Chicago Sued Over 9% “Cloud Tax” On Streaming Services


Back in July, the city of Chicago started levying an unpopular new tax on its residents: cloud services, including streaming media like Netflix, suddenly cost 9% extra. Neither denizens of the Windy City nor the businesses who serve them are at all happy with this, however, and now the lawsuits have begun.

The Chicago Tribune reports that a Chicago-area nonprofit representing a group of Chicago residents filed suit against the city late last week.

The suit claims that the new tax on streaming services — including Netflix, Spotify, Amazon, and others — is out of bounds for two reasons. The first is procedural, having to do with Chicago’s process for changing the law on its books. The city aldermen did not vote on the changes, and the suit claims they should have been permitted to.

However, the second claim in the lawsuit has greater implications for state and local governments nationwide. That claim says that the new tax violates the Internet Freedom Tax Act, a 1998 piece of law that prohibits local, state, and federal governments from enacting “internet taxes” like an e-mail or bandwidth tax.

The city contends, however, that the 9% cloud tax is merely an extension of its existing Amusement Tax, and therefore well within bounds.

“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.

Suit filed against Chicago Internet taxes [Chicago Tribune]