Taxes

Live in Chicago? Your Netflix Bill Is About to Go Up Thanks to This New Tax

Two new tax rules are intended to help close the city's massive budget gap.

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For years, the city of Chicago has run a giant budget deficit, primarily as a result of ballooning education sector pensions. If you live in the Windy City and watch House of Cards, you'll soon be helping to pick up the tab.

Starting in a few months, city residents who subscribe to online media streaming services like Netflix, Hulu, or Spotify, will be pitching in to help fill the city's budget hole. A related ruling will raise the cost of other online computing services, like Lexis Nexis. Basically, if it's a service that steadily connects your computer to an outside server, the tax hits it. Non-streaming downloads won't be subject to the tax.

Prices for those online services will go up 9 percent, thanks to the city's decision to expand its existing amusement tax, as well as a personal property lease transaction tax, according to the Chicago Tribune. Payments of the tax are due no later than September, but may begin even sooner.

Netflix appears to be passively accepting the new tax, at least for moment, and preparing to make it a regular part of the tab. "We will be adding it to the cost we charge subscribers," a spokesperson for the company told Ars Technica. "Jurisdictions around the world, including the US, are trying to figure out ways to tax online services. This is one approach."

City officials claim, somewhat absurdly, that the ruling isn't an expansion of the taxes. Rather, it's just a clarification of how those taxes work in order to make those taxes consistent across the board. ("The City's new rulings clarify the application of taxes to digital goods to ensure consistency and eliminate revenue gaps," a city spokesperson said in a statement to Ars and other outlets.)  Conveniently enough for the city's overstretched budget, it's a clarification that's expected to raise an addition $12 million annually. 

One potential worry this raises is that this sort of small-ball, intensely localized revenue-boosting gimmickry will become the norm across the country, which would inevitably create all sorts of legal and pricing headaches for Internet services, most of which aren't bound geographically. That, in turn, is likely to lead to businesses gaming the rules' boundaries. As Russell Brandom suggests at The Verge, the most plausible immediate "effect is simply moving servers outside of the city limits — and, where possible, the offices that use them."

In the meantime, however, there's already some question about whether the city is within its legal rights to expand—er, "clarify"—the taxes this way. Both Ars and The Verge point to a client alert post by lawyers at ReedSmith calling the twin rulings "staggering in their breadth" and suggesting that "both rulings run afoul of provisions in the Federal Telecommunications Act, the Internet Tax Freedom Act, and federal and Illinois constitutional limits on taxation." In other words, the city's latest desperate attempt to help paper over the huge problems that public pension obligations have caused its budget may be illegal as well as irritating.

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  1. a client alert post by lawyers at ReedSmith calling the twin rulings “staggering in their breadth” and suggesting that “both rulings run afoul of provisions in the Federal Telecommunications Act, the Internet Tax Freedom Act, and federal and Illinois constitutional limits on taxation.”
    .
    Why should we care what these guys say the law says? Who died and left these guys Supreme Court justices?

  2. What a perfect example of how the parasites will never, ever stop. There is never enough money for them. They will never stop trying to take as much money as they can, always pushing the limits and trying to steal as much as possible without people rebelling.

    Government is no longer satisfied with some. Because it is voracious. Any boom, and prosperity we might be able to scrape from this continuing recession will immediately be jumped upon and taken, because it’s past the point of reason. Government finally gave up whatever restraint it might have had and went FULL BINGE, and it doesn’t come back from that. Greece is just a preliminary example of that.

    1. But without the government, who will strangle every last producer of wealth? We neeeeed the government.

      1. What is wrong with making a profit you pathetic puke???

        1. Do you own a sarc detector? I highly recommend one.

          1. It was civilly forfeited. Anyone who can afford to travel can afford to buy another.

            1. Are you that fingerbangy TSA agent I dealt with in the Newark airport last year?

              1. I wooden know.

                1. Anal splinters are the worst.

        2. It was positively dripping with sarcasm.

  3. Basically, if it’s a service that steadily connects your computer to an outside server, the tax hits it.

    Now I know why my company is moving some of its data centers out of Chicago.

