Chicago Sued Over Its Attempted 9% Netflix Tax

from the tax-ALL-the-things dept

Back in July we noted how the city of Chicago was hoping to cash in on streaming services by imposing a new tax on Netflix. Blind to the negative impact such taxes can have on emerging economies, Chicago proudly proclaimed it would be expanding its 9% "amusement tax" authority (traditionally covering book stores, music stores, ball games and other brick and mortar entertainment) to cover any service that interacts with the cloud. While the new ruling was supposed to technically take effect September 1, Chicago recently announced it was postponing portions of the new tax until next year to field criticism and manage plan logistics.

While Chicagoans wait, the city's now on the receiving end of a new lawsuit (pdf) by the Liberty Justice Center, which claims that Chicago is violating the law in two ways. One, the lawsuit claims that the city aldermen violated city rules by not holding a full vote on the changes. Two, the lawsuit states that Chicago's tax grab also violates the Internet Freedom Tax Act, which prohibits local, state, and federal governments from enacting "internet taxes." The plaintiffs are quick to note that actually putting the idea to a public vote likely wouldn't end well for the city:
"No aldermen voted on this tax. It never went before the Chicago City Council, which makes the so-called 'Netflix tax' an illegal tax," Jeffrey Schwab, an attorney with the Liberty Justice Center, said in a news release Thursday. "If the city wants to tax Internet-based streaming media services, then it should put the measure through the political process, and let Chicagoans have their voices heard through the democratic process."
Should Chicago's plan even survive the lawsuit, it remains unclear how the city plans to collect the tax. Would it demand that Netflix and Spotify tax users themselves, even if they have no physical presence in the city proper? Would Chicago residents be required to report this revenue (which they either won't do, or would hide behind VPNs)? Chicago's just one of many cities taking this controversial tack as traditional revenue runs dry, creating an absolutely mind-boggling legal minefield for new economy companies suddenly facing an ocean of discordant and often logically and legally inconsistent attempts to tax the cloud.

Filed Under: chicago, entertainment tax, internet tax freedom, internet taxes, netflix tax, tax
Companies: netflix


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  • identicon
    Anonymous Coward, 15 Sep 2015 @ 6:28am

    Chicago Politics

    They are just following in the Obama's foot steps on just passing any damn law they please without following the law... been working so far, need to expand this shit into other area's.

    Remember people, do not want to hear any complaining when a repuke does it when they make it into power! Well I can complain, I don't like either party, but meh, it just means I am in the super minority where both sides like to shit on everyone.

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 15 Sep 2015 @ 6:35am

      Re: Chicago Politics

      It's adorable you 1. Think the president has the ability to "pass any damn law they please. and 2. Think you're somehow edgy and original for not liking either party.

      So may I have a list of all the damn laws Obama has passed illegally? The man has done virtually nothing in his time in office besides bomb the fuck out of the middle east with drones so I imagine it will be hard for you to name much.

      reply to this | link to this | view in chronology ]

      • identicon
        Anonymous Coward, 15 Sep 2015 @ 6:40am

        Re: Re: Chicago Politics

        Ironically the "bomb the fuck out of the middle east" thing is one of the few things his congressional opposition loves him for, but would never admit it publicly because the fake dichotomy between Rs and Ds would fall apart!

        reply to this | link to this | view in chronology ]

      • identicon
        AJ, 15 Sep 2015 @ 7:42am

        Re: Re: Chicago Politics

        Agreed. He didn't pass any "Laws".. but he sure has done some work with Executive Orders... Not quite as many as Bush yet, but very close and he's not done yet. Both sides bitch about executive orders, and both sides are guilty as hell.

        " The man has done virtually nothing in his time in office besides bomb the fuck out of the middle east with drones"

        Couldn't disagree with you more. He promised to "fundamentally change" the US., and he has certainly done so. Immigration, health care, and a 5 fold increase in drone strikes from Bush to Obama, we got the change he promised, and the change we voted for.

        "Every country has the government it deserves" and "In a democracy people get the leaders they deserve."
        -Joseph de Maistre

        http://www.slate.com/articles/news_and_politics/map_of_the_week/2012/06/obama_drone_strikes_t he_president_ordered_more_than_george_w_bush.html

        reply to this | link to this | view in chronology ]

        • identicon
          Anonymous Coward, 15 Sep 2015 @ 9:07am

          Re: Re: Re: Chicago Politics

          "Every country has the government it deserves" and "In a democracy people get the leaders they deserve."
          -Joseph de Maistre


          I really like that quote, pretty much puts a lot of things into perspective!

          reply to this | link to this | view in chronology ]

          • icon
            John Fenderson (profile), 16 Sep 2015 @ 4:52pm

            Re: Re: Re: Re: Chicago Politics

            It's also insulting and not really true (unless you consider "people" somme sort of monolithic entity, but at that point you're talking about something fictional). I actively work to make government less awful and I vote accordingly. In what sense do I "deserve" the government I have?

            reply to this | link to this | view in chronology ]

      • identicon
        Anonymous Coward, 15 Sep 2015 @ 9:06am

        Re: Re: Chicago Politics

        EO are essentially laws that have been passed.

