When the city of Chicago quietly implemented a new 9% tax on cloud-based services, it had many local startups demanding more information on the law, and wondering how it would impact their businesses. The fear from many in the Chicago tech community was that the law could be costly for startups that use cloud services, and it may deter new companies from launching in Chicago. Mayor Rahm Emanuel has been a loud proponent of Chicago's tech ecosystem, but the law has been received as nothing but stifling to startups.
Trunq, an image storage and sharing startup set to launch its app and website later this month, is a prime example of the potential dangers of the cloud tax. C0-Founder Steve Wernikoff and the rest of his team are based in the Chicago area, have investors and advisors in the city, but are weighing their options of leaving Chicago because of the new tax.
"We’re just about to put down our roots, so we’re looking at this tax discussion closely," Wernikoff said. "We love Chicago. It's a really exciting place for tech startups. But ultimately we have to do what's best for the company.
"If it was necessary to head out West, we would look into that. At this point we have flexibility to decide what makes the most sense, and the tax implications could factor in."
Wernikoff said his biggest frustration has been the lack of transparency and information available from the city, and he's looking for clearer information on how the laws would impact his business.
"Uncertainty makes it tough to run a business," he said.
Trunq is an app and website that combines messaging and personal file storage so users can capture, share and privately save their photos and videos. You can send a file to be opened in the future, or upload and save an image from the past. Items are stored in your personal “trunk,” which is like a digital scrapbook.
"Think of it like if Snapchat and Dropbox had a baby," Wernikoff said.
Trunq's platform is built almost exclusively on cloud servers, Wernikoff said, adding that he's concerned about how his company's cloud software use could be taxed, and if Trunq's customers would need to be charged more once its premium service rolls out.
The city of Chicago has yet to give a detailed explanation of the tax and how it impacts tech companies, but the mayor's office released a statement earlier this week that said in part that "the administration will be taking measures to provide relief to small businesses" and "it will basically exempt start-ups (based on revenue) from paying the tax." The statement added that it would take about a month to formalize the proposal.
"Responding to the startup community's concerns is a good thing," Wernikoff said. "We’re cautiously optimistic that the city will set some clear interpretations of these tax rulings that won’t hurt the startup community. We're just going to continue to watch closely, like the rest of the tech community, and see what actually is set in stone."
Image via Trunq
