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What Is Netflix Tax And Will It Come To My City?

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Chicago was able to collect large sums from various online services thanks to the so-called Netflix Tax. More cities might start imposing this tax soon too.  ( Charles Deluvio | Unsplash )

There's a new tax that aims to fine streaming services, most notably Netflix. The precedent to this came four years, when Chicago imposed a 9 percent tax on streaming services, which led to a bevy of lawsuits.

But now, Chicago has apparently collected $2 million in sales tax from Sony and two online ticketing services, making it the first major area to impose such a tax successfully.

As Bloomberg reports, Sony and the ticketing services cut the city a check in payment for the "Netflix Tax," which suggests that instead of taking the matter to court, companies are choosing to pay instead.

The settlement in question was obtained in May 15 through a Freedom of Information Act request, Bloomberg notes. It was paid in Jan. 15 and covers Sony's amusement tax liabilities for gaming charges paid by Chicago customers between April 2017 and October 2018. The city waived any interest and penalties that might have been issued to Sony's bill.

What Is The Netflix Tax?

In addition to Sony, Chicago also collected large sums from Eventbrite and Fandango. The levy has been dubbed the "Netflix Tax" because it focuses mainly on streaming video services, gaming, and other digital entertainment outfits.

Chicago might not be the last city to successfully implement this tax, though. This year, Rhode Island's governor proposed a budget that includes new sales taxes on digital videos, books, and music. Pennsylvania, meanwhile, enacted a similar tax back in 2016 and is expected to start implementing it this year.

More cities are welcoming this idea, says Mark Mazure, of Urban-Brookings Tax Policy Center, because there are less consumers buying goods.

"People are buying more and more services and less goods, so the sales tax pace is getting reduced, and you end up trying to find ways to raise revenue from services," said Mazur, as CBS reports.

What Happens Next?

Last year, the Supreme Court handed down a decision allowing states to collect sales tax from online transactions. That will likely only embolden more cities to impose such fees moving forward. Online shopping and payments are one of the biggest activities done online, which means the Netflix Tax could give states and cities sizable revenues if implemented. In turn, companies affected might raise their prices to offset the extra fees.

Thoughts on this so-called Netflix tax? As always, if you have anything to share, feel free to sound them off in the comments section below!

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