Chicago's 9% Tax on Cloud Services Faces Lawsuit

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Several weeks ago, CloudWedge published an article entitled Get Ready to Pay the “Cloud Tax” in Chicago for Streaming Services. The article drew immediate reaction from readers all around the world, with most wondering how a city could legally enact a tax on a cloud hosted service used by consumers.  The city of Chicago argues that cloud streaming services such as Netflix, Hulu and more fall under the Amusement Tax code, which allows the city to collect a 9% fee on all amusement related activities.
Needless to say, residents and businesses in Chicago we not amused. They collectively expressed their displeasure with the new tax by beginning online petitions, writing blogs and contacting their local government officials. Chicago city officials argue that the Cloud tax wasn’t a new tax at all.
Some activists groups believe the Cloud tax in Chicago breaks federal law. As a result, the Chicago Tribune reports that a new lawsuit on the controversial tax has been filed against the city. Inside the lawsuit, those against the tax lay out their case. The main argument posed by the activist group is that the Internet Freedom Act passed in 1998 expressly forbids local, state and federal government entities from taxing online activities.
Chicago city officials tried to soften the backlash of the announcement of the Cloud tax. After facing weeks of criticism, Chicago city officials said that startup businesses would be exempt from paying the tax. That wasn’t enough, argues some advocates.
Many believe that the tax on Cloud services is just a money grab for the city. Others believe the tax flat out violates the existing laws on the books. Whatever your position may be, we’d like to hear about it in the comments section below.