Chicago Introduces Social Media Tax, Increases Personal Property Lease Transaction Rate

On January 1, Chicago became the first U.S. city to impose a social media amusement tax (SMAT) on social media businesses. The new tax applies to defined businesses that collect consumer data on more than 100,000 Chicago consumers in a calendar year. Also effective January 1 is an increase in the personal property lease transaction tax (PPLTT) rate.

Both changes were passed as part of the City Council’s 2026 revenue ordinance.

SMAT

Key Provisions and Definitions

The SMAT is imposed on social media companies that collect consumer data on more than 100,000 Chicago consumers in a calendar year based on the number of consumers from whom a social media company collects consumer data in a calendar month. It is assessed against social media businesses at a rate of $0.50 for every Chicago consumer over 100,000 in a month. Companies must calculate the tax monthly and pay it by the 15th of the following month (unless the 15th falls on a weekend or holiday), with tax returns filed annually. The first payment, which covers January 2026, is due February 16, 2026. The first tax return will cover January 1, 2026, to June 30, 2026, and has a filing due date of August 17, 2026. 

In its revenue ordinance, the City Council defined several important terms, including “amusement,” which means engagement with media content delivered through the use of social media for the substantial purpose of entertainment and enjoyment. 

A social media business is a for-profit entity that in support of its business activities provides individuals with access to social media and collects, maintains, uses, processes, sells, or shares consumer data other than consumer contact information, according to the council. That definition does not include:

• News organizations;
• Internet search or service providers;
• Email services;
• Online video games;
• Streaming services whose content is not user-generated but does include interactive functions;
• Communication services;
• Advertising networks that deliver solely commercial content;
• Telecommunication carriers;
• Broadband services;
• Cloud computing services; or
• Technical support services.
  
  

Also, SMAT does not apply to intercompany data transfers because all entities in a controlled corporation group are considered a single entity.

Another important definition is that for the term “Chicago consumer,” which the council has defined as a Chicago resident who uses social media in the city and whose consumer data is collected by the social media business regardless of whether the individual is charged for accessing the account or any media. The burden is on the social media company to analyze consumer data to determine if a consumer is a Chicago customer. However, there is a rebuttable presumption that a consumer whose information on record with or available to a social media business indicates a Chicago home address, a Chicago mailing address, or an internet protocol address or other consumer data on primary use location connected with a Chicago location is a Chicago consumer. 

Personal Property Lease Transaction Tax

As of January 1, Chicago’s PPLTT rate increased to 15%, up from 11%. The tax applies to businesses and individuals leasing personal property, including tangible items, software, software as a service, and cloud-based services, in Chicago.