How does Illinois's new 2025 lease tax interact with Chicago's Personal Property Lease Transaction Tax on a leased motor vehicle?

Plain-English summary

A company whose software calculates taxes on vehicle sale and lease transactions for finance companies nationwide asked the Department to untangle how Illinois's new 2025 lease-tax law interacts with Chicago's long-standing Personal Property Lease Transaction Tax (CPPLTT, 15% as of January 1, 2026) on a motor vehicle leased by a Chicago resident.

The key answer resolves the whole question at once: Illinois's 2025 lease-tax expansion (which generally makes State and local Retailers' Occupation Tax apply to leases of tangible personal property, the same as sales) SPECIFICALLY EXCLUDES motor vehicles, watercraft, aircraft, and registered semitrailers. Those categories keep their PRE-2025 tax treatment: the dealer owes Retailers' Occupation Tax on the vehicle, the LESSOR (not the lessee) owes Use Tax, and the lessee itself owes neither Retailers' Occupation Tax nor Use Tax on the lease payments. So the new statewide lease-tax law never touches a motor vehicle lease in the first place, whether the lease happens in Chicago or anywhere else in Illinois.

That means Chicago's CPPLTT operates on its own track, unaffected either way -- it was never in competition with (or exempted by) the new state lease-tax rule for vehicles, because that rule doesn't reach vehicles at all. The Department separately confirmed the GENERAL principle that would apply to non-vehicle leased property: gross receipts from a lease that's already subject to a home-rule unit's own lease-receipts tax (like the CPPLTT) ARE exempt from the State and Department-administered local retailers' occupation taxes, but only if that home-rule ordinance was adopted before January 1, 2023 -- Chicago's CPPLTT qualifies. This exemption matters for other kinds of leased property covered by the 2025 change; it's simply not the operative issue for vehicles, which are excluded from that change entirely.

The Department also spelled out sourcing rules for property that IS subject to the new 2025 lease tax: recurring-payment leases with property delivered to the lessee are sourced to the property's primary location for each payment period (based on an address the lessee provides), while other leases follow the normal retail-sale sourcing rules.

What this means for you

Motor vehicle finance companies, dealers, and lessors

Don't apply Illinois's 2025 lease-tax framework to vehicle leases at all -- it doesn't cover motor vehicles, watercraft, aircraft, or registered semitrailers. Keep using the pre-2025 approach: dealer pays Retailers' Occupation Tax, lessor pays Use Tax, lessee pays neither on the lease payments themselves. Layer Chicago's CPPLTT (or another municipality's equivalent tax) on top exactly as you did before 2025.

Businesses leasing OTHER (non-vehicle) tangible personal property in a home-rule city

For property that IS covered by the 2025 change, check whether your city's home-rule lease-receipts tax ordinance was adopted BEFORE January 1, 2023 -- if so, the state/local Retailers' Occupation Tax doesn't also apply on top of the home-rule tax. If the ordinance came later, that carve-out may not protect you.

Accountants, tax software providers, and compliance professionals

Use the Department's own "Tax Rate Finder" (mytax.illinois.gov) to confirm the combined state/local rate for a given jurisdiction rather than assuming how different lease taxes stack. For non-vehicle leases newly subject to the 2025 rule, apply the sourcing rules correctly: recurring periodic payments source to the property's primary location per period; other leases use normal retail-sale sourcing.

Common questions

Q: Does Illinois's new 2025 lease tax apply to motor vehicle leases?
A: No. Motor vehicles, watercraft, aircraft, and registered semitrailers are specifically excluded -- they keep their pre-2025 treatment (dealer owes Retailers' Occupation Tax, lessor owes Use Tax, lessee owes neither).

Q: Does Chicago's Personal Property Lease Transaction Tax change because of the new state lease-tax law?
A: No, not for vehicles -- since vehicles are excluded from the state change entirely, Chicago's CPPLTT continues to apply on its own, exactly as before.

