A new "cloud tax" takes effect today in Chicago and streaming services as well as online databases sit in the crosshairs. The tax is a combination of two recent rulings from the Department of Finance: the first covers "electonically delivered amusements" such Netflix and Spotify, and the second covers "nonpossessory computer leases" like Amazon Web Services or Lexis Nexis.
Each ruling takes an existing tax law and configures it to levy another 9 percent tax on some online services. What does this mean in dollars and cents? With the new law, $100 of server time in Joliet would cost an extra nine dollars if you're in Chicago.
This flies in the face of the logic of cloud services and sounds like it was implemented by people who don't like or don't understand the internet. Simply put, cloud services are meant to be universal and they can't be if certain towns tax them.
Taking another angle, though, the reason this tax came to be is that Chicago is missing all the money that taxing businesses like Blockbuster used to produce. Once everything went to the cloud and brick and mortar businesses closed, the city lost money.
Although we've all grown used to binge-watching Netflix and turning to Spotify for our tunes, we still stand at the beginning of our cultural relationship with cloud based services. This development in Chicago can't be shocking, but has some troubling implications. Will other cities jump on board? Will companies who might be impacted by similar taxes move their servers to un-taxed states? There's a lot that's still unknown.
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