Chicagoans paying to stream movies, TV shows and music from sites like Netflix or Spotify will now be charged a so-called “Cloud tax” to use the services.
A 9 percent tax will be added to the streaming services in the city under June rulings by the city Finance Department.
The rulings, which took effect July 1, cover an “amusement tax” in the city and a “personal property lease transaction” tax and extend the city’s tax laws to certain online services.
The amusement tax allows for the taxing of charges paid “for the privilege” of watching, listening or playing electronically delivered movies, music or games.
The tax does not apply to the sale or permanent download of shows, movies, videos, music or games, but instead applies to rentals or “temporary” streaming options.
The personal property lease tax covers the use of databases for everything from real estate listings to car prices to stock prices.
The rulings apply to both residents and businesses.
A spokesperson for Mayor Rahm Emanuel told the Chicago Tribune the rulings “are consistent with the City’s current tax laws and are not an expansion of the laws.” She also said that “in an environment in which technologies and emerging industries evolve quickly” such rulings are often needed to “clarify the application of existing laws.”
The move has sparked debate among some businesses and officials in the city.
“As these two rulings demonstrate, bad times make for bad tax administration,” Michael Wynne, a partner and attorney at the Reed Smith law firm’s Chicago office wrote on the company’s website. “With these two rulings, the Department has expanded the scope of its tax ordinances to their absolute limit, if not further. If any state or local governments were wondering how to tax transactions occurring in the Cloud when legislative authority for such taxation is absent, the Department has just sketched a roadmap.”
Spotify and Netflix could not immediately be reached for comment.