    Also… WTF is an “amusement tax”?

    1. The government taxes anything fun?

      1. Still to come: Chicago taxes ass sex.

          1. I was also thinking of the Scottish restaurant sketch from SNL:

            “Plus 75 cents for the check itself…”

          2. Note the guest appearance of Tony at the end of the clip.

  4. Both Ars and The Verge point to a client alert post by lawyers at ReedSmith calling the twin rulings “staggering in their breadth” and suggesting that “both rulings run afoul of provisions in the Federal Telecommunications Act, the Internet Tax Freedom Act, and federal and Illinois constitutional limits on taxation.”

    While they are probably (and hopefully) correct, I can’t help but wonder if it’s the fact that the tax also targets LexisNexis and other legal research sites that really spurred this response from lawyers.

  5. *changes address in Netflix*

    That was easy

  6. FINALLY, they will fill that giant gaping hole in their budget.
    We’ll be fine after this little “clarification”.

    1. The problem with our government, is that it’s underfunded. Never mind that it takes in more revenue than any extortion racket in the history of humanity year after year, that’s beside the point.

  7. Oh and this is cute:

    Companies that deliver cloud-based services will be responsible for collecting taxes from their Chicago customers

    “Joe, we need to hire a dozen programmers and lawyers to handle the new tax on our Chicago customers.”
    … *keyboard tap tap tap* …
    “What Chicago customers?”

    1. Just another example of the government pushing its enforcement costs onto private entities, just like they do to banks and the like. It’s just another form of theft. I really don’t think people realize how much the parasites steal if you take compliance costs, regulation, etc into account, beyond the mere taxation and fees. People just don’t realize how much of everything they do is for the benefit of parasites and not themselves.

      1. I remember reading a Reason article a while back that referenced a Yale study showing that showed if US federal regulations merely stopped being produced after 1949, the median American salary today would be be about $330,000 per year (inflation adjusted).

        But alas, no one misses what they never had.

  8. Basically, if it’s a service that steadily connects your computer to an outside server, the tax hits it. Non-streaming downloads won’t be subject to the tax.

    Two solutions immediatly come to mind: bitorrent+VPN (See link in my handle) and/or having your cousin Bob from out of state or out of the city subscribe to Netflix for you.

    1. I use that service to watch blacked out NHL games. for whatever reason, setting my location to Switzerland gets the best feed .

      1. VPN+Netflix is fracking awesome. When I switch to my Dutch or British server, I get to watch a whole shit ton of shows I didn’t even know existed or have access to.

      2. *smile slowly spreads across face*

    2. Netflix gift cards and a fake address.

    3. Don’t (exactly) need the bittorrent. VPN is enough to get your streaming running through someplace other than Chicago.

      1. True. I say bittorrent merely because it’s not streaming data. And if it’s encrypted through a VPN, you’re much less likely to be sued or kidnapped.

      2. I don’t know that I would even worry about the VPN.

        IP Addresses don’t necessarily correlate to an actual city boundary.

        Getting a location from my IP address puts me in a town 42 miles away.

        https://ipcim.com/en/?p=where

        1. That town is likely where your ISP has some servers. Meaning tracking your location is, at best, no harder than a gruff sounding attorney or LEO calling your ISP demanding to know who you are. Even then, they can still track your real IP address to it’s nearest node, which may be just down the street from you. Use this service for checking how visible your IP is.

          https://diafygi.github.io/webrtc-ips/

          VPNs are a must for anyone who wants to download with bittorrent safely (in the US). With a VPN, they’ll need to hone in on a leak or decrypt the tunnel between me and my VPN service. Threatening the VPN service won’t do the gubmint any good since they don’t keep logs of user information.

