Chicago politicians think that they can tax cloud and streaming services that sell to their residents, including Netflix, Spotify, Pandora, XBox Live—and even premium email services.
They can enact a cloud tax, of course. But can it be applied fairly? Can it be enforced? —At what cost? It certainly can’t be enforced at a cost that is less than many times the anticipated revenue. But who cares? This is Chicago!
More likely, any attempt to enforce such a screwy tax would simply move the providers further away from Chicago jurisdiction. If the entire country is compelled to honor and collect taxes on behalf of every other municipality, then the service will simply be moved to another country. After all, we are talking about virtual services, aren’t we?!
Can you imagine the Chutzpah? As if there is something local about internet content.
- The broadband service itself?
Sure. It fits within a framework of municipal services. These can be taxed as telecommunication services—at least if they have a fixed delivery address.
- But a service that originates out of town and is designed for users on the go? Not a chance!
Can Chicago tax at the source? Good luck. Can they tax at the consumption point? (i.e. tax anyone using a service within their jurisdiction). Let’s think it through. The dim bulbs who enacted this tax, haven’t tried thinking, so we will pose the easy questions…
Will they tax tourists passing through airports and checking email or watching Netflix in the waiting area? What about a Chicago resident who watches TV primarily at his child’s home in the suburbs? Does he pay the tax to Chicago? Perhaps the city will create a bureaucracy of exemptions for tourists and residents who consume entertainment while traveling. Why not? Whatever tax is ultimately collected could be used to employ more Internet Savvy politicians! Then it becomes a jobs bill!
Here’s another good scenario: What about an XBox account that was purchased as a gift by an out of state Grandpa. He used his own address so that he can pay the bills. Is Grandpa now an illegal tax delinquent? Will there be a warrant for his arrest when he visits little Billy? Or will Chicago perform deep-packet inspection to ensure that Billy is lawfully using the Internet and is not using an out of town XBox account?
Perhaps, the tax is simply levied on a subscriber’s billing address. That would be real smart, Mr. legislator! What about a Chicago residence who is traveling far from home? I occasionally use a VPN relay to get around Netflix geographic restrictions. Does a Chicago resident traveling or living in Germany pay a tax to Chicago for viewing Netflix?
This is not a minor land grab. It is a serious attempt to tax the flow of bits.
It is doomed to failure, of course. Perhaps city council overlooked the fact that the state recently struck down the Amazon tax. Florida even backed down from taxing real-world services such as dental cleaning, Federal Express, fitness membership and private school tuition. If they found it difficult to tax these businesses with Florida addresses and direct customer contact, just how far do they think a tax on cloud services will fly?
Wild Ducks know that I am given to sarcasm. I promised a few readers that I would tone it down just a scooch. But when wing nuts enact wacky legislation in the name of helping constituents (or in the name of religious freedom), avoiding sarcasm is an unreasonable expectation. Their actions beg to be put into perspective. Not one of these idiots sat down to consider whether a cloud tax is reasonable, fair or enforceable.
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