Chicago to apply 9 percent tax to streaming products like Netflix, Spotify

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CHICAGO — City residents who use online streaming services like Spotify and Netflix will now have to fork over a bit more to enjoy them.

A new ruling by the Chicago Department of Finance placing a 9 percent tax on “electronically delivered entertainment” went into effect  Wednesday. The law also levied a tax on Chicago businesses using online databases for everything from real estate listings to court cases. The additional cost will likely be added to user subscription fees.

The expanded taxes are expected to bring in an additional $12 million per year in Mayor Emanuel’s latest effort to fight the city’s growing debt by increasing a variety of small fees and fines.

“In an environment in which technologies and emerging industries evolve quickly, the City periodically issues rulings that clarify the application of existing laws to these technologies and industries,” said mayoral spokeswoman Elizabeth Langsdorf in a statement.

The so-called “cloud tax” will affect online gaming sites as well as those that stream music, movies and TV shows. However, there will be no additional charges on media purchased electronically off sites like iTunes.

More than two dozen states already charge a similar sales tax on digital services.

Companies have until September 1 to start paying the taxes, but new rules allow them to begin collecting from subscribers earlier than that.

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