Chicago Imposes 9% Tax On Netflix and Other Streaming Services

It just got more expensive to watch Netflix, Hulu and other video streaming (as well as music streaming) services in Chicago.

Its city residents will soon be paying more money to use Netflix and other streaming services. The city council voted for a nine percent “Cloud Tax” in the hopes to generate $12 million in revenue.

This tax will begin in September, and is an extension of the area’s entertainment tax that affects cinema and sports. The tax is also geared at online gaming.

Chicago city spokeswoman Elizabeth Langsdorf said the ruling is in compliance with the tax law presently in place and isn’t an expansion of any laws. She said Chicago has offered limited guidance on digital access to information and entertainment where some Internet providers have collected lease tax, amusement tax or no tax at all.

According to the ordinance, the city will need to use consumers’ billing address to determine how much they will pay in taxes.

California tax professor Edward Kleinbard said he’s never heard of a tax like this anywhere else. Reed Smith, a corporate law firm, said this tax was a direct attempt to get more money from the cloud and is more comprehensive than any U.S. jurisdiction.

Netflix is already in working to add the nine percent tax to its Chicago subscribers’ bills.  Consumers’ cost will continue to rise with more companies following Netflix’s lead.

The new tax comes when local entities are facing a loss in sales tax revenue from its conventional main street stores. This tax on the ever-increasing cloud industry is an attempt to make up for the shortfall.

Congress is attempting to try again on introducing a law that would force Internet retailers to collect sales tax when they sell to persons out of state.