Streaming Customers Sue Over 'Netflix Tax'
Chicagoans claims tax violates federal law
By Michael Harthorne,  Newser Staff
Posted Sep 15, 2015 1:35 PM CDT
Streaming customers filed a lawsuit against the City of Chicago over the so-called "Netflix tax" last week.   (AP Photo/Paul Sakuma, File)

(Newser) – Angry streaming customers in Chicago are fighting back against the so-called "Netflix tax," filing a lawsuit against the city last Wednesday that could have national implications, the Daily Dot reports. The plaintiffs—including Netflix, Hulu, and Spotify customers—allege the 9% tax on streaming services (an extension of Chicago's amusement tax) announced in June violates the Internet Tax Freedom Act, which outlaws discrimination against Internet businesses. According to Fortune, the lawsuit claims streaming customers now face a higher tax rate than if they were watching a DVD, going to the theater, or attending a concert. If the suit succeeds, it could hamper local governments' ability to tax Internet services at a time when increased online commerce is shrinking tax revenues around the country.

The lawsuit also alleges the streaming tax is essentially a new one, not an extension of the amusement tax as Chicago's city comptroller claimed. New taxes, unlike changes to existing taxes, require a vote of city officials. "If the city wants to tax Internet-based streaming media services, then it should put the measure through the political process and let Chicagoans have their voices heard through the democratic process," an attorney for the plaintiffs says in a press release. The Chicago Tribune reports the city has vowed to fight the lawsuit. The "Netflix tax," part of Mayor Rahm Emanuel's plan to make up the city's budget gap through new fees, is set to go into effect in January.