        Here is a link to all of them.
        http://www.archives.gov/federal-register/executive-orders/obama-subjects.html

        While not all of the EO's are illegitimate the ones that affect immigration are because there is already well established laws regarding them. The loop holes are not legitimate.

        Or how about EO: 13681, the President does not have the power to essentially regulate financial transactions no matter how well intentioned.

        If YOU are okay with him acting like a King, then all I am saying is that keep your stinking trap shut the next time someone else in power, decides to abuse it! You are either against ALL abuse or you have no standing to challenge ANY abuse!

        While it is true that The President has a reasonable amount of power to flex with Executive Order, he however cannot use them to over ride actually established laws by the legislature, you now the Branch Of Government tasked with Passing Law? NOT the Executive Branch!!!

        reply to this | link to this | view in chronology ]

        • identicon
          Anonymous Coward, 15 Sep 2015 @ 9:55am

          Re: Re: Re: Chicago Politics

          You may want to try reading EO 13681. It has to do with financial transactions within the Government. Like updating to terminals with better security. I'm pretty sure that he can regulate how payments are handled within the U.S. Government as it is not applied to any other financial institution.

          reply to this | link to this | view in chronology ]

        • icon
          nasch (profile), 15 Sep 2015 @ 4:02pm

          Re: Re: Re: Chicago Politics

          the ones that affect immigration are because there is already well established laws regarding them.

          Just because there are statutes about it doesn't mean the President can't issue orders directing the executive branch how to do their jobs. On the contrary, that is what they're for. The legitimacy of each executive order would have to be determined individually.

          reply to this | link to this | view in chronology ]

      • identicon
        Anonymous Coward, 15 Sep 2015 @ 9:42pm

        Re: Re: Chicago Politics

        That's just not true. He also viciously attacked whistleblowers and has consistently whittled away at privacy, especially on the internet.

        Also, he did make some useful progress in healthcare, not enough, but some.

        reply to this | link to this | view in chronology ]

    • identicon
      RD, 15 Sep 2015 @ 9:40am

      Re: Chicago Politics

      Reported for blaming every ill in the world on Obama, especially in Chicago (which has a long, long history of corruption long before Obama came along).

      reply to this | link to this | view in chronology ]

  • This comment has been flagged by the community. Click here to show it
    identicon
    Anonymous Coward, 15 Sep 2015 @ 6:41am

    Mike Masnick just loves to hate artists. LOL! Bawk bawk, Mikey!

    reply to this | link to this | view in chronology ]

    • identicon
      Baron von Robber, 15 Sep 2015 @ 6:47am

      Re:

      But you're not an artist cuz artists like Mike

      reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 15 Sep 2015 @ 7:04am

      Re:

      Uh, Mike didn't write this article.

      reply to this | link to this | view in chronology ]

      • identicon
        Anonymous Coward, 15 Sep 2015 @ 7:15am

        Re: Re:

        Not only that, what the article isn't even about 'artists', unless AC is calling what netflix offers, TV/Movie Artists....

        reply to this | link to this | view in chronology ]

      • icon
        Derek Kerton (profile), 15 Sep 2015 @ 9:33am

        Re: Re:

        But to be fair, he never said Mike wrote it.

        He might mean that Mike is responsible for the content as publisher, just as Rupert Murdoch is responsible for his evil creation, even though he hasn't done any on-air work.

        reply to this | link to this | view in chronology ]

    • icon
      PaulT (profile), 15 Sep 2015 @ 7:43am

      Re:

      Personal attack on Mike despite him not writing the article? Check.

      Attack on a fictional reality where artists are not being paid, despite this being an article about companies that pay to licence 100% of their content legally? Check.

      Animal impressions to end the article, making sure that nobody could take you seriously even if they missed the first two points? Check!

      Well, you're certainly following whatever checklist it is you use for your routine. Now do the one where you act like a sane human being with a grasp on reality.

      reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 15 Sep 2015 @ 9:11am

      Re:

      Wow are you really five years old. Get a life loser.

      reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 15 Sep 2015 @ 6:04pm

      Re:

      average_joe just hates it when due process is enforced.

