back to article Cash-strapped Chicago slaps CLOUD TAX on Netflix, Spotify etc users

New changes to tax law in the city of Chicago have effectively raised the prices of online streaming and cloud services in the Windy City, beginning on Wednesday. The Chicago Tribune reports that an update to the city's "amusement tax" adds a 9 per cent tax to Chicagoans' subscriptions to streaming services like Netflix and …

  1. Anonymous Coward
    Anonymous Coward

    Its just the beginning ....

    First Chicago, then any other major city with an 'Amusement Tax'. First Netflix... then others... like Internet sales tax.

  2. Anonymous Coward
    Anonymous Coward

    Watch out Chicago

    you could be the next Detroit

    1. Anonymous Coward
      Anonymous Coward

      Re: Watch out Chicago

      Actually, the state of Illinois is the next Detroit.

      1. Fungus Bob

        Re: Watch out Chicago

        I've seen Illinois, the AC is right...

        1. Fatman

          Re: Watch out Chicago

          <quote>I've seen Illinois, the AC is right...</quote>

          I used to live in Chicago, Illinois, and I know that the AC is right!!!


  3. Mark 85

    Ah.. lawsuits in perpetuity...

    Given the nature of way things happen in Chicago, the abundance of lawsuits about to be filed will eat up any revenues and then some for the next 10 years.

    I'll add that there won't be any problems with state law as Chicago runs the state legislature*.

    *In case you wonder how... there's Chicago and then there's "down state" which is everything else. The way things are set up, anything Chicago wants, Chicago gets from the state. I've lived there too long not to appreciate the power of Chicago and it's large graveyard vote in every election.

  4. DerekCurrie

    The Opposite Of Sensible Or Fair

    "Chicago residents who prefer to download their music rather than stream it, on the other hand, are in luck: the change to the tax law doesn't apply to them."

    Resulting Incentive: Torrent media downloads and avoid the tax. IOW: Crime. How Chicago of Chicago.

    Obviously, this breaks real Net Neutrality as well.

    1. Ted Treen

      Re: The Opposite Of Sensible Or Fair

      "Chicago residents who prefer to download their music rather than stream it, on the other hand, are in luck: the change to the tax law doesn't apply to them."


  5. Voland's right hand Silver badge

    Legal challenges aside

    Well, I did not know that Chicago is in Greece, I know now.

    There are two sides to a tax and formulating it is only half of the equation. The other half is collecting it and enforcing compliance. This looks like something which will have a distinctly Greek level of tax collection and compliance.

  6. Gray

    Not to worry ...

    The Feds will never let it stand. They'll applaud the initiative, but will swat the interlopers off the cash cow and reserve the choicest teats for themselves.

  7. Anonymous Coward
    Anonymous Coward

    Keep... democrat.

  8. jake Silver badge

    "The Chicago Tribune"

    That bastion of truthful reporting ...

    "reports that an update to the city's "amusement tax" adds a 9 per cent tax to Chicagoans' subscriptions to streaming services like Netflix and Spotify, and indeed to any activity that constitutes "watching electronically delivered television shows, movies or videos," "listening to electronically delivered music," or "participating in games, on-line or otherwise."

    So they are going to tax over-the-air electronically delivered TV, movies, videos and music? And presumably anyone listening to the Cubs or the Sox on a transistor will be charged?

    "Chicago residents who prefer to download their music rather than stream it, on the other hand, are in luck: the change to the tax law doesn't apply to them."

    Presumably because it's not "electronically delivered" ;-)

    Politicians are a class unto themselves. A clueless class.

  9. Mage Silver badge

    Is it legal?

    They used tax windows, hearths, radio sets, car radios separately.

    I think governments can tax anything if they can collect it and the natives don't revolt.


    USA (Mad King, unfair taxes -> Boston Tea party -> War of independence)

    India Cotton (Could only be exported to UK, Indians had to buy UK cloth)

    Ireland Water (it's not like there a lack of rain, but they don't have enough reservoirs and 30-% to 50% is leaking)

    UK Bedrooms and Poll Tax

    Tax on Blank media supposedly to compensate rights holders. What about people with their OWN content?

    1. Peter Gathercole Silver badge

      Re: Is it legal? @Mage

      UK "Bedroom Tax" is not a tax. The media and opposition parties deliberately misrepresent it to increase the emotive impact of the issue.

      It is actually a rebate on the housing benefit (a welfare payment) given to someone who lives in a house with an unused bedroom. (Rebate is used a little strangely here, because you don't normally expect it to be used to benefit state institutions).