Q: For property that IS covered by the 2025 lease-tax change, does a home-rule city's own lease tax get layered on top of the state/local Retailers' Occupation Tax?
A: Not if the home-rule ordinance imposing that lease-receipts tax was adopted before January 1, 2023 -- in that case the property's lease receipts are exempt from the State and Department-administered local Retailers' Occupation Tax.

Q: How are lease payments sourced under the new 2025 rule?
A: Recurring periodic payments with property delivered to the lessee are sourced to the property's primary location for that payment period; other leases (including one-time payments or pickup at the lessor's location) follow normal retail-sale sourcing rules.

Q: Can I rely on this letter for my own leasing/finance software calculations?
A: No. This is a General Information Letter -- not binding on the Department. Confirm rate combinations and sourcing for your specific transactions with a tax professional or the Department's Tax Rate Finder.

Citations and references

Session laws / statutes:

• P.A. 103-592, Article 75 (2025 imposition of Retailers' Occupation Tax on leasing of tangible personal property)
• 35 ILCS 120/2 (lessor gross receipts tax)
• 35 ILCS 120/1 (definition of "lease"/"sale" including a lease, effective 2025)
• 35 ILCS 120/2-5(49)(2) (exemption for property subject to a pre-2023 home rule lease-receipts tax, e.g. Chicago's CPPLTT)
• Illinois Vehicle Code § 1-187 (motor vehicles/watercraft/aircraft/semitrailers excluded from the 2025 lease-tax change)

Source

• Landing page: Illinois 2026 Sales Tax Letter Rulings
• Original PDF: ST26-0010-GIL.pdf

Original ruling text

ST 26-0010-GIL

04/07/2026

LEASING

This letter discusses the application of taxes on lease receipts imposed by a home
rule unit of local government. (This is a GIL).
April 7, 2026
NAME
TITLE
COMPANY
ADDRESS
EMAIL
Dear NAME:
This letter is in response to your email dated March 18, 2026, in which you requested
information. The Department issues two types of letter rulings. Private Letter Rulings
(“PLRs”) are issued by the Department in response to specific taxpayer inquiries concerning
the application of a tax statute or rule to a particular fact situation. A PLR is binding on the
Department, but only as to the taxpayer who is the subject of the request for ruling and only
to the extent the facts recited in the PLR are correct and complete. Persons seeking PLRs
must comply with the procedures for PLRs found in the Department’s regulations at 2 Ill.
Adm. Code 1200.110. The purpose of a General Information Letter (“GIL”) is to direct
taxpayers to Department regulations or other sources of information regarding the topic
about which they have inquired. A GIL is not a statement of Department policy and is not
binding on the Department. See 2 Ill. Adm. Code 1200.120. You may access our website at
https://tax.illinois.gov/ to review regulations, letter rulings and other types of information
relevant to your inquiry.
The nature of your inquiry and the information you have provided require that we
respond with a GIL.
INQUIRY:
I work at COMPANY, a consumer credit calculation software company.
One of our software solutions is used by motor vehicle finance companies
throughout the country to calculate vehicle sale and lease transactions,
incorporating relevant taxes and fees.
I understand that as of January 1, 2025, gross receipts from the lease
of personal property (including motor vehicles) that is subject to Chicago’s
Personal Property Lease Transaction Tax are exempt from the State and

COMPANY
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April 7, 2026
Department-administered local retailers’ occupation taxes, as stated in this
GIL.
•

•

In the example where a Chicago resident leases a motor vehicle from a
Chicago dealership, is the Chicago Personal Property Lease Transaction Tax
(15% as of January 1, 2026) the only tax applied to the transaction?
o If no, what additional tax(es) apply, e.g., the RTA tax?
o If yes, does this change if the Chicago resident leases a motor
vehicle from a non-Chicago dealership?
Is the taxable “selling price” to which the CPPLTT is applied the same as the
“selling price” as defined in IL Dept. of Revenue ST-9-LSE?
Thank you for your assistance with this matter, as the information will
help our clients ensure they are calculating Illinois motor vehicle lease taxes
appropriately.

