By Dave Nyczepir
Route Fifty
Chicago Mayor Rahm Emanuel will exempt the city’s startups and small businesses from the city’s new “cloud tax,” but critics say the levy, which will apply to popular streaming services like Netflix, has questionable legality to begin with because it wasn’t legislatively adopted.
The 9 percent tax on streaming digital content and cloud-based services isn’t a new tactic to generate revenue, state tax expert Steve Kranz told Route Fifty. But how the Chicago Finance Department established the tax is.
Monthly payments to Netflix or Spotify—service providers acting as the collectors—will include the cost of the tax starting Sept. 1.
“We don’t tax services in this country, whether they’re legal, journalistic or accounting, and there are lots of economic and policy reasons for that,” Kranz, a tax partner at international law firm McDermott Will & Emery, said. “The question is: ‘Are these new business models, where you’ve got digital content being delivered, services or tangible goods?’ That’s a question that should be resolved by legislators.”
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