Apple v Chicago streaming service tax battle ends in hushed settlement
(2022/07/25)
- Reference: 1658766611
- News link: https://www.theregister.co.uk/2022/07/25/apple_surrenders_in_chicago_streaming/
- Source link:
A lawsuit settled last week between Apple and Chicago will be meaningful for streaming services around the US.
At issue was the US city's " [1]amusement tax ," which levies a 9 percent fee on entertainment facilities. The law was [2]expanded in 2015 to include streaming services such as Apple TV and Music, Netflix, Spotify, Hulu and others.
Unsurprisingly, the expansion was opposed by streaming providers, but an [3]agreed dismissal order filed last week in the circuit court of Cook County saw Apple abandoning its fight in an undisclosed settlement that dismissed its claims with prejudice.
[4]
While decisions in the US largely favor streaming services that want to avoid paying extra taxes, the settlement in Chicago could be seen as an effort by Apple to avoid a ruling stating the tax is legal.
[5]
[6]
In March this year Cook County Circuit Court Judge Dan Duffy [7]granted Chicago's motion to dismiss the initial suit, but left room for Apple to amend its complaint. Duffy presided over last week's rejected amendment, too.
Apple's lawsuit was first filed in 2018 and [8]alleged violations of the Internet Tax Freedom Act, as well as the commerce and due process clauses of the US Constitution. The decision was delayed due to a lawsuit filed by Chicago customers of Netflix, Hulu and Spotify against the city government that challenged the constitutionality of the fees.
[9]
Chicago prevailed in that lawsuit, both originally and in [10]an appeal [PDF], which found the fees to be constitutional. The Chicago government had no comments in response to questions from The Register , and we have yet to hear back from Apple or its lawyers in the case.
Changing the streaming landscape
According to Bloomberg Tax, [11]lawsuits across the country have targeted streaming services, with varying results.
Bloomberg said that, as of late 2021, 13 states had localities actively suing to get compensation from service providers like Apple, Amazon and Spotify. Some decisions defended the rights of video streaming providers, while others like Chicago have come down hard in the opposite direction.
One recent case in Lancaster, California, saw that city attempting to recoup [12]unpaid franchise fees from Hulu and Netflix, an attempt it lost.
Of the 13 states with lawsuits mentioned by Bloomberg, six cases have since been [13]dismissed or ruled in favor of streaming services, with others outstanding. Other local municipalities have taken to suing cloud computing providers as well, and for similar reasons: their services are [14]taking money out of local coffers .
[15]Philippines approves digital services tax on streaming services, apps, even SaaS
[16]FCC chair wishes for 100Mbps down, 20Mbps up broadband minimum in US
[17]DataStax launches streaming data platform with backward support for JMS
[18]Cash-strapped Chicago slaps CLOUD TAX on Netflix, Spotify etc users
The US isn't exactly ahead of the curve on this debate: Much of the rest of the world already decided taxing tech services was a given in the face of tax revenue losses.
The government in the Philippines approved a [19]12 percent tax on streaming and cloud services last year, and [20]Canada has considered imposing a 5 percent tax as well. G7 nations last year agreed to a 15 percent tech tax, and in turn eliminated digital service taxes paid by citizens.
