Residents sue Chicago over controversial 'Cloud Tax'

By midian182 ยท 24 replies
Sep 15, 2015
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  1. In response to Chicago’s recent Cloud Tax - which adds 9% to the cost of online services such as Spotify, Amazon and Netflix - a nonprofit organization representing a group of the city’s residents has launched a lawsuit that claims the policy is illegal.

    The suit was filed last week in Cook County state court. It claims the city comptroller’s decision to apply the existing Amusement tax to online services amounted to a new tax that could only have been imposed by a vote from city aldermen.

    The lawsuit also claims that the cloud tax contravenes the Internet Freedom Tax Act of 1998, which prohibits local, state and federal governments from imposing discriminatory internet-only taxes, such as email or bandwidth taxes. Moreover, the plaintiffs claim the tax discriminates against electronic commerce; it’s been pointed out that while the levy is applied to Netflix's streaming service, it doesn’t affect the company’s DVD-by-mail services.

    It’s been reported by the Chicago Tribune that the cloud tax is expected to bring in $12 million annually to the city, and that it is part of a larger attempt to ease budget problems by Mayor Rahm Emmanuel. The city says it will fight the lawsuit vigorously, and that the new tax is merely an extension of the existing Amusement tax, therefore legal.

    “The City has not yet seen the complaint, but we are confident that the ruling is a valid application of the existing Amusement Tax,” a law department spokesman told the Tribune.

    The tax is believed to be the only one of its kind in the country. Because it is part of the Amusement tax - which applies to charges paid for the privilege to participate in, witness or view amusement - the cloud tax also extends to online gaming.

    Permalink to story.

  2. OneSpeed

    OneSpeed TS Addict Posts: 286   +92

    You have to pay to be "Amused"? What next, "Piss" tax?
    Evernessince likes this.
  3. davislane1

    davislane1 TS Grand Inquisitor Posts: 4,737   +3,757

    Piss increases water salinity in the local environment as well as placing additional strain on water treatment facilities. I think 1 cent per liter -- measured via toilet sensor -- is fair. Alternatively, a 1% tax on water usage could be an option if the toilet sensor is too invasive.
    NightAngel79 and Evernessince like this.
  4. jacaseyclyde

    jacaseyclyde TS Rookie

    Poop also increases strain on water treatment facilities, as it also needs to be cleaned out. Will the toilet sensor be able to detect poop as well? And is it taxed at the same rate, under a general "Excrement" tax? Or does it get it's own taxation rules?

    And how do we handle those who do not want to pay the excrement tax, and choose instead to use some secluded area nearby? Does that count as tax evasion?
  5. davislane1

    davislane1 TS Grand Inquisitor Posts: 4,737   +3,757

    Taking a dump outdoors is already illegal and thereby already taxed.
    Hexic likes this.
  6. LOL you guys made my day! :D
  7. Hexic

    Hexic TS Maniac Posts: 333   +164

    Leave it to Illinois. That state is so screwed. All there is to say.
  8. mailpup

    mailpup TS Special Forces Posts: 7,186   +469

    You're behind the times. The City of L.A., for one, already has a sewer usage tax based upon the amount of water you use.
  9. Evernessince

    Evernessince TS Evangelist Posts: 2,104   +1,280

    Really good devil's advocate. I don't think most politician's realize that each time they create a new tax, there's a cost to implementing it and maintaining it. This cost falls on both the government and the companies forced to collect it.
  10. lipe123

    lipe123 TS Evangelist Posts: 718   +236

    Even online gaming !? WTF

    Thats some messed up law if you ask me, how do you even enforce something like that. Does a police officer randomly bust houses to check for netflix or world of warcraft activity?

    What about children's toys, is that not amusement also - is that being taxed? (lets not even ask about adult toys)

    Why don't they just use property taxes like any other normal city instead of trying to tax something like amusement.
  11. mailpup

    mailpup TS Special Forces Posts: 7,186   +469

    I doubt that they care about this aspect. Any costs to the government associated with collection is built into the tax. The cost to any private entity is disregarded.
    Why should only property owners pay for such a thing?
  12. MilwaukeeMike

    MilwaukeeMike TS Evangelist Posts: 2,890   +1,224

    No, police officers would not be checking to see if you're playing WoW. They're not in charge of taxes. It's the job of the IRS to make sure people pay their taxes, and if you didn't vote for Obama in 2012, you can bet you're already on a watch list. Your best bet is to donate to Hillary's campaign and make it public.

    Oh, and name your wifi DemsIn2016 or something of the sort. That'll keep the IRS off your back :)
  13. Tanstar

    Tanstar TS Evangelist Posts: 616   +176

    I don't think the IRS deals with City Taxes.
    I'm sure they'll try to force Netflix and such to charge their customers who live in Chicago and pay it back to the city. Any entity who doesn't have offices in Chicago will refuse. Any that does have offices in Chicago will move out of the city and then refuse.
  14. Tanstar

    Tanstar TS Evangelist Posts: 616   +176

    Oh, and Chicago must be a miserable place to live :p
  15. MilwaukeeMike

    MilwaukeeMike TS Evangelist Posts: 2,890   +1,224

    I was talking to a friend of mine from Chicago this weekend who recently moved out of downtown Chicago and he said Chicago taxes are so high they pretty much guarantee you have to be rich to live in the city. Their property tax is 2nd only to new jersey.

