Fear and loathing over Chicago's new 'cloud tax'

Crain's Chicago Business reports:

The city of Chicago says it's willing to work with tech startups on the implementation of a tax on cloud technology.

Tech entrepreneurs blasted City Hall, complaining loudly that the tax rules issued last month but which took effect last week, would hurt them and discourage startups in Chicago. The city said it would extend a nine percent lease tax to cloud-based technology services.

“Based on feedback we have received from Chicago's vibrant start-up community, the administration will be taking measures to provide relief to small businesses so as not to put them at a competitive disadvantage,” a spokeswoman for Mayor Rahm Emanuel said in statement.

The city still isn't clarifying exactly who will get taxed and by how much, nor what kind of "relief" might be in the cards. “Proposals are being discussed with stakeholders, and we will release further guidance later this month,” the spokeswoman said.

One possibility is exempting businesses under a certain size, based on revenue.

That would only be a partial victory for technology companies, which increasingly are relying on companies such as Amazon, Microsoft, Google and IBM to rent computing capacity. Cash-strapped startups are particularly dependent on such services.

The struggles of declining Blue America. What tax will Chicago think of next ?