Chicago’s 9% Tax on Streaming Services Remains Legal in Fresh Court Ruling

Chicago’s 9 percent tax on streaming services is legal, and doesn’t violate the Internet Tax Freedom Act or the Illinois Constitution, a state appellate court ruled this week, striking down the latest legal challenge to the tax, Law360 reports.

Chicago, so far, has managed to successfully navigate legal challenges to the tax, which it enacted in mid-2015 as part of the city’s amusement tax, which is typically levied against concerts and other live events.

In mid-2015, the city estimated the tax on streaming entertainment would generate $12 million per year in new revenue.

Shortly after that decision, lawyers at the Liberty Justice Center sued the city on behalf of a group of streaming customers. The group challenged the tax on four major points, notably that it was unfair to tax streaming entertainment at a different rate than the equivalent offline activity, for example, charging someone the amusement tax to rent a digital movie on Amazon Prime Video, but not charging the same tax for renting a physical DVD.

Separately, Apple sued Chicago in 2018 over the same tax, on similar grounds.

In early 2018, Sony dropped its legal challenge to Chicago’s amusement tax, cutting the city a $1.2 million check, Bloomberg reported at the time. The city reportedly collected nearly $800,000 from Eventbrite, and $70,000 from Fandango.

Chicago was the first major U.S. city to enact a tax that specifically targets streaming services. Other cities and states tax streaming services under general sales taxes.

Earlier this year, Illinois State Rep. Arthur Turner introduced House Bill 3359, which would enact a statewide tax on streaming entertainment. That bill remains in the state’s Rules Committee.