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Can New Chicago Taxes On Netflix, Apple, Spotify Withstand Legal Challenges? 188

Mr D from 63 writes: Today, a new "cloud tax" takes effect in the city of Chicago, targeting online databases and streaming entertainment services. Residents who stream movies and music from companies like Netflix and Spotify will now need to pay an additional 9% tax. This also applies to Chicago businesses that pay to use databases online. Chicago expects to collect $12 million a year as a result of the new tax ruling. From the 24/7 Wall St. story: "Also worth noting is that the city’s tax ruling in both cases avoids the issue of whether there is a close-enough connection (nexus, in legalese) to require providers like Netflix or others to collect either tax. International law firm ReedSmith weighs in on this point as well: '[O]nce the Department begins to audit and assess customers located within the city, many of those customers are likely to demand that providers collect the tax going forward. As a result, many providers will likely feel the need to register to collect the taxes, despite lacking nexus, and despite having strong arguments against the Department’s expansive interpretation of its taxing ordinances.'"
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Can New Chicago Taxes On Netflix, Apple, Spotify Withstand Legal Challenges?

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  • Taxes (Score:2, Interesting)

    by Anonymous Coward

    Legalized theft.

    You want what someone else has, and you're willing to steal it at the barrel of a gun.

    Fuck you.

    • Re: (Score:2, Funny)

      by Anonymous Coward

      Move to Greece. Hardly anybody pays taxes there, and everything is GREAT!!!1

      • Re:Taxes (Score:4, Interesting)

        by alvinrod ( 889928 ) on Thursday July 02, 2015 @07:37PM (#50036649)
        You can't have no taxes and a government that wants to promise the world at the same time. Low taxes are fine if you have a government that isn't spending anything on programs and by the same token if you have a government that has or wants to have a lot of policies and programs, it is going to need to have a revenue stream to support them.
    • Re: (Score:2, Insightful)

      by penix1 ( 722987 )

      Meanwhile Mr. AC I am sure you are one of the first to scream when the government doesn't provide the services you think they should provide. Remember, there is no such thing as a free lunch!

      • by Anonymous Coward

        What services did the city of Chicago provide that Spotify and Netflix make use of to serve content to customers?

        • by AK Marc ( 707885 )
          Netflix isn't being charged or collecting the tax (yet). This is a Use Tax, which has been ruled legal 100 times before (perhaps hyperbole, perhaps not). This just clarified the long-used Use Tax to include digital services. The customers use Chicago, so they owe.

          Or more specifically, Netflix content travels over Chicago right-of-way.
          • Re:Taxes (Score:4, Insightful)

            by KingMotley ( 944240 ) on Thursday July 02, 2015 @07:06PM (#50036517) Journal

            What if I live in Chicago, but only use netflix while out of state?

            • Give me a break.
            • by AK Marc ( 707885 )
              Chicago will probably say you owe, but you'd likely win in court, if you chose to fight.
              • If you can afford to fight... I wish people would demand that the city do the extra paperwork at least, but it must be minor issue in the minds of Chicago voters. Personally I think 9% is outrageous. It had better come with a set of Monster network cables

                • by AK Marc ( 707885 )

                  Personally I think 9% is outrageous. It had better come with a set of Monster network cables

                  http://taxfoundation.org/blog/... [taxfoundation.org]

                  9% is high, but not the highest. There are places with higher, and I'm not sure in that graphic whether they count hotel taxes and other such surcharges as "sales tax" and that's more like this one is aiming, as an "entertainment tax".

          • This is a Use Tax, which has been ruled legal 100 times before (perhaps hyperbole, perhaps not).

            I just had to snicker when you said it was a "Use Tax", a very difficult to collect and enforce kind of tax. I lived in a state with Use Tax once.. never paid it either. Use Taxes are silly, they actually say something like if you buy a tank of gas in another state, you have to pay Use Tax on the gas you have remaining when you re-enter the state with the Use Tax. Insanity tax. Good luck with that, Chicago.

            • by AK Marc ( 707885 )
              My point was that so many people were getting hung up on "use taxes are silly" without even realize they were talking about use taxes. The tax should be valid, it's valid everywhere. It should be ignored. I was born and raised in a state with use taxes. I didn't learn what a use tax was until after I had left. Neither I, nor my parents, ever paid a use tax, despite having owed one, many times.

