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Samantha Breslow Discusses the Paradox of Chicago’s Approach to Nexus and the “Cloud Tax” with Bloomberg Tax

Bloomberg Tax 01/03/2020
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Chicago's previously hidden tax ruling exempted Moxie Software Inc. from tax collection duties under the "Cloud Tax". In an article by Bloomberg Tax, Samantha Breslow explains the discrepancy between the Cloud Tax and Chicago's stance on nexus.

Because the city didn't address the question of nexus in 2015 when modifications to its Personal Property Lease Transaction Tax were made, the Moxie PLR suggests that tech companies with no physical presence in Chicago prior to the Supreme Court's South Dakota v. Wayfair ruling have no duty to collect and remit the cloud tax. Chicago's tax counsel determined Moxie didn't have to immediately collect from customers under the cloud tax but reserved the city's right to change that if its law changes.

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Quill Corp. v. North Dakota, a case which indicated taxpayers had to have a physical presence in order to be taxed, was tossed after the implementation of Wayfair, which instead made it possible for states to tax remote sellers who were considered to have an economic nexus even if they had no physical presence.

“In these unpublished PLRs, the department takes the position that Quill is not applicable to the transaction tax, yet concedes that this is an ‘unsettled area of law’ and does not require the taxpayer to collect the transaction tax,” said Sam.

The previously hidden PRL now raises the possibility of tax relief for other tech businesses like Moxie under audit.

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