DEPARTMENT’S RESPONSE:
The Illinois Retailers’ Occupation Tax Act imposes a tax upon persons engaged in this
State in the business of selling tangible personal property to purchasers for use or
consumption. See 35 ILCS 120/2; 86 Ill. Adm. Code 130.101. In Illinois, Use Tax is imposed
on the privilege of using, in this State, any kind of tangible personal property that is
purchased anywhere at retail from a retailer. See 35 ILCS 105/3; 86 Ill. Adm. Code 150.101.
These taxes comprise what is commonly known as “sales” tax in Illinois.
Effective January 1, 2025, in accordance with the provisions of Article 75 of Public Act
103-592, persons engaged in the business of leasing tangible personal property at retail
(“lessors”) in Illinois are subject to State and local retailers’ occupation tax on the gross
receipts from leases of tangible personal property made in the course of business. See 35
ILCS 120/2. A “lease” is defined as a transfer of the possession or control of, the right to
possess or control, or a license to use, but not title to, tangible personal property for a fixed
or indeterminate term for consideration, regardless of the name by which the transaction is
called, but does not include a lease entered into merely as a security agreement that does
not involve a transfer of possession or control from the lessor to the lessee. On and after
January 1, 2025, for purposes of State and local retailers’ occupation taxes, the term “sale”
includes a lease. See 35 ILCS 120/1. The tax applies to lease receipts received on or after
January 1, 2025 for leases in effect, entered into, or renewed on or after that date. The lessor
must remit for each tax return period the tax applicable to lease receipts received during
that tax return period. See 35 ILCS 120/2.
The inclusion of leases in the tax imposed under the Retailers’ Occupation Tax Act by
Article 75 of Public Act 103-592 does not, however, extend to motor vehicles, watercraft,

COMPANY
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April 7, 2026
aircraft, and semitrailers, as defined in Section 1-187 of the Illinois Vehicle Code, that are
required to be registered with an agency of this State. The taxation of these items continues
as prior to January 1, 2025 (i.e., dealers owe retailers’ occupation tax, lessors owe use tax,
and lessees of these items are not subject to retailers’ occupation or use tax).
Gross receipts from the lease of property that is subject to a tax on lease receipts
imposed by a home rule unit of local government are exempt from the State and
Department-administered local retailers’ occupation taxes (such as Home Rule ROT, RTA,
MED, etc.) if the ordinance imposing the home rule tax was adopted prior to January 1, 2023.
See 35 ILCS 120/2-5(49)(2) as added by Article 75 of Public Act 103-592. Specifically, gross
receipts from the lease of property that is subject to Chicago’s Personal Property Lease
Transaction Tax are exempt from the State and Department-administered local retailers’
occupation taxes. To determine what applicable taxes make up the total tax rate for a given
jurisdiction, you may use the Department of Revenue’s “Tax Rate Finder” at
https://mytax.illinois.gov/ to determine the combined State and local tax rate.
Important to note and regarding leases and sourcing, the lease of tangible personal
property that is subject to the tax on leases under Article 75 of Public Act 103-592 is sourced
as follows:
(i)

For a lease that requires recurring periodic payments and for which the
property is delivered to the lessee by the lessor, each periodic payment
is sourced to the primary property location for each period covered by
the payment. The primary property location shall be as indicated by an
address for the property provided by the lessee that is available to the
lessor from its records maintained in the ordinary course of business,
when use of this address does not constitute bad faith. The property
location is not altered by intermittent use at different locations, such
as use of business property that accompanies employees on business
trips and service calls.

(ii)

For all other leases, including a lease that does not require recurring
periodic payments and any lease for which the lessee takes
possession of the property at the lessor’s place of business, the
payment is sourced as otherwise provided under this Act for sales at
retail other than leases.

I hope this information is helpful. If you require additional information, please visit
our website at https://tax.illinois.gov/ or contact the Department’s Taxpayer Information
Division at 800-732-8866.

COMPANY
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April 7, 2026
Very truly yours,

George L. Encarnacion, Jr.
Associate Counsel
GLE:sce

Printed by the authority of the state of Illinois.
Electronic Only - One Copy
Issued 04/07/2026; Redacted 05/05/2026