Local governments are feeling the crunch of an economy on the downturn. Luckily for them, streaming providers are a new source of revenue.
A major victory has been won in the battle for taxation of streaming services. At least it’s a victory if you’re in favor of governments gaining more access.
The City of Chicago has bested the efforts of Apple to hold off streaming taxation that is structured in a novel way. Despite Apple’s attempts to avoid the complexities of special taxes at the municipal level, the company is giving up on its four-year battle to prevent Chicago from applying a 9% city-only tax on the tech giant’s streaming services.
“Some 33 states require streaming services to collect sales tax, but many states are struggling to recoup revenues from the gross receipts franchise fees—up to 5%—they collected from cable TV providers (who needed state land to lay cable). Some cities have banded together in class-action lawsuits to require streaming services to pony up that 5%, but in states like Arkansas, California, and Texas, the major streaming providers have argued successfully that they don’t use municipal resources.
Some state and local governments have found novel ways to tax streaming services. Florida applies a communications tax on streaming, Kentucky applies a special video tax, while the City of Chicago applies an amusement tax originally designed for concerts and sporting events.”
— MIchael Steinhart, Janet Moran, Deloitte Insights
The tax will likely be passed onto customers who will begin filling the coffers of the Windy City starting September 15th of this year. According to the Tech Times, Chicago has already collected an impressive $31.2 million from just streaming services in 2021. For what is often considered the most violent major city in the United States, taking down Apple is just another feather in its cap.
Meanwhile, for streaming companies, this could signal a new beginning of regulatory struggles. Fears within the industry are that municipalities big and small all over the country will now seek higher and higher taxes on their citizens using streaming — and that patchwork of tax zones throughout the nation could be an administrative nightmare.
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