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There's a cloud hanging over Chicago's tech ecosystem.
The city’s controversial lease transaction tax, which drew sharp criticism from many tech community leaders after its quiet introduction in late June, will not go into effect until January 1 of next year, the city announced last week.
Popularly dubbed the “cloud tax,” the ruling plans to expand a long-standing statute so that it now includes what it sees as taxable, tech-based transactions (think cloud-based services like SaaS, and PaaS).
Despite the city’s usual efforts to support the city’s tech startup community, the tax sits at a hefty 9 percent, leaving many leaders in the tech community scrambling to understand how the tax may affect business.
Mayor Rahm Emanuel seems open to relief for technology startups, and many tech companies and taxpayer advocacy groups have met with the city expressing their concerns.
Though the Mayor — who usually champions the city’s burgeoning tech ecosystem — said in an 1871 statement that startups could be “basically exempt” from the tax, there's still been no resolution on what exactly that relief might look like, how a business can meet qualifications, or when those exemptions could come into play.
The tax's twin, which collects a tax on streaming entertainment services in the city like Netflix, is still slated to go into effect September 1.
As it stands, Chicago startups now have until the first of the year to put systems in place to abide by the new application of the cloud tax — or wait with crossed fingers for the city to keep it’s word.
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