      If you do not get housing benefit, you are not affected at all by this.

      Queue downvotes, but I don't think that the state should pay welfare benefits to people so that they can live in houses larger than they need, although I do think there needs to be significant exceptions for people with intermittent requirement for an extra room, for example if they need to house significant amounts of medical equipment, an occasional live-in carer, or children and members of the armed forces returning home for holidays and leave.

      If it were a true tax, everybody would have to pay it, even people not receiving benefit and/or people owning their own house outright.

      On the story, I thing Chicago are ill-advised to introduce a tax that is going to be difficult to enforce.

      1. Peter Gathercole Silver badge

        Re: Is it legal? @Mage

        Gawd. I'm going senile. Read Queue as Cue!

        Can we have a bit more than 10 minutes as an editing period, please?

        1. jake Silver badge

          @Peter Gathercole (was:Re: Is it legal? @Mage)

          "Gawd. I'm going senile."

          You and me both ;-)

          "Read Queue as Cue!"

          Well ... ElReg does seem to like to queue some posts by some commentards, so it's actually a rational typo from my perspective ;-)

      2. arrbee

        Re: Is it legal? @Mage

        Apart from its selective targetting, the main problem with the bedroom tax is that alternative housing does not exist in most areas, so those affected have no choice except to take a cut in their income.

        So while it may not qualify as a tax it is certainly a cut in this particular payment.

        Of course if the government had done as they promised and replaced the housing they forced local councils to sell off (*) on a one-to-one basis then this might have been less of a problem, but since they've failed to replace even 10% of those sold its just a tad hypocritical to blame those who now can't move out of their "too large" homes.

        (*) most have ended up with Buy-To-Let owners who are subsidised by the taxpayer; in fact if you combine this with the cost of (theoretically) replacing the sold-off houses with smaller ones, then you'd be hard put to see this entire policy as anything other than a way to transfer our money from those don't have much to those who do.

        1. Peter Gathercole Silver badge

          Re: Is it legal? @arrbee

          I'm not going to quibble. I appreciate all of your points, and I sympathise with the people who are caught in this trap.

          I was just objecting to the use of the term "tax".

          I would actually rather prefer to have a more realistic balance between living costs and wages such that things like housing benefit and other subsidised housing (yes, I'm including council houses and housing associations) were only needed by a much smaller number of really needy households, rather than those who just can't afford to live where they do, whatever the reason why.

          For what it's worth, and for reasons beyond most of these people's control, they are forced to rely on the state and it's devolved institutions for support far more than is healthy for the nation's finances. I wonder if enforcing the living wage and reducing benefit paid, and then carefully change the tax and/or NI on companies by an appropriate amount to shift the money away from benefits and on to a more income and tax basis would be a reasonable first step? Possibly Tim Worstal cold crunch the numbers and comment?

          I appreciate what you are saying about buy-to-let, but the right-to-buy, which is what caused the public housing to be sold off was intended to benefit the original purchaser. Some of them will have bought and then sold, making significant profit for the people taking advantage of the right, but when they sold, it would be at the market rate. The b-t-l landlords would have paid market rates, and the only benefit thy has was that the houses were available at all. But the house transferred to private when the original purchasers bought, not when they were sold on.

          What has helped the b-t-l purchasers most is the mortgage guarantee and incentive packages that were introduced to try to support the first time buyer market, and thus the whole of the housing ladder. These were not sufficiently guarded to prevent b-t-l landlords from using the schemes. Other than that, it's the relentless rise of house prices that allows a landlord to borrow against their existing portfolio to fund purchases, and then rely on the price rises to provide them a capital gain so they can either borrow more, or sell in the future and make a profit far higher than commercial interest rates.

          There's lots wrong with the economy, much more than the loss of public housing.

          1. arrbee

            Re: Is it legal? @arrbee

            Fair comment.

            The relentless rise in house prices is, of course, another economic trick. So long as it is classed as "wealth creation" then it improves all those important numbers the government have chosen to use to measure the state of the UK economy; treat it as inflation, however, and the UK is significantly closer to the economic mire (since GDP for one is meant to be nett of inflation). This explains why so much of our money has gone into first boosting prices and then subsidising first time buyers who can no longer afford them. It is by far the easiest and quickest way to "improve" the economy. The end result being hugely increased levels of debt and the BoE no longer able to increase interest rates until some external event lets them off the hook they happily swallowed.

