Netflix’s New Local Tax Will Begin From Next Month

According to a story from The Hollywood Reporter, Apple has reached a settlement in its legal dispute with Chicago over the alleged “Netflix Local Tax” imposed by the city. Targeting streaming services, the Local Tax levied a 9 percent surcharge on “amusements that are provided electronically.”

The settlement’s precise terms were not disclosed to the public. However, Bloomberg Tax stated in a previous article that the tax’s revenues, which were reportedly the first of their kind, increased to almost $30 million in the year concluding June 30th, 2021.

Chicago Will Collect Netflix Local Tax

The Local Tax choice has taken a while to make. In an effort to make up for the money lost from traditional brick-and-mortar stores, Chicago enacted the new Local Tax in 2015. Apple was one of many organizations and businesses that objected to the law when it was challenged in 2018.

Sony Interactive Entertainment, the Entertainment Software Association (ESA), a trade association for video games, and a lobbying organization for Netflix, Hulu, and Spotify were among the other parties to bring legal challenges. The number of challenges to the tax caused delays in Apple’s lawsuit against the city. While the legal challenge brought by streaming service subscribers progressed, the matter was placed on hold for more than two years. However, over time, these additional legal disputes were either dismissed, settled, or decided in Chicago’s favor. Apple’s new complaint, which claimed that the tax is illegal, was dismissed by a judge last week. Apple, according to The Hollywood Reporter, decided against refiling.

Although the “Netflix tax” only contributes a small portion of the city’s $1.5 billion in annual tax collection, Bloomberg Tax adds that revenue has more than tripled in the last five years. The tax generated $9.4 million in revenue in 2017, $28.8 million in 2020, and $31.2 million in 2021 from the 47 enterprises that had registered in accordance with the regulations. When the pandemic prompted the closure of physical premises, however, a large portion of the city’s other local business taxes was severely impacted.