There is an old saying that death and taxes are the only two certainties within life. If you’re a resident of Chicago and you enjoy streaming media from a popular cloud service such as Netflix, you will likely be hit with the “cloud tax” in the next few months.
The cloud tax is actually a clarification regarding the amusement tax that is already in place within Chicago. According to the Chicago Department of Finance, the amusement tax will be redefined to include “Paid television programming” and “Electronically delivered music.”
The amusement tax in Chicago has been in place for quite sometime. Whenever a patron in Chicago attends a sporting event, a musical play or enjoys anything within the entertainment realm, the activity is subject to a 9% tax. That tax is sometimes built into the price of the activity itself, therefore, tourists and others may not be aware that there actually is an amusement tax in place within the Windy City.
The Chicago Sun-Times says that a city wide audit prompted the foray into digital services like Spotify and Netflix. With the new change of policy, digital entertainment will now be subjected to the tax. Although Chicago made the change on July 1st, the city says that it will give digital entertainment vendors 60 days in order become compliant with the tax.
Many analysts have begun referring to this clarification of the amusement tax as the cloud tax, as the new interpretation focuses heavily cloud based entertainment services. Chicago’s Department of Finance expects to net $12M in new tax revenues within the first year of its enactment.
“In an environment in which technologies and emerging industries evolve quickly, the city periodically issues rulings that clarify the application of existing laws to these technologies and industries,” said Elizabeth Langsdorf, a spokesperson for the city of Chicago.
“These two rulings are consistent with the city’s current tax laws and are not an expansion of the laws. These ensure that city taxation is uniformly and fairly applied and that businesses are given clear guidance on the applicability of the city’s tax laws to their operations, and they clarify that the amusement tax and personal property lease tax apply to digital services,” added Langsdorf.
According to comments found around the internet, consumers do not seem too happy with the new cloud tax in Chicago. It is unclear whether or not cloud companies will mount a legal defense, although organizations such as Taxpayers United for America have opposed the idea of a cloud tax.
What are your thoughts on the new cloud tax in Chicago? Tell us in the comments section below.