Chicago To Apply 9% ‘Netflix Tax’

By: Ryan Carrillo

It was only a matter of time before Chicago’s Democrats came up with a way to grab a bigger slice of the pie from the tech industry.

The Chicago Tribune reports that on Wednesday, the City of Chicago implemented a new 9% tax on streaming and cloud services. The “cloud tax” has caught many off-guard and left both providers and customers of streaming and cloud services scrambling to understand what this new tax will mean to them.  Technology companies, which are among the heaviest users of cloud services, will likely be taxed for both the services they use as well as provide.

The cloud tax is an extension governing two types of taxes, the city “amusement” tax and the city personal property lease transaction tax. The taxes cover products streamed to businesses and consumers as well as various online databases.

The city expects the new taxes to bring in roughly 12 million new dollars a year.

Some business owners are left wondering which of their customers should be taxed and whether they need to begin tracking their physical locations.

According to the Chicago Tribune:

Several in the Chicago tech industry criticized the mayor and the city for creating an environment that they see as less friendly to tech startups than other places around the country.

Terry Howerton, co-founder at TechNexus, a private-sector venture collaborative, said the rulings do not properly define categories such as “cloud computing,” leaving them open to apply to almost any company.

Every tech startup in Chicago is either using cloud computing services or selling them, and the city being the first to set this precedent puts us at a disadvantage to every other major tech hub … or even our own suburbs,” Howerton wrote in an email to Blue Sky.

Michael Reever, VP of government affairs at the Chicagoland Chamber of Commerce, criticized the taxes as quick, inefficient fixes to larger fiscal problems, saying, “Given the economic climate and the economic picture, this is a step backward to making Chicago a tech hub.”

Chicago is currently facing a massive debt and according to the Huffington Post, “Chicago and its sister governments are officially on the hook for more than $32 billion in unfunded pension debt. With just over a million households in the city, that staggering figure means each Chicago household is on the hook for $32,000 to cover these liabilities. Chicago’s pension debt exceeds the state’s total proposed operating budget for the upcoming fiscal year.”

It’s no wonder then why the city is looking at new ways to raise revenue. However, this new tax will only hurt, rather than help.

Justin Massa, founder of restaurant data startup Food Genius said, “to customers that we call on in the city of Chicago, we just got 9 percent more expensive,” adding “For anyone selling cloud services, life just got 9 percent harder.”