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David A. Hughes Discusses Chicago’s “Netflix Tax” with Bloomberg Law Tax

Bloomberg Law Tax 01/25/2021
A remote control on a blurry set of streaming titles.

In this article by Bloomberg Law Tax, David A. Hughes discusses Chicago's "Netflix Tax".

Read the full article here.

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Chicago will inject an economic presence standard and a safe harbor for smaller streaming and cloud services into its administration of the city’s “Netflix tax,” beginning July 1.

Chicago’s Department of Finance issued a bulletin late Thursday outlining its enforcement of the amusement tax (Ruling No. 5) as applied to streaming entertainment services, and its Personal Property Lease Transaction Tax, which applies to internet-based computing services.

The department said it expects out-of-state businesses doing business in Chicago and meeting new economic presence, or nexus, standards to fully comply with the amusement and cloud taxes “on a prospective basis, beginning July 1.”

The guidance statement clarifies Chicago’s views on enforcing the two tax programs going forward, but raises questions about enforcement for earlier periods, said David Hughes. Chicago’s taxes on streaming entertainment and cloud computing date back to 2015. In addition, the guidance doesn’t specify compliance approaches for businesses with a physical presence in Chicago.

“This could remain a contentious issue, especially for pre-Wayfair periods,” David said.

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