Tax the Air You Breathe
- The past five years have seen a huge shift in the way we consume media, as brick-and-mortar stores shift to digital subscriptions. It's been a valuable tradeoff for some, building billion-dollar companies and unlocking huge libraries of music and video for relatively paltry subscription fees, but it's also been a challenge for cities that rely on those businesses for revenue. Now, Chicago wants to take back those missing taxes, and the way it's retaking them has some lawyers up in arms.
Today, a new "cloud tax" takes effect in the city of Chicago, targeting online databases and streaming entertainment services. It's a puzzling tax, cutting against many of the basic assumptions of the web, but the broader implications could be even more unsettling. Cloud services are built to be universal: Netflix works the same anywhere in the US, and except for rights constraints, you could extend that to the entire world. But many taxes are local — and as streaming services swallow up more and more of the world's entertainment, that could be a serious problem.
Chicago's new tax is actually composed of two recent rulings made by the city's Department of Finance: one covering "electronically delivered amusements" and another covering "nonpossessory computer leases." Each one takes an existing tax law and extends it to levy an extra 9 percent tax on certain types of online services. The first ruling presumably covers streaming media services like Netflix and Spotify, while the second would cover remote database or computing platforms like Amazon Web Services or Lexis Nexis. Under the new law, what passes as $100 of server time in Springfield would cost $109 if you're conducting it from an office in Chicago.
Retirement can't come soon enough.