Apple will start collecting 'Netflix tax' in September

Apple will begin collecting taxes on Apple TV+ subscriptions within Chicago as part of its settlement relating to the city's 2015 Amusement Tax.

In July, Apple gave up its four-year fight against Chicago's so-called "Netflix Tax." The tax requires the tech giant to pay a 9% tax on streaming service income earned from Chicago subscribers.

According to Bloomberg Law, Apple has agreed to collect the tax, starting September 15, from customers in Chicago. As part of the settlement, Apple will not need to pay back taxes.

In 2015, Chicago introduced a change to its Amusement Tax that placed a 9% tax on streaming entertainment services. Also referred to as a "Netflix Tax" and impacting services like Netflix, Spotify, and Apple's own Apple TV+.

Three years later, Apple filed a lawsuit against the city, arguing the tax violated the federal Internet Tax Freedom Act and the U.S. Constitution's commerce and due process laws. The case hung in courts for more than two years.

Eventually, Chicago won the trial. Afterward, Apple amended its complaint to say that case was a "facial challenge" to the tax program but that Apple was challenging how the tax was applied to its own services.

Cook County Circuit Court Judge Daniel Duffy dismissed the lawsuit. He declared that Apple's filing was an insufficient challenge and gave Apple leave to file an amended complaint.

Apple chose to settle rather than file an amended complaint.

18 Comments

22july2013 3725 comments · 11 Years

About 2 years ago

Does Netflix have to pay the same tax if they bill their users directly?

Curiouserandcurious 41 comments · 6 Years

That’s a lot of tax.

davidw 2112 comments · 17 Years

22july2013 said:

Does Netflix have to pay the same tax if they bill their users directly?

It's not Apple that has to pay the tax. It's the subscribers to the streaming service that has to pay the tax. And the tax is not levied to streaming subscribers, in all States. It depends on each State sales tax laws and how it's applied. Or whether there are specific taxes that applies to digital streaming services, like the "Amusement tax" in IL and NY. Some "Netflix tax" are only local and not Statewide.

https://www.taxjar.com/blog/sales-tax-digital-products

https://www.timesunion.com/news/article/Why-are-Netflix-bills-are-going-up-in-New-York-16679952.php

Here is CA, there is no State "Netflix tax" on streaming services, yet. Streaming services are considered intangible goods and not subject to any sales tax in CA. But there might be a local "Netflix tax". Like how Netflix subscribers in Chicago has to pay the "Amusement tax". Netflix would have to collect the tax and remit it to the State (or county). Like what Apple has to do in Chicago. It's the State (or county) that is charging the consumers the tax. The tax is not being charged to the streaming providers. The providers just has to collect it for the State (or county). Much like a retail store collecting the sales tax.

22july2013 said:

Does Netflix have to pay the same tax if they bill their users directly?

Just to be clear. The lawsuit was requiring Apple to pay the 9% "Amusement tax" since Apple has not been billing and collecting the tax from their Apple streaming subscribers. Much like how if a retailer do not collect the sales tax on the taxable goods they sell, they are still responsible for paying to the State, the sales tax on it. Since Apple was fighting this tax, they were not billing and collecting any "Amusement tax". The settlement is that Apple will now bill and collect the "Amusement tax" from their streaming subscribers and remit it to the State. And Apple will no longer be liable to pay back the 9% "Amusement tax" that they didn't bill and collect from their streaming subscribers, during the time this suit was in the courts.

urahara 733 comments · 13 Years

It seems that I work hard, earn money, the government takes part of it from me.
Now i want to relax and enjoy, restore my energy (so that i could work hard again and pay taxes), and government makes it even more expensive for me (and thus more difficult to do).
So my energy restoration is diminished, my productivity is lower, I earn less, and pay less income taxes.
Tell me who is the winner in this situation?

It seems only who is better off from this ‘Amusement tax’ are layers.