Stream at the peril of your pocketbooks, Chicagoans.
The city collected in January on more than $1 million in unpaid sales tax from Sony, Bloomberg Tax reported Wednesday.
The entertainment conglomerate waved the white flag on its liabilities for taxes on gaming charges, electing not to further resist the imposition of the city’s 9% tax on its streaming services.
The Chicago tax survived a court challenge last year.
The move might signal that other tech firms who have lodged resistance to Chicago’s tax, such as Apple, might follow Sony’s lead. Or that other cities and states might consider instituting a similar tax.
“You can just see the trend here in that, in the olden days, the locality could tax your cable bill, and as people are switching to streaming services, they kind of followed the money,” Mark Mazur, director of the Urban-Brookings Tax Policy Center, said in a phone call. “It’s certainly something that state and local governments will be taking a look at going forward.”
Sony had previously disputed its liability under the tax, often referred to as a “Netflix tax,” arguing that it lacked a physical presence in Chicago, Bloomberg Tax reported.
The confidential settlement between the city and Sony, obtained by Bloomberg Tax, covered gaming charges between April 2017 and October 2018. The settlement waived interests and penalties on Sony’s tax bill, and Sony began collecting the 9% tax in November, according to the report.
“It gives a sense that this is an acceptable area for other jurisdictions to look at in terms of setting up their tax base,” Mazur said of the settlement.
Pennsylvania and Florida have also passed taxes on streaming services.
Last year, the Supreme Court ruled that states can collect sales tax on online purchases.
Katherine Loughead, a policy analyst at the Tax Foundation, an independent Washington think tank, said she didn’t think Chicago was taking the best approach to taxing streaming services.