              Chicago's move is rational. It placed a use tax on entertainment, then argued that streaming entertainment is
    • Re:Taxes (Score:4, Insightful)

      by GrahamCox ( 741991 ) on Thursday July 02, 2015 @08:02PM (#50036741) Homepage
      People really think like this? Really? I'm sorry for you. Somehow, you've been brought up to be a sociopathic moron.

      Life is better when people cooperate and look out for each other. That's what has made the human race so successful as a species. If that's not your experience, again, I'm sorry for you. However, if you expect people to look out and care about you, then you have to look out and care for them, at least just a little. And in the modern world that means that you pay taxes.

      You might feel that your taxes are not well spent, or that they only end up in the pockets of the corrupt, or the already well-off. That's obviously bad, but it's not the fault of taxes in themselves. Maybe you should stop voting for idiots and corrupt politicians, and do something to ensure that your taxes are used equitably.

      But if you disagree with the whole premise, then that just means you're as greedy and selfish as they are.
      • I owe you absolutely nothing and unless I am buying something from you or you are buying something from me I have no interest in you. If you want want government to stealcfrom me to subsidise you somehow and then call me a 'sociopath' or a 'moron' for not accepting that, then you are not only a thief, but some kind of a sick psycho thief.

    • Do you

      A) hate civilization
      B) want to freeload off of everyone else that pays for it?

  • by turkeydance ( 1266624 ) on Thursday July 02, 2015 @06:10PM (#50036249)
    As their earnings placed them in the top tax bracket in the United Kingdom, the Beatles were liable to a 95% supertax introduced by Harold Wilson's Labour government (hence the lyrics "There's one for you, nineteen for me").
    • Wasn't it marginal? (Score:5, Informative)

      by rsilvergun ( 571051 ) on Thursday July 02, 2015 @06:50PM (#50036449)
      I suppose I could see them complaining if it was a flat 95%, but afaik the UK does Marginal taxes the same as the US, meaning they paid the same taxes as a lorry driver up to certain point.
  • by 140Mandak262Jamuna ( 970587 ) on Thursday July 02, 2015 @06:10PM (#50036251) Journal

    International law firm ReedSmith weighs in on this point as well: '[O]nce the Department begins to audit and assess customers located within the city, many of those customers are likely to demand that providers collect the tax going forward. As a result, many providers will likely feel the need to register to collect the taxes, despite lacking nexus, and despite having strong arguments against the Department’s expansive interpretation of its taxing ordinances.'"

    When the government starts auditing people and dunning for money, their first reaction is going to be, "how do I throw these clowns out of office?", they are not going to make a hue and cry and demand their service providers to collect taxes. These providers are also savvy, they will spend a little on lobbying, fund a few challengers and some incumbents ...

    Knowing Chicago it looks more like another shakedown to get some campaign cash than to collect a new tax.

    • International law firm ReedSmith weighs in on this point as well: '[O]nce the Department begins to audit and assess customers located within the city, many of those customers are likely to demand that providers collect the tax going forward. As a result, many providers will likely feel the need to register to collect the taxes, despite lacking nexus, and despite having strong arguments against the Department’s expansive interpretation of its taxing ordinances.'"

      International law firm ReedSmith does not appear to have had experience with New Hampshire. When Massachusetts leans on providers who operate in both states to collect Massachusetts sales tax when a Massachusetts resident buys something in New Hampshire, the New Hampshire legislature leans back, making such reporting by the New Hampshire branches illegal.

      Some years ago Massachusetts stationed an observer near the parking lot of a New Hampshire liquor store. He would write down the Massachusetts license pl

  • by Ritz_Just_Ritz ( 883997 ) on Thursday July 02, 2015 @06:17PM (#50036281)

    In case the crime and murder rate wasn't enough.

    • It's a 9% tax on entertainment. It's not the bloody Spanish Inquisition or the Gestapo. It's become damn near impossible to raise taxes enough to run a city anymore. The Right Wing have a name for it, Starve the Beast. Thing is a big dog is a beast, and that Beast was the only thing keeping the Robber Barons at bay. Doesn't anyone remember what laissez faire meant for 99% of the population in 1900s?
      • by Anonymous Coward

        I agree. When you have a bunch of overpaid beauracrats running these cities there will always be issues. Not to mention the corruption. Welcome to Detroit errr... Chicago.

