 As
online video consumption continues to rise, dominating the amount of bandwidth
consumed by Internet users globally, the city is capitalizing on a predictable
trend as another revenue stream to fix its public pension woes.
Whereas Chicago’s “amusement tax” previously applied to entertainment viewed “in
person,” meaning that the consumer ventured from their home to witness the show,
starting on July 1, it now also applies to “charges paid for the privilege to
witness, view, or participate in amusements that are delivered electronically.”
This means that a consumer of streaming video, music, and online gaming services
such as Netflix, Spotify, or Xbox Live, will be taxed nine percent if the
service is “delivered to a customer in the City,” said the ruling on the
expanded tax.
Ars Technica reported that mayor’s office — which expects to make $12 million
per year from the tax for the city — said the ruling was consistent with, not an
expansion of, current tax law, and that Netflix would be adding the tax to the
cost the company charges subscribers.
“Jurisdictions around the world, including the US, are trying to figure out ways
to tax online services. This is one approach,“ said the company.
A Netflix spokesperson referred Watchdog.org to the statement, saying that the
company had “nothing further to add at the time.”
What worried the city’s entrepreneurs about the “cloud tax” even more the
“amusement tax,” however, was personal property transaction lease tax, which
they claimed would hurt startups and small businesses.
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In a statement to Chicago startup incubator 1871, Emanuel’s office said that it
will “announce that the administration will be taking measures to provide relief
to small businesses so as not to put them at a competitive disadvantage with
their peers in other cities.”
“It will take us a month or so to formalize the proposal, but it
will basically exempt start-ups (based on revenue) from paying the
tax. Obviously a lot of legal issues here as this tax has been on
the books for decades, but we are confident we can work through
them,” said the mayor’s office.
The city’s residents already pay the highest wireless tax rate in
the country, to the detriment of the city’s young poor minorities
who, as Watchdog.org reported in May 2014, rely solely on their
mobile device to access the Internet.
And as wireless services become faster and cheaper, consumer demand
for mobile video increase.
Ericsson, in a June 2015 study, for example, estimated that by 2020,
60 percent of all mobile data traffic will be from online video
consumption.
Illinois residents pay a 21.63 percent combined federal and state
wireless tax rate, the fifth-highest in the nation, according to a
2014 estimate from MyWireless.org, a wireless industry
affiliated-nonprofit.
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