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Chicago 'Cloud Tax' Adding 9 Percent Charge to Audio and Video Streaming

by Ryan Book   Jul 5, 2015 12:28 PM EDT

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Residents of Chicago are already well familiar with the city's taxes on various forms of entertainment, and now those taxes will be passed along to streaming services such as Spotify for music and Netflix for video. The "cloud tax" will be 9 percent.

The new tax is technically not a new law but rather an extension of the old law to cover digital sources of entertainment. The city, which is looking for ways to bring in money any way possible, is expecting to bring in around $12 million a year with the new taxes. And no, Chicago residents, don't expect Netflix to pick up the tab. The 9 percent will be charged to the companies responsible for the content, but you can bet that the cost will be passed along to the consumer.

The biggest controversy surrounding the passage of the update (aside from citizens not wanting to pay more taxes) is whether the city was in the right for expanding the old law, or whether new legislature should have been created for digital content.

City spokeswoman Elizabeth Langdorf justified the city's actions in a statement.

"In an environment in which technologies and emerging industries evolve quickly, the city periodically issues rulings that clarify the application of existing laws to these technologies and industries," she said. "These two rulings are consistent with the city's current tax laws and are not an expansion of the laws. These ensure that city taxation is uniformly and fairly applied and that businesses are given clear guidance on the applicability of the city's tax laws to their operations."

Chicago is reportedly the first city to issue such a tax on digital services, according to the Chicago Sun-Times.

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