[21]
If that's not enough, cities considering a streaming service tax may want to look at Chicago's tax revenue records: [22]Since implementing the scheme in 2015, the city's tax revenue has quadrupled. ®
Get our [23]Tech Resources
[1] https://www.chicago.gov/city/en/depts/fin/supp_info/revenue/tax_list/amusement_tax.html
[2] https://www.theregister.com/2015/07/02/chicago_cloud_tax/
[3] https://aboutbtax.com/34g
[4] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/legal&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2Yt8SgLriYmFs3aoFl8TshAAAARI&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[5] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/legal&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44Yt8SgLriYmFs3aoFl8TshAAAARI&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[6] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/legal&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33Yt8SgLriYmFs3aoFl8TshAAAARI&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[7] https://news.bloombergtax.com/daily-tax-report-state/apple-loses-bid-to-overturn-chicagos-unique-9-netflix-tax
[8] https://www.hollywoodreporter.com/business/business-news/apple-settles-suit-against-chicago-over-citys-tax-on-streaming-services-1235184402/
[9] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/legal&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44Yt8SgLriYmFs3aoFl8TshAAAARI&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[10] https://ljc-assets.s3.amazonaws.com/2015/09/Opinion.pdf
[11] https://news.bloombergtax.com/daily-tax-report-state/netflix-hulu-in-growing-fight-with-cities-over-streaming-money
[12] https://lawstreetmedia.com/news/tech/california-state-court-tosses-citys-right-of-way-fee-dispute-against-hulu-and-netflix/
[13] https://legalnewsline.com/stories/608746093-cities-on-a-losing-streak-as-courts-reject-5-tax-on-netflix-hulu
[14] https://news.bloombergtax.com/daily-tax-report-state/streaming-cloud-computing-are-state-city-revenue-targets
[15] https://www.theregister.com/2021/09/22/philippines_approves_digital_services_tax/
[16] https://www.theregister.com/2022/07/18/fcc_broadband_minimum_proposed/
[17] https://www.theregister.com/2022/06/29/datastax_streaming_jms/
[18] https://www.theregister.com/2015/07/02/chicago_cloud_tax/
[19] https://www.theregister.com/2021/09/22/philippines_approves_digital_services_tax/
[20] https://www.theregister.com/2016/11/30/canada_mulls_taxing_netflix_five_percent/
[21] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/legal&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33Yt8SgLriYmFs3aoFl8TshAAAARI&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[22] https://news.bloombergtax.com/daily-tax-report-state/chicago-on-a-revenue-roll-from-cloud-and-netflix-taxes
[23] https://whitepapers.theregister.com/
At issue was the US city's " [1]amusement tax ," which levies a 9 percent fee on entertainment facilities. The law was [2]expanded in 2015 to include streaming services such as Apple TV and Music, Netflix, Spotify, Hulu and others.
Unsurprisingly, the expansion was opposed by streaming providers, but an [3]agreed dismissal order filed last week in the circuit court of Cook County saw Apple abandoning its fight in an undisclosed settlement that dismissed its claims with prejudice.
[4]
While decisions in the US largely favor streaming services that want to avoid paying extra taxes, the settlement in Chicago could be seen as an effort by Apple to avoid a ruling stating the tax is legal.
[5]
[6]
In March this year Cook County Circuit Court Judge Dan Duffy [7]granted Chicago's motion to dismiss the initial suit, but left room for Apple to amend its complaint. Duffy presided over last week's rejected amendment, too.
Apple's lawsuit was first filed in 2018 and [8]alleged violations of the Internet Tax Freedom Act, as well as the commerce and due process clauses of the US Constitution. The decision was delayed due to a lawsuit filed by Chicago customers of Netflix, Hulu and Spotify against the city government that challenged the constitutionality of the fees.
[9]
Chicago prevailed in that lawsuit, both originally and in [10]an appeal [PDF], which found the fees to be constitutional. The Chicago government had no comments in response to questions from The Register , and we have yet to hear back from Apple or its lawyers in the case.
Changing the streaming landscape
According to Bloomberg Tax, [11]lawsuits across the country have targeted streaming services, with varying results.
Bloomberg said that, as of late 2021, 13 states had localities actively suing to get compensation from service providers like Apple, Amazon and Spotify. Some decisions defended the rights of video streaming providers, while others like Chicago have come down hard in the opposite direction.
One recent case in Lancaster, California, saw that city attempting to recoup [12]unpaid franchise fees from Hulu and Netflix, an attempt it lost.
Of the 13 states with lawsuits mentioned by Bloomberg, six cases have since been [13]dismissed or ruled in favor of streaming services, with others outstanding. Other local municipalities have taken to suing cloud computing providers as well, and for similar reasons: their services are [14]taking money out of local coffers .
