Chicago and some ridiculous tax for streaming services

Some big companies are revolutionizing how Americans consume media content. These wildly popular services enable ubiquitous and virtually instantaneous access to expansive catalogues of domain providers, music, movies, and TV shows.

Today, there are a lot of providers and data center facilities in and around the city. Many of these data centers are delivering content-related services to businesses and a number of users both locally, and throughout the world.

So, when the Chicago Department of Finance issued a modification to an existing ‘Amusement Tax’ – people were certainly surprised to see a new application to the digital world. A recent DataCenterKnowledge article points out that this means the 9 percent tax now applies to big providers of services .

So – an organization which hosts some type of content-based streaming service in Chicago may very well be taxed twice; as a user and as a provider.

Before we go into how this really impacts the user and a Chicago-based provider; let’s understand this “new” tax a bit better. First of all, this isn’t a new tax. Rather, it’s a different interpretation around an existing ‘Amusement Tax.’ Forbes recently pointed out how Chicago already imposes an amusement tax “upon the patrons of every amusement within the city.”

Reports on Wednesday of the “cloud tax” took many people from Chicago by surprise, leaving domain providers and consumers of streaming and cloud services scrambling to understand the implications. Technology companies, among the heaviest users of cloud services, are likely to be taxed for the services they use as well as those they provide.

The cloud tax extends ordinances governing two types of taxes — the city amusement tax and the city personal property lease transaction tax. The taxes cover many products streamed to businesses and residents. They also cover use of various online databases that could especially affect businesses.

The city expects the taxes to bring in about $12 million a year. Several in the Chicago tech industry criticized the mayor and the city for creating an environment that they see as less friendly to tech startups than other places around the country.

“Every tech startup in Chicago is either using domain and cloud providers, computing services or selling them, and the city being the first to set this precedent puts us at a disadvantage to every other major tech hub … or even our own suburbs,” Howerton wrote in an email to Blue Sky.

The future of content delivery will revolve around providers; and, new forms of entertainment streamed from cloud services may very well have new fees imposed around them. “I think the objectionable part is that, instead of drafting new laws for that, we’re simply stretching the old laws to fit.”

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