Tech Crunch: Could Chicago’s Netflix Tax Come to Your City?

Jul 7, 2015 at 11:25 am |

chicago netflix tax cloud tax

(Photo by iStock/ marchello74/ David Rosa)

Just when you thought Netflix was the best thing ever invented, they went and found a way to tax it.

Chicago just became the first city to place a digital media tax on streaming services, more specifically, on subscription and per-event fees that are cloud-based. This ruling comes from two separate legal precedents: an amusement tax (the city has a minimum 5% amusement tax on concerts, sports, and other ticketed events) and a personal property lease transaction tax. Users will now be paying an extra 9% for cloud-based software and media.

Chicago lawmakers have clarified that this is not an expansion of the law, but an appropriate action taken under current legislation. Chicago Mayor Rahm Emanuel anticipates $12 million in profits from this decision, which is going into effect between July 1 and September 1.

As you can imagine, fans, subscribers, and business owners alike are not happy about the ruling, which will affect services such as Spotify and Netflix and businesses like Apple and Google. All legal arguments aside, you have to wonder what a tax on technology says about the culture of a given city or state. Entrepreneurs in the Windy City are furious that such a tax is a slap in the face to tech startups, potentially inhibiting the growth of the industry.

So, could this “Cloud Tax” become the new norm, and might you be paying more for your media soon? While Chicago is the first individual city to pass such legislation, the fact of the matter is that many states already have some existing policies on digital taxation; Washington charges 52 cents extra per month on a Netflix subscription. At the moment, only Washington D.C. and North Dakota are completely exempt from the taxation of digital goods.

Could digital taxation be the future? With an expected 70 million Netflix subscribers by the end of 2015, the Netflix Tax could mean big bucks for municipal and state governments. How much is your binge watching worth to you? SHARE this and let us know what you think of the tax!

Are you prepared to pay more for Netflix and Spotify?