          1. I was not addressing VPN + Torrent (Which of course is a good idea) but rather using the VPN to convince Netflix you aren’t in Chicago. Could they contact your ISP to figure it out? Ya. Are they likely to? Doubt it.

            If you are torrenting you probably would want to go a step further than VPN and configure your torrent client to use a proxy server. If your vpn were to disconnect, your torrent would keep right on downloading exposing your IP.

            1. Well a VPN is a proxy server of sorts, but with oodles of encryption, if I understand it correctly. So I actually use utorrent which has great features for VPN users. I run my VPN straight through the torrent client and will sometimes “double bag it” by running my VPN client on an east coast server while at the same time running my VPN client for my internet connection. It’s relatively leak resistant, especially if you disable WebRTC in your browser.

              Also PrivateInternetAccess (my VPN) has a killswitch feature which kills your internet entirely when the VPN gets disconnected.

              Though the most secure way of all, is to configure your router/modem to run the VPN and act as a gateway to all of your in-home devices. If your router has the ability.

      3. They’re supposed to use the ZIP code on your billing address.

        1. For now.

        2. There’s no billing if you pre-pay.

          1. Try getting a subscription service that doesn’t want a CC on file.

            1. The only reason they need a CC is if you want to do the free 30 day thing.

  9. I’d love to hear about the city services I’m burdening by staying home and watching Netflix instead of going out to the movies.

    PS: Fuck you, CPS, and fuck you, Karen Lewis. Fuck you right in your cancer-ridden brain.

    1. Utilities? You don’t pay for that electric and gas, right?

  10. Live in Chicago? Your Netflix Bill Is About to Go Up Thanks to This New Tax You Poor Bastard

    FIFY

  11. There is no need to subscribe to NETFLIX if you have a ROKU 3 player—-
    1. Get a ROKU 3 and set it up
    2. download the unsupported app store plugins here http://streamfree.tv/p/2015/pl…..-appstore/
    3. install the plugin in the plugins folder of PLEX
    4. Find and install ISHOWS and LET ME WATCH THIS plugins on your ROKU
    5. Say goodbye to NETFLIX—and watch what you want for free

    1. PS—–install the PLEX channel on your ROKU 3 player—–do this after setup—then proceed

  12. But John Roberts will say it’s not a tax, it’s a penalty and therefore legal since you can simply stop using the service.

  13. Please note that Chicago is ALREADY taxing the broadband connection itself.

    What Chicago is proposing is akin to taxing magazine subscriptions. Imagine your subscription to Reason being taxed. (Or are some states already doing this?)

    1. Well a normal magazine gets it’s payroll taxed. It’s employee’s get their income taxed. Their real property gets taxed. They may even pay a corporate tax in most circumstances. Their publisher pays their own taxes. The printers pay their own taxes. The delivery service, assuming that it’s not the postal service which is another can of worms, gets taxed. The list goes on. By the time the magazine actually gets to the consumer, I have to think they’ve already paid taxes approaching 60% of the full price. Probably more, maybe less. But it’s drastically more expensive than it would otherwise be.

      1. Sounds like a future Reason cover, a la Mad magazine back in the day.

        $4.95 NOT SO CHEAP
        ($1.25 without taxes)

        1. Reason being a non-profit, if I recall correctly, probably means they pay less taxes. But there is no one at all, anywhere in our economy who doesn’t pay higher prices because of taxes, whether it’s someone’s else’s tax bill or not. The cumulative effect must be staggering, so I’m kind of glad I don’t know that exact figure…

  14. Not sure why anyone would want to live there, but… Just get a PO Box out of the city as your billing address for everything.

    1. Are those free?

  15. Are Netflix shows not available online somewhere for free?

    I’ve been watching AMC shows online for years, even though I already have basic cable. And it’s all HD now. If you know the right sites, you can watch all kinds of things without paying a cent.

    Why do people pay to stream movies. I don’t get it. It’s a waste of money.

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