Apple last month settled a lawsuit against Chicago as the city imposed a new local tax for streaming services. At the time, the company feared that the action would result in a ruling that such a tax is completely legal, which could set precedents for other governments to do the same. The company will begin collecting the tax for subscribers in Chicago starting next month.
A local tax on streaming services
As reported by Seeking Alpha, Apple will begin collecting the so-called “Netflix tax” from consumers in Chicago starting in September. Documents obtained from the settlement revealed that the taxes will apply to every Apple streaming platform, such as Apple Music, Apple TV+, and even Apple Arcade. Apple News+, however, will remain exempt from the tax.
The report also mentions that Apple will not be responsible for collecting back taxes, which “could have amounted to perhaps millions of dollars.” According to local Chicago regulations, streaming video, music, and gaming services are required to pay a 9% municipal tax.
The tax for streaming services in Chicago was actually a “reinterpretation” of a previous tax program that already established a city tax on tickets for recreational activities and concerts that are “delivered electronically.” The latest change to the tax program took effect in 2015. Other companies like Netflix and Spotify were also affected.
However, just like Apple, these companies have also dropped the lawsuits against Chicago. Apple previously claimed that the tax is “illegal” since the City of Chicago has no power to impose a local fee on digital platforms. An appeals court concluded that the tax doesn’t violate the Internet Tax Freedom Act and isn’t unconstitutional, either.
For now, other details about the tax (such as whether it will result in higher prices for subscribers in Chicago) remain unknown.
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