      • by devman ( 1163205 )

        My biggest complaint would be (if I lived in Chicago) how this tax is structured. It is a "use tax" which mean I have to keep track of everything that falls under this tax and remember to put it down on the appropriate tax form at tax time. It is a mess. It will have the same problem every other use tax does in that it will have a recordkeeping burden and that will drive non-compliance more than anything.

        If they are smart they'll have a tax table where you can make a good faith estimate of your expenditures

      • Re:Oh get over it. (Score:5, Insightful)

        by Dutch Gun ( 899105 ) on Thursday July 02, 2015 @07:30PM (#50036625)

        And all those little taxes, from city, state, and country, all add up to between 40% and 60% of most US citizens' income. How much is enough? No one (well, maybe some nutjobs) wants to go back to laissez-faire, but I think it's not unreasonable to look at the amounts of graft and waste that occurs and demand better accountability before simply bending over for each new tax like a good, compliant citizen.

        I have to wonder if the Chicago politicians even know what the hell they're really taxing when they attempted to tax all "cloud computing and streaming". It feels a lot more like a desperation move that they're hoping no one calls them on. Adding new taxes like this also increases the regulatory burden for its citizens and the city itself, which indirectly reduces the taxes effectiveness by increasing the overhead of compliance. It would be far better to simply adjust the property tax rate to match the expected revenue increase. Of course, that's a lot more visible, and the taxes there are already apparently pretty terrible, which is why they probably balked at that idea.

        So, "get over it?" I wonder how many people will "get over it" by getting the hell out of Chicago - or at least the city itself? Having visited the area recently, I can assure you that there are lots of very expansive and attractive outlying towns and suburbs suitable for both homes and businesses.

        • And all those little taxes, from city, state, and country, all add up to between 40% and 60% of most US citizens' income. How much is enough?

          Actually it's about 33% (dipped below 30% during the recession, but has moved back up). But I agree with you. People need to understand that only the sum total of all taxes matter. Even corporate taxes are eventually paid for by individuals - via higher prices for goods and services, or lower wages for employees. In that respect, taxes could be vastly simplified

          • by Anonymous Coward

            33% if your smoking crack... 25% fed rate... 15% SSi / Medicare.. and yes you have to count both employee and employer halves.. 9% state income tax in Oregon.. that's 49% right there.. plus 1% business tax in Portland.. and all the other misc bullshit taxes and I'm well close to 60%.. and I can't even afford a median priced home here... they rich guys can go fuck themselves

            • by Noxal ( 816780 )

              How intellectually dishonest for you to omit that there are no sales taxes in Oregon.

              • That's a ridiculous assertion. Most of us understand quite well that states get their taxes in a variety of ways.

                Oregon's northern neighbor Washington State, for instance, collects sales tax but has no income tax, whereas California has both an income AND a sales tax. Nearly all states also impose property taxes, and of course they tax businesses. Ultimately, everything gets paid for by individual consumers, either directly (as with sales, income, or property taxes), or indirectly though increased prices

      • One needs to "starve the beast" the beast being our own tendencies to vote to lavish on ourselves, with disproportionately wasteful government super-markup.

        It is voracious, and always spends as much as it can get, and is always chronically short, needing to borrow. Actually, most borrowing is viewed as income to spend -- they can get away with borrowing X percent of GDP. It has nothing to do with need and everything to do with more money to spend.

        Starve that beast. Shut off new inventions of income.

      • by Anonymous Coward

        The more the population increases, the more efficient government should become. Taxes should actually go down as there are more people paying a piece of the price for infrastructure. The problem is, once a government program gets established, it's near impossible to get rid of, even after it has accomplished what it was intended to. Then there is a new need, a new program, and more money needed. The bureaucracy just keeps growing and growing without ever cutting back. most conservatives are not against

      • Re: (Score:2, Informative)

        by Anonymous Coward

        The Right Wing

        Right Wingers run Chicago? Detroit? Baltimore? Stockton? Flint? Cleveland? Camden? Oakland?

        WTF are you smoking?

        Every one of these hellholes has been under near exclusive control of left wing hate mongers and race baiters since the late '60s. How in the hell is anything that goes on there — particularly municipal tax policy — related to the Right?

