Netflix Tax Dispute Ends In A Settlement

Apple and Chicago have reached an agreement to suspend their legal dispute over the city’s groundbreaking tax on streaming service subscribers.

In 2015, Chicago enacted a “Netflix tax” that imposed a 9 percent penalty on anybody who used streaming entertainment services. A long-standing tax scheme was reinterpreted to include “amusements that are provided electronically” in the city’s tax on tickets for sporting events and concerts as part of the revenue program. The first tax that particularly targeted services like Disney+, Spotify, and Amazon Prime Video is largely considered as having been implemented.

Apple filed a lawsuit in 2018 against Chicago’s Netflix Tax, claiming that the federal Internet Tax Freedom Act, which forbids states from putting discriminatory levies on various forms of internet trade, was violated as well as the Constitution’s due process and commerce provisions.

Chicago Imposed A 9% Netflix Tax 

After the decision, Apple changed its case, claiming that the tax is unlawful with regard to certain services it provides. But Duffy did not buy it and threw the Netflix Tax case out.

The business decided against resubmitting its grievance. The case’s merits were never discussed by the judge. Apple and other tax-affected streamers dodged a verdict that may have established a precedent that the revenue model is legitimate by deciding not to take their claims further.

Chicago was also sued by Sony over the tax, but Sony later withdrew. Streaming service subscribers in Chicago contributed more than $30 million to the city’s coffers in 2021, according to a Bloomberg Tax study of city statistics.

Local governments are pressing harder to have streamers pay fees for utilizing public infrastructure, which was previously only allowed for cable companies that needed to utilize public rights-of-way to build their lines. Streamers have largely won legal battles to contest the taxes. Since streamers do not utilize any public wires, cables, or facilities, judges have rejected suggestions that fines should be imposed on them. In keeping with a succession of decisions made throughout the nation in April, Los Angeles Superior Court Judge Yvette Palazuelos determined that streamers are exempt from state regulations governing video service providers.