            1. Peter Gathercole Silver badge

              Re: Is it legal? @arrbee


    2. strum

      Re: Is it legal?

      >I think governments can tax anything if they can collect it and the natives don't revolt.

      Quite. “The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing”

      There does seem to be a strange belief around here, that if something hasn't previously been taxed, it would be an outrage to tax it now.

      Governments need taxes to survive (and societies need governments to survive). An increasing number of once-taxable activities are becoming more difficult to collect on. Governments will have to change their focus. That means that some of the newer activities will have to bear their share of the burdon. Suck it up.

      1. Anonymous Coward
        Anonymous Coward

        Re: Is it legal?

        > Governments need taxes to survive

        Since taxation if going up at a fairly rapid rate in most places in the western world, I think that you'll find that most of these taxes are actually funding government inflation.

        I find it fairly amusing that the USians in the main abhor socialism as a concept yet their federal government is becoming such an inflated monster, there is little recognisable difference.

  10. Anonymous Coward
    Anonymous Coward

    Chicago-based hosting

    so does this impact a web server located in Chicago delivering content to people both in and out of the area (if for example they pay a membership fee)? If it does, what legal right does the city of Chicago have to levy a tax on consumers in Athens, Georgia - let alone the 'real' Athens?

    1. jonathanb Silver badge

      Re: Chicago-based hosting

      The EU has a similar tax, called MOSS, you may have read about it here at the end of last year/beginning of this year. In the case of the EU, the answer is no, if you supply to someone outside the EU, you don't charge MOSS VAT, but you may have local taxes you are required to collect, such as the Japanese consumption tax or this Chicago tax.

  11. Spaceman Spiff

    I guess the City of Chicago hasn't heard about VPNs? "Hey CofC, I'm not watching Netflix in Chicago. I'm watching it in Backwater Iowa!"

  12. Kevin Ray

    Are VPNs the only Solution?

    One blow after another for the people who are inclined towards online entertainment! I think that VPNs are the only solution right now to avoid these harsh taxation policies. I just fear that day when Governments would impose full-proof restrictions on VPN providers. Well, till then I am going to stick to Ivacy VPN. God bless all the netizens!

  13. sisk

    I predict an imminent increase in BitTorrent traffic going into Chicago.

  14. Mike Brown

    playing games online or otherwise?

    what about playing board games? so they tax per session, or just the game itself?

    1. John Tserkezis

      Re: playing games online or otherwise?

      "what about playing board games? so they tax per session, or just the game itself?"

      What about playing with ourselves? Does the tax apply to that?

      Yes, I know...

      1. Ted Treen

        Re: playing games online or otherwise?

        @John Tserkezis

        Never happen. Since most politicos are total onanists, they'd never penalise themselves.

  15. bjr

    They will spend more on lawyers then they could ever hope to collect

    This is insane. This is basically the same as a sales tax and the law is very clear on this, you can't collect a sales tax from a company unless they have a nexis your jurisdiction. Since none of the streaming companies are located in Chicago they can't collect a tax from them. The streaming companies will fight this all the way to the Supreme Court (where they will win), they have to because if they don't they will end up having to collect taxes for potentially 10's of thousands of cities, towns and states. The cost to Chicago in legal fees will be at least an order of magnitude more than they can ever hope to collect.

  16. Henry Wertz 1 Gold badge

    Illegal and avoidable

    There's no chance this internet tax doesn't run afoul of the Internet Tax Freedom Act, since this Act was passed explicitly to bar taxes of online services and products. There is, of course, the question of whether online services should be exempt from taxation while everything else is subject to sales taxes and such. There was a good reason for this law though... the reason this law was passed was due to the ridiculousness of expecting online retailers to deal with having like 10,000 different sales tax jurisdictions (NOT an exaggeration, per Google there were 9,998 in the US as of mid-2014!) all with different tax rates and rules on what is and is not taxed.

    Easily avoidable -- in areas with excessive cell phone taxes (in parts of California the taxes, fees, charges and bonus overcharges can amount to close to 50% of the bill!), it's common for people to not worry about getting a local phone number (since cell cos don't charge for long distance anyway.) They set up paperless billing and say "Yeah, of course I'm based in (Utah or wherever.)" I wouldn't hesitate for a second giving Netflix an "alternate" address and I bet a lot of Chicagoans will not hesitate either.

  17. emmalopez

    At first I thought this was an attack on the online services, but Cable providers are currently being taxed. While I don't normally side with the cable providers, in this instance online services had an unfair advantage.

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