        Doesn't anyone remember ...?

        No. They don't. People are so far removed from actual suffering and deprivation that they can't fathom what actual pain is like. Today the co

    • Another Reason...not to live in Chicago

      I live in Chicago. East Rogers Park, at the most northeast end of the city. I live on a Lake Michigan beach and have gorgeous views of water (east) and coastline (south). The building I live in has charm, character and a generous community. I pay a modest rent for a spacious one bedroom place. Best of all, it's quiet.

      On a hot July day like today, I look out my window and see beach goers, kayaks, sailboats, catamarans, and the like. It's like living on a resort.

      During t

  • by Anonymous Coward

    Chicago has chased all of the businesses out since the early 1990s with tax increases. Google "Chicago head tax", it's a real thing. Chicago thinks businesses want to do business in a place that's freezing in the winter, with inadequate transportation routes, and increasing city-related costs/tax. Chicago is a drain on the entire state which is also $65bn in debt.

    Good luck Chicago!

  • Last Out Queue (Score:5, Interesting)

    by pubwvj ( 1045960 ) on Thursday July 02, 2015 @06:22PM (#50036317)

    Will the last person to leave Chicago please turn off the lights?

    • by Anonymous Coward
      Chicago, the next Detroit. Funny how the Democrats continue to run cities into the ground.
      • Chicago, the next Detroit. Funny how the Democrats continue to run cities into the ground.

        But leave it to the Republicans to run the entire Country into the ground.

      • by JBMcB ( 73720 )

        True story: A couple decades ago the City of Detroit bought a couple parcels of land downtown to build a parking garage. They never combined the parcels with the county, though, so one looked like it was still owned by a private entity. A few years ago the county got their act together and started foreclosing on landowners delinquent in their property taxes. The city of Detroit ignored the mail about the property taxes being due. The county put one of the parcels of land for the parking garage up for sale,

    • Reminds me of Miami in the early '80's. Will the last American please grab the flag!
    • by WrongWay ( 26772 )

      I left the city 15 years ago thank god... but im still stuck in Illinois.. which is a whole nother shit storm.

  • Netflix has their cdn boxes everywhere. That's a physical presence
    • by hawguy ( 1600213 )

      Netflix has their cdn boxes everywhere. That's a physical presence

      They transfer ownership to the ISP, so they are not owned by Netflix:

      https://openconnect.netflix.co... [netflix.com]

      OCA ownership is transferred to an ISP at no charge and OCAs are fully supported by the Netflix Open Connect Engineering and Operations teams. For ISPs interested in localizing their traffic and working more closely with Netflix, we have delivery options for all sizes of ISPs, guidelines for peering and interconnection, and a collection of frequently asked questions.

      • by pepty ( 1976012 )
        1."OCA ownership is transferred to an ISP" Transferred before or after installation? Laws in IL and IN are set up so that once you have a physical presence you don't have to keep it to be subject to sales/use taxes. My company is likely to start having to charge sales tax in IL because we will have a booth in a conference in Chicago for a few days, even though we won't actually sell anything there. Ditto for Indiana once we show up to install equipment.

        2. If a chain of stores transferred ownership of stor

  • What the fuck?!! (Score:5, Interesting)

    by codepigeon ( 1202896 ) on Thursday July 02, 2015 @07:31PM (#50036631)
    This is way off topic, but what the fuck is happening to slashdot. I just now noticed something blaring from my headphones on the floor. Apparently it was some kind of audio ad and for the life of me I didn't know which part of the webpage was playing it.!??!

    Then I happen to notice that the 'busy circle' at the top of the chrome tab has been spinning for at least 5minutes. Are you fucking kidding me?

    Here are two of them that I noticed. God only knows how many others were busy doing god knows what. (liverail.com and advertising.com) (I wont post actual links)

    I can't stand the "slashdot is dying" meme, but I think I am close to moving on to another news aggregate. -Slashdot reader since ~2000AD
    • If you're logged in and have good karma, you should be able to disable ads as a "courtesy" to dedicated contributors. Or just use an adblock extension.
      • by Lando ( 9348 )

        Disable ads as a courtesy doesn't work for long. It's a short window until the ads come back. I finally pulled out the adblock tools. Slashdot overstepped the amount of advertising I was willing to put up with. I was one of the first 100 here, this is my third account since I forgot the login for the others. Only people that probably put up with this crap are the new people that don't know better. I certainly don't recommend slashdot to people anymore.

