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Chicago’s ‘Cloud Tax’ Makes Online Users Pay More To Use Netflix And Amazon

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On Wednesday, a new tax that is targeting online businesses and streaming services to pay taxes on revenue lost from traditional businesses went into effect in Chicago.

Dubbed the "cloud tax," consumers who use streaming sites like Netflix and other cloud services will have to pay a nine percent tax.

Lawyers at ReedSmith discussed the new rules of the tax, which is an expansion of preexisting Amusement and Least Transaction Tax. Now including cloud technologies, Chicago is the first to directly tax the cloud more comprehensibly than any other U.S. jurisdiction.

The cloud tax is the result of Chicago's Department of Finance to get back revenue lost by the state, as more businesses offer digital subscriptions. Starting today, the Amusement Tax will also include streaming services for music, movies and games as well as satellite TV provided in Chicago.

The Lease Transaction Tax will now include cloud services such as: the online procurement of real estate listings, car and stock prices, economic statistics as well as the online procurement of word and data processing, calculations, tax preparations and "other applications available to a customer through access to a provider's computer and its software."

The first ruling includes services like Netflix and Spotify, while the second encompasses Amazon and other computer platforms like Lexis Nexis.

Through audits, city officials will be able to confirm that the taxes are being paid for through streaming and other cloud services.

To make sure their customers are held responsible, Netflix plans to add the tax to its monthly subscription fee. This means the company would have to closely monitor IP and billing addresses.

Chicago's cloud tax went into effect on July 1, 2015. 

Via: The Verge

Photo: Clay Gilliland | Flickr

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