Cloud services being taxed in Chicago
Starting back in July, Chicago residents were chagrined to discover that their streaming services, such as Netflix, Spotify, and Amazon, were going to cost them an additional nine percent, thanks to a cloud services tax levied by the city.
Chicago lawmakers ruled that any paid television, video, or music service streamed through the internet, as well as any cloud search services, would be subject to the new tax. Permanent downloads won’t be taxed, but any “rental,” streamed, or subscription service will be.
Add nine percent to your bill, no biggie
Many companies, like Netflix, will automatically tag the nine percent fee onto your monthly bill. Others, however, will leave it up to their customers to report and file taxes for their streaming subscriptions. All of this will lead to higher monthly bills for users, and a big headache when it comes time to file taxes.
Unsurprisingly, disgruntled citizens have banded together to object to the new tax. Late last week, a nonprofit representing a group of concerned Windy City residents filed a suit against the city.
Was the tax passed illegally?
The prosecution will argue that the tax was passed illegally, as the city alderman were denied the opportunity to vote on the issue.
They will also demonstrate that the cloud tax violates preexisting statutes that protect internet users from burdensome taxes. The Internet Freedom Tax Act, which was passed way back in 1998, is supposed to prevent all levels of the government, whether city, state, or federal, from taxing citizens for using common internet services like email.
City claims they’re above board
The city, on the other hand, claims that the cloud tax is legal under the preexisting Amusement Tax, which charges an extra fee to Chicagoans for the “privilege to witness, view, or participate in an amusement.”
They say this tax should also apply to “amusements that are delivered electronically.” Legal representatives for the city feel “confident that the ruling is valid.”
The city stands to lose an estimated $12 million in potential tax revenue.