[15]Philippines approves digital services tax on streaming services, apps, even SaaS
[16]FCC chair wishes for 100Mbps down, 20Mbps up broadband minimum in US
[17]DataStax launches streaming data platform with backward support for JMS
[18]Cash-strapped Chicago slaps CLOUD TAX on Netflix, Spotify etc users
The US isn't exactly ahead of the curve on this debate: Much of the rest of the world already decided taxing tech services was a given in the face of tax revenue losses.
The government in the Philippines approved a [19]12 percent tax on streaming and cloud services last year, and [20]Canada has considered imposing a 5 percent tax as well. G7 nations last year agreed to a 15 percent tech tax, and in turn eliminated digital service taxes paid by citizens.
[21]
If that's not enough, cities considering a streaming service tax may want to look at Chicago's tax revenue records: [22]Since implementing the scheme in 2015, the city's tax revenue has quadrupled. ®
Get our [23]Tech Resources
[1] https://www.chicago.gov/city/en/depts/fin/supp_info/revenue/tax_list/amusement_tax.html
[2] https://www.theregister.com/2015/07/02/chicago_cloud_tax/
[3] https://aboutbtax.com/34g
[4] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/legal&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2Yt8SgLriYmFs3aoFl8TshAAAARI&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[5] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/legal&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44Yt8SgLriYmFs3aoFl8TshAAAARI&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[6] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/legal&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33Yt8SgLriYmFs3aoFl8TshAAAARI&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[7] https://news.bloombergtax.com/daily-tax-report-state/apple-loses-bid-to-overturn-chicagos-unique-9-netflix-tax
[8] https://www.hollywoodreporter.com/business/business-news/apple-settles-suit-against-chicago-over-citys-tax-on-streaming-services-1235184402/
[9] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/legal&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44Yt8SgLriYmFs3aoFl8TshAAAARI&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[10] https://ljc-assets.s3.amazonaws.com/2015/09/Opinion.pdf
[11] https://news.bloombergtax.com/daily-tax-report-state/netflix-hulu-in-growing-fight-with-cities-over-streaming-money
[12] https://lawstreetmedia.com/news/tech/california-state-court-tosses-citys-right-of-way-fee-dispute-against-hulu-and-netflix/
[13] https://legalnewsline.com/stories/608746093-cities-on-a-losing-streak-as-courts-reject-5-tax-on-netflix-hulu
[14] https://news.bloombergtax.com/daily-tax-report-state/streaming-cloud-computing-are-state-city-revenue-targets
[15] https://www.theregister.com/2021/09/22/philippines_approves_digital_services_tax/
[16] https://www.theregister.com/2022/07/18/fcc_broadband_minimum_proposed/
[17] https://www.theregister.com/2022/06/29/datastax_streaming_jms/
[18] https://www.theregister.com/2015/07/02/chicago_cloud_tax/
[19] https://www.theregister.com/2021/09/22/philippines_approves_digital_services_tax/
[20] https://www.theregister.com/2016/11/30/canada_mulls_taxing_netflix_five_percent/
[21] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/legal&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33Yt8SgLriYmFs3aoFl8TshAAAARI&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[22] https://news.bloombergtax.com/daily-tax-report-state/chicago-on-a-revenue-roll-from-cloud-and-netflix-taxes
[23] https://whitepapers.theregister.com/
Am I reading this right?
Swarthy
As I am reading this, it looks like TV/Cable companies have been paying a percentage for using public rights-of-way, which makes sense; internet providers also pay a percentage for use of public infrastructure, which tracks. As people "cut the cord" and discontinue paying for cable, the localities are "losing"(read making less) money, so they want the streaming services to pick up the slack.
This seems a lot like the debate a few years ago about streaming/social media companies "needing" to pay the ISPs for the bandwidth. I believe the end result was that (for example) Netflix pays their ISP, the consumer pays their ISP, and the ISPs work out peerage and costs allocation - which is how it's been done since ISPs were a thing.
If this is the case, it would seem that the ISPs are already paying for the RoW utilization, and this is a panicky and poorly thought out attempt to balance the municipalities' books.
Think of the poor bureaucrats
God forbid anyone in Chicago reach something resembling happiness without first throwing some change in the direction of city officials.