Chicago recently ruled that Netflix subscribers must pay a 9 percent tax as part of its “amusement tax.” However, this isn’t just for Netflix. It includes music subscriptions such as a Spotify and other online rental services for movies, TV shows and games.
While this extension of the “amusement tax” could potentially bring in $12 million to aid with the city’s debt, many believe this tax is illegal and went on to file a lawsuit.
According to the Liberty Justice Center:
The Comptroller has exceeded his authority under the ordinance by issuing a rule that imposes a new tax that the City Council did not authorize in enacting the Amusement Tax. No aldermen voted on this tax. It never went to the Chicago City Council, which makes the so-called ‘Netflix tax’ an illegal tax. If the city wants to tax Internet-based streaming media services, then it should put the measure through the political process, and let Chicagoans have their voices heard through the democratic process.
The ‘Chicago Tribune’ also points out that the Netflix tax violates the Internet Freedom Tax Act because the tax rates are higher than offline entertainment services.
The plaintiffs are seeking an injunction as well as compensation for the past tax fees they’ve paid. However, the city of Chicago plans on fighting the suit even though they stated they have yet to see the complaint.