  • ...you folks wanted government to provide everything under the sun.

    Now they're going to take everything you have to pay for it.

    Oh, and BTW Chicago has been losing population for years. I wonder why?
    http://www.chicagotribune.com/... [chicagotribune.com]

  • I was wondering if cable subscriptions would be impacted by this (or were they already hit by the sales tax?). The article states "expanded its amusement tax to include amusements such as TV shows, movies, videos, music and online games, if they are delivered by electronic means to customers in the city". Since most cable subscriptions are digital now it would seem that they should be included in this. It would be weird (though not unexpected for a law to have unforeseen consequences) to have something l

  • by jcr ( 53032 ) <.jcr. .at. .mac.com.> on Thursday July 02, 2015 @08:50PM (#50036923) Journal

    This also applies to Chicago businesses that pay to use databases online.

    This would be enough to cause the Chicago Mercantile Exchange to relocate to another state. I'm sure that Indiana, Wisconsin, or Michigan would welcome them with open arms.

    -jcr

    • Or Dallas, TX perhaps.

  • As Netflix is delivering content remotely to an end user, what exactly is the difference between it and say Satellite, Cable or even broadcast TV other than the medium utilized to deliver the data bits ?

    We going to apply this " information tax " to everything else in the long run too ?

    Pro Tip for the nobles: Entertainment ( you know. . . the whole bread and circuses thing ) is the only thing preventing the masses from burning down the entire Kingdom. You might want to reconsider throwing a wrench into t

  • The Internet service itself from the ISP is already taxed and other surplus fees. Wouldn't this be a double tax to use something you already paid tax on? This is a dangerous slop I would think. What is next changing an extra tax because you want to use the electricity to charge your car? Oh you want to use that water to bake bread with, yea there is a tax for that too...

  • New Chicago? That was a planet featured at the beginning of "The Mote in God's Eye" (Niven/Pournelle)

  • Did anyone take anything seriously after they saw that name? I didn't. Those people get what they are too lazy to divert. I've been there, rode in on a train, hired a bum to get us to the liquor store (not joking, dude took my whole party to a big underground liquor store, after which we went to the House of Blues)
  • The proper way to handle such ridiculous legal nonsense is to simply ignore it. Refuse to collect anything and pretend the law wasn't passed. Then make Chicago do all the legal work to form a case proving they actually need to comply with the law. That's cheaper, easier, and more likely to work than immediately lawyering up and fighting it.
  • Every February it started again anew, there's going to be a tax on the Internet, it became a ritual posting and thread. Now it seems to of taken place, it only takes one to spread.

  • Living in Chicago now? Start sharing netflix id's across the board - hurt's netflix's revenue (laughingly, on slightly) and the city at the same time. Can you imagine the look on their face when they see 1 netflix account for Chicago? I know, I know - limited devices active on a single account - would still be hilarious though. Otherwise, you can always go back to bit torrent.
  • is the gradual and accelerating erosion of Internet freedom. On a recent trip to China I got a hint of what the future will be like. We all know that Google and many other sites are banned in China, but we understand the knock-on effects? Many sites, including our own, use Google services of one sort or another, a choice that renders them broken in China. A banning here, a closed reddit there, a tax in the windy city; slowly the noose tightens on the glory that was our network.
  • I don't understand how they're going to know you use the service, unless you pay by credit card. I use PayPal for all online purchases. You can make up any "delivery" address that you like. If you use a VPN, Netflix won't know where it's going, and Comcast won't know what you're getting. Of course, few people bother with this privacy nonsense.

  • "Reasons to never ever move to Chicago" file...

    $ vi reasons-to-never-ever-move-to-chicago.txt

    PageDown

    PageDown

    PageDown

    PageDown

    PageDown

    PageDown

    dang... how many pages are there?

    PageDown

    PageDown

    PageDown

    PageDown

    Shoulda' done this to start with.

    G

    wait... wait... wait...

    ERROR: /tmp file system full

    ... crap.

Let's organize this thing and take all the fun out of it.

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