Chicago’s “Netflix Tax” Is Bringing In Huge Money From Subscribers
If there's one thing Chicago city government is really good at, it's finding ways to extract more and more money from the pockets of its residents.
Back in 2016, Chicago decided that they needed to tap into a reservoir of cash by taxing two key features of the digital economy: cloud computing and streaming entertainment.
After Instituting The Cloud/Streaming Tax, Chicago Is Seeing A Huge Windfall
Revenue generated from Chicago’s “cloud/Netflix tax” quadrupled during the past five years, raising nearly $120 million from residents in fiscal year 2021 according to a Bloomberg Tax analysis of city Office of Budget and Management data.
It seems as though there's never been more perfect conditions to maximize a city's take on cloud computing and streaming entertainment than the conditions that came about as a result of the pandemic. More people working from home means more cloud computing, and your entertainment streaming services couldn't get subscribers signed up fast enough.
How Did Chicago Pull This Off, And Could Rockford Do The Same Thing?
According to a report at IllinoisPolicy.org,
Chicago expanded a tax originally reserved for automobiles, business equipment and other leased items to include cloud computing. The ordinance imposed a 5.25% tax in 2016 and was increased to 9% in 2021 as the city searched for more tax dollars.
The city also changed its amusement tax in 2015, extending the city’s 9% levy on tickets for recreational activities and concerts to “amusements that are delivered electronically.”
Okay. So, Chicago basically said "we're just going to create a couple of taxes out of whole cloth, and you're going to pay them." And Chicagoans have been doing just that.
The city has seen combined revenues collected from the digital service taxes soar from $39.9 million in 2017, the first full year of service, to $148.4 million in fiscal year 2021, which ended on the first of July.
There Have Been Lawsuits, But None Have Gotten Rid Of The Taxes
Sony Interactive Entertainment LLC, the gaming division of Sony Corp, didn't like these taxes one bit, and so they filed a lawsuit claiming that it "lacked nexus within the city." That ended up being a non-starter, so Sony backed off.
Tech giant Apple is pushing hard in a separate challenge to the Netflix tax in Cook County Circuit Court. The next hearing in the case is tentatively slated for December on Chicago’s petition for dismissal.