laws in an attempt to capture new revenue. This is pushing a square peg into a round hole, as demonstrated by the conceptual gaps of recent City of Chicago guidance: Personal Property Lease Transaction Ruling #12 and Amusement Tax Ruling #5.
These sister rulings, issued simultaneously on June 9, 2015, take opposite approaches to characterizing transactions: the lease transaction tax ruling focuses on the means of providing a service using computer hardware and software; the amusement tax ruling looks at the ends of a customer's desire to be entertained. These inconsistencies are a result of extending old taxes to new services and create opportunities for taxpayers to challenge Chicago's position.
Originally published by Thomson Reuters/Tax & Accounting.
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