      DMCAed, you fucking asshole.

      reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 15 Sep 2015 @ 6:43am

    Chicago's just one of many cities taking this controversial tact as traditional revenue runs dry...
    I don't like being the grammar police (that's not true, sometimes I like it very much) but I've seen "tact" used this way a couple of times around here lately and it jumps out at me every time.

    I think you're going for the expression generalized as "changes in tack", "unexpected new tack", etc., which highlights the word's origin as the same one used in sailing. (It's definition 2e of "tack (n)" at MW.)

    I don't claim to know all use of English so I could be wrong, but I've never seen "tact" as an abbreviation for "tactic" either, if that's what you were going for.

    Like I said, I could be wrong; maybe all the kids these days use "tact" that way and nobody's told me? Wouldn't be the first time...

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 15 Sep 2015 @ 7:03am

      Re:

      I do not think that word means what Karl think it means

      noun: tact
      /takt/

      adroitness and sensitivity in dealing with others or with difficult issues.

      "Chicago broke the news to me with tact and consideration"

      synonyms: diplomacy, tactfulness, sensitivity, understanding, thoughtfulness, consideration, delicacy, discretion, prudence, judiciousness, subtlety

      reply to this | link to this | view in chronology ]

    • icon
      nasch (profile), 15 Sep 2015 @ 4:03pm

      Re:

      I don't like being the grammar police (that's not true, sometimes I like it very much) but I've seen "tact" used this way a couple of times around here lately and it jumps out at me every time.

      Not just here, I think "tact" is in general used incorrectly more often than "tack" is correctly.

      reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 15 Sep 2015 @ 6:46am

    Leave it to Karl to call it a Netflix tax. Actually, it's a 'cloud' tax, as has been previously reported by other websites and it affects all streaming websites, not just Netflix.

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 15 Sep 2015 @ 7:02am

    Typical Liberal think

    Chicago's just one of many cities taking this controversial tact as traditional revenue runs dry

    First, tax is not "revenue", it is tax. Revenue is earned, tax is taken; at gun point if necessary.

    Second, revenues run dry in liberal cities and states because there is no end to the amount of spending they want to do. Just look at the education system. The US spends more per child than any other country with worse results than many. Yet they want even more money as if money somehow solves all problems. But hey, healthcare will be different, right?

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 15 Sep 2015 @ 7:17am

      Re: Typical Liberal think

      actually, the red's take more in 'welfare' than the blues. You just perpetuating the myth.

      reply to this | link to this | view in chronology ]

    • icon
      Geno0wl (profile), 15 Sep 2015 @ 7:25am

      Re: Typical Liberal think

      They spend "more money per child" because that is what people demand. Good buildings cost money, good teachers cost money, good books and technology cost money.
      And all the way every group or person is trying to squeeze their slice out(like Pearson, Apple, the teacher's union, the building contractors). Welcome to the real world.
      And if you want to blame why "we do worse"(which is hard to quantify and I would argue isn't as cut and dry as some like to make it out since we don't exactly use the same exact standards) than blame parents for not pushing their own kids.
      But then again the name of your comment is " Typical Liberal think" so why am I even trying to sway you...

      reply to this | link to this | view in chronology ]

    • icon
      PaulT (profile), 15 Sep 2015 @ 7:58am

      Re: Typical Liberal think

      "The US spends more per child than any other country with worse results than many. Yet they want even more money as if money somehow solves all problems."

      You're right that money isn't the sole answer. But where is the waste? Reducing that figure won't improve your standards, at least not without reducing the problems that cause your high prices.

      Do you have a substantive suggestion or is "waah! liberals!" the best you have?

      "But hey, healthcare will be different, right?"

      You already spent the highest per-capita on healthcare before the recent reforms, yet a huge percentage of your population had zero coverage beyond an emergency room. That's not including what people spent on their insurance premiums and bankruptcies, etc. - that was just your healthcare spending. Yet, other countries that guaranteed every citizen a better standard of healthcare were spending far less.

      But, damn the liberals for trying to get everyone covered, right?

      reply to this | link to this | view in chronology ]

      • identicon
        Anonymous Coward, 15 Sep 2015 @ 9:04am

        Re: Re: Typical Liberal think

        ...money isn't the sole answer. But where is the waste? Reducing that figure won't improve your standards, at least not without reducing the problems that cause your high prices...

        Part of the problem with the costs in the US is the organization and management of the various school systems. And there's no agreement on what makes an efficient system. Two examples: Las Vegas and Phoenix. Las Vegas (Clark County) has exactly one school district for the entire county whereas Phoenix (Maricopa County) has over 55 districts with some being divided into separate districts for primary and secondary levels. Several years ago Phoenix had a referendum vote on unifying those separate primary/secondary districts: most were defeated but 2 districts narrowly approved. Lawsuits were filed to overturn those elections and the courts sided with the plaintiffs, thus no change. This past year a committee was formed to investigate breaking up Las Vegas' one school district into several smaller districts.