    And we haven't even gotten started on the traffic!
  16. G0DofPaiN

    G0DofPaiN TS Booster Posts: 58   +35

    Also a joke regarding taxes on sex, someone impotent addressing to the local government:
    The undersigned Johnny Wick,
    Man of the law without d**k
    I ask to be spared of due
    For something that I can't do.

    The answer comes promptly:
    Dear Mr. Johnny Wick
    Man of the law without d**k
    If there is a tongue or finger
    You will pay the imposition.
  17. Neojt

    Neojt TS Addict Posts: 223   +56

    So having fun in Chicago is 9% more expensive then else ware.. what a depressing tax
    Evernessince likes this.
  18. New York is natural disaster zone, businesses setup satellite offices for data in Chicago, Mayer wants to cash in.
  19. cliffordcooley

    cliffordcooley TS Guardian Fighter Posts: 9,725   +3,700

    I guess if they don't like it, they can go back to NY. :)
  20. davislane1

    davislane1 TS Grand Inquisitor Posts: 4,737   +3,757

    "If you don't like high taxes, go pay higher taxes."
    SuperVeloce likes this.
  21. Skidmarksdeluxe

    Skidmarksdeluxe TS Evangelist Posts: 8,647   +3,274

    You're talking crap now, anymore of that and you could find yourself in the poo. :D
  22. SuperVeloce

    SuperVeloce TS Booster Posts: 133   +34

    Are you joking?! You already pay for the water treatment facility, its far from free... and those are built to take on this amazingly high stran from your pee. Any home cleaning agents and cosmetics are by far worse than your pee.
  23. davislane1

    davislane1 TS Grand Inquisitor Posts: 4,737   +3,757

    Either Poe's law is in full effect or you got out of bed entirely too early.
  24. Joe Iversion

    Joe Iversion TS Rookie

    Haven't you noticed. Now that the trend is to leave closer to the city or in the city, all the big name cities such as NYC, Boston, San Fran, Chicago, Miami are pretty much for rich people only
  25. NatalieEGH

    NatalieEGH TS Rookie Posts: 16   +8

    On a serious note, I think the city of Chicago is asking for a major auditing problem. The entertainment landscape has changed greatly since the law was put into place.

    The law in question first became effective 17 Feb 1986 and was last revised 9 June 2015. "Amusement"
    "(1) any exhibition, performance, presentation or show for entertainment purposes, including, but not limited to, any theatrical, dramatic, musical or spectacular performance, promotional show, motion picture show, flower, poultry or animal show, animal act, circus, rodeo, athletic contest, sport, game or similar exhibition such as boxing, wrestling, skating, dancing, swimming, racing, or riding on animals or vehicles, baseball, basketball, softball, football, tennis, golf, hockey, track and field games, bowling or billiard or pool games; (2) any entertainment or recreational activity offered for public participation or on a membership or other basis including, but notlimited to, carnivals, amusement park rides and games, bowling, billiards and pool games, dancing, tennis, racquetball, swimming, weightlifting, bodybuilding or similar activities; or (3) any paid television programming, whether transmitted by wire, cable,fiber optics, laser, microwave, radio, satellite or similar means." The document goes on to give of what is taxed and how they determine if you are subject to the tax. The text is listed at ""

    1. A person is officially listed with the IRS as a professional gambler. Charging that person a 9% tax for amusement because they are on a gambling site could easily be challenged as conducting business even when not actually gambling. The city is therefore legally required to refund the that revenue.

    2. A teacher assigns children to watch a particular show on television. That becomes homework even if it would normally be amusement. That money would need to be refunded. At least earlier versions of the ordinance specifically exempted "amusements" for educational purposes.

    3. With the way the ordinance is written, while downstream customers that do not live in Chicago may still be affected. If you purchase a ticket online for a local movie or event and the ticket company is based in
    Chicago, the company is still liable for taxes on that sell. If you download music and is routed through a node in Chicago, the owner of the node could in theory be liable taxes for the sell or renting of the song.

    4. There is not a good definition provided for what "paid television programming" is. It is obvious that any television (or radio) seen using cable, internet, satellite, or requiring specialized descramblers that have subscription fees would qualify if you are being charged a fee for the cable, internet, satellite, or hardware but what about television/radio received via normal broadcast transmission. If you are a patron of the local educational channel and send donations on a regular basis (monthly, annually, whatever) is that now considered paid television programming. Do shopping channels that originate in Chicago paid television programming or do they qualify if you purchase an item and live in Chicago? Since WGN is routinely part of cable service in many areas of the country are Chicago residents now liable for paying for receiving it using a home antenna?

    This ordinance is too vague in several areas.

    It determines end customer tax liability by "The Department will utilize the rules set forth in the Mobile Telecommunications Sourcing Conformity Act, 35 ILCS 638, to determine sourcing for the amusement tax. In general, this means that the amusement tax will apply to customers whose residential street address or primary business street address is in Chicago, as reflected by their credit card billing address, zip code or other reliable information." Using this method if a person is on vacation to England and downloads a song, they are still liable for the tax even though the activity took place in a different jurisdiction.

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