        The other issue with the US's systems is the sheer number of schools. This is one issue nobody wants to debate. At some point there is going to have to be acceptance that you cannot have a school in every single neighborhood. I've never once heard any objection when a school district wants to build a new school. But let any district propose to close a school and watch the sparks fly!

        reply to this | link to this | view in chronology ]

      • icon
        nasch (profile), 15 Sep 2015 @ 4:07pm

        Re: Re: Typical Liberal think

        You already spent the highest per-capita on healthcare before the recent reforms... Yet, other countries that guaranteed every citizen a better standard of healthcare were spending far less.

        What's interesting is many people point out the long waits for non-emergency care in some countries as a failing of universal healthcare, when the real cause is that those countries spend far, far less per patient than the US does, so they don't have as many health care workers and facilities.

        reply to this | link to this | view in chronology ]

        • icon
          PaulT (profile), 16 Sep 2015 @ 12:00am

          Re: Re: Re: Typical Liberal think

          I can only speak directly from using the UK system (I've been fortunately enough not to need much interaction with the healthcare systems of the other countries I've lived and worked in so far), but the real problem is indeed investment. Basically, the Conservative governments from the 70s to the 90s hated the idea of the NHS, and deliberately underfunded it. Since a lot of the country's infrastructure was built on existing facilities from the Victorian era to WWII, facilities in some areas became quickly outdated and overwhelmed by increasing populations.

          Still, vast improvements have been made and most British people are glad of the NHS, even if they get private care through their employers or other means. Most people have positive experiences with it.

          But, this is what's amusing about the "socialism/libs" attacks whenever the NHS's shortcomings are mentioned. The problems weren't due to the "liberals" and their "socialist" system, they're due to the "conservative" attempts to dismantle it every time they get elected. If they system had been adequately funded since the beginning, it would probably have cost less than the half-assed repair jobs in the interim.

          reply to this | link to this | view in chronology ]

    • icon
      Derek Kerton (profile), 15 Sep 2015 @ 9:38am

      Re: Typical Liberal think

      "First, tax is not "revenue", it is tax."

      A tax IS a revenue for the gov't treasury. That's sorta why they call the agency that taxes us:

      The Internal REVENUE Service.

      Maybe you missed that. Totally understandable. It's just some obscure gov't office.

      reply to this | link to this | view in chronology ]

    • identicon
      nygrump, 16 Sep 2015 @ 10:19am

      Re: Typical Liberal think

      While I understand what you mean, the dictionary definition of "revenue" includes taxes. It means basically any income stream.

      reply to this | link to this | view in chronology ]

  • icon
    Coogan (profile), 15 Sep 2015 @ 8:01am

    ...Chicago recently announced it was postponing portions of the new tax until next year to field criticism and manage plan logistics.
    ...it remains unclear how the city plans to collect the tax. Would it demand that Netflix and Spotify tax users themselves, even if they have no physical presence in the city proper? Would Chicago residents be required to report this revenue (which they either won't do, or would hide behind VPNs)?

    It seems like these are things that should've been hammered out BEFORE passing the actual law.

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 15 Sep 2015 @ 8:13am

      Re:

      If we had actual rule of law, sure. But laws nowadays aren't supposed to make things better; since nearly all legislators are funded by megacorps, they're intended to give the wealthy a means to attack arbitrary people. As such, modern laws are intentionally vague, to provide as many potentially useful interpretations as possible.

      reply to this | link to this | view in chronology ]

    • icon
      nasch (profile), 15 Sep 2015 @ 4:08pm

      Re:

      It seems like these are things that should've been hammered out BEFORE passing the actual law.

      That would involve politicians thinking about the consequences of the laws they pass.

      reply to this | link to this | view in chronology ]

  • identicon
    alex, 15 Sep 2015 @ 11:56am

    Moronic tax

    Not sure how this would be enforced but why not simply get a WISP account from a company outside the city and stream in the privacy of your own home as much as you please? Anybody care to count the number of politicians who are going to lose jobs over this fiasco? If Chicago is in such dire need of funds, let 'em legalize cannabis and tax the hell out of it. :-)

    reply to this | link to this | view in chronology ]

  • identicon
    Glenn, 15 Sep 2015 @ 2:40pm

    The Finance Minister of Chicagoland said "We need more money!" (running out of paper clips or something), so a marginally related tax was "expanded" to include something in popular usage now. Thieves will always be thieves. (Of course, this method actually looks like "taxation without representation" since it wasn't actually voted into existence.)

    reply to this | link to this | view in chronology ]


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