Illinois judge dismisses Apple's challenge to Chicago 'Netflix Tax'

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in iPod + iTunes + AppleTV
Apple's attempt to shake off Chicago's Amusement Tax in the courts on streaming has been dismissed, though the iPhone maker still has the opportunity to refile and try to rid itself of the 9% tax.




In 2015, Chicago introduced a change to its Amusement Tax that placed a 9% tax on streaming entertainment services. Also referred to as a "Netflix Tax" and impacting services like Netflix, Spotify, and Apple's own Apple TV+ and Apple Music, the iPhone maker has attempted to overturn the initiative.

On Friday, Cook County Circuit Court Judge Dan Duffy granted a motion by Chicago to dismiss Apple's lawsuit against the Amusement Tax, reports Bloomberg Law. The granted motion effectively ends the current round of litigation, but doesn't stop it completely.

Judge Duffy's order dismisses the complaint without prejudice, with the addition that Apple's legal team could file a second amended complaint within 35 days to keep the lawsuit alive.

In his order, Duffy says Apple isn't required to present any evidence at this time, but it still "must plead facts" to sufficiently state a cause of action, upon which some form of relief could be granted.

The Judge's declaration is in relation to Apple's original 2018 lawsuit, which said the tax violated the federal Internet Tax Freedom Act, as well as the U.S. Constitution's commerce and due process laws. That lawsuit was paused for more than two years while courts handled a related lawsuit against Chicago by users of Netflix, Hulu, and Spotify.

While Chicago won that trial, Apple amended its complaint to say that case was a "facial challenge" to the tax program, but that Apple was challenging how the tax was applied to its own services.

However, Judge Duffy found it was an insufficient challenge, due to Apple's complaint not being specific enough to be used in arguments over whether the Amusement Tax is constitutionally valid.

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Comments

  • Reply 1 of 28
    tommikeletommikele Posts: 584member
    Shameful money grab by Chicago government. Doesn't seem much different than class action lawyer looking for a deep pocketed defendant to file a lawsuit against.

    Not a lawyer, but it certainly seems bogus and discriminatory to single out streaming services. If the tax is valid everything going through the internet pipes should be taxable. I thought (could be wrong) that no state could tax interstate commerce and it seems moving data between states is interstate commerce.

    The Judge was a Cook County Judge, not state or Federal. I would be surprised to see this hold up as it moves up the judicial ladder toward Federal courts.
    scstrrfwatto_cobra
  • Reply 2 of 28
    Chicago (Cook county not far behind, and IL too) has been gentrifying the entire city through increased taxes/fees across all aspects of life (property taxes some of the highest in the nation, along with Cigarettes, gas, and at one point any drink with SUGAR!!!). They need to wake up and realize that people aren't beholden to big city life for work anymore. As more and more corporations adopt and keep permanent work from home workforces the city will see all their cash cows dry up really really quick. Looking forward to the day when Chicago becomes an abandoned desert town.
    scstrrfwatto_cobra
  • Reply 3 of 28
    So you're telling me that in addition to any sales tax that's paid on the streaming subscription, they want another 9%? I guess they figure they get their cut from cable services, they should get them from streaming services too. Bet they'd find a way to tax OTA broadcasts if they could.
    watto_cobra
  • Reply 4 of 28
    viclauyycviclauyyc Posts: 829member
    Chicago (Cook county not far behind, and IL too) has been gentrifying the entire city through increased taxes/fees across all aspects of life (property taxes some of the highest in the nation, along with Cigarettes, gas, and at one point any drink with SUGAR!!!). They need to wake up and realize that people aren't beholden to big city life for work anymore. As more and more corporations adopt and keep permanent work from home workforces the city will see all their cash cows dry up really really quick. Looking forward to the day when Chicago becomes an abandoned desert town.
    Did the sugar tax affect liquor too? Most liquor has sugar. 
    watto_cobra
  • Reply 5 of 28
    payecopayeco Posts: 526member
    tommikele said:
    Shameful money grab by Chicago government. Doesn't seem much different than class action lawyer looking for a deep pocketed defendant to file a lawsuit against.

    Not a lawyer, but it certainly seems bogus and discriminatory to single out streaming services. If the tax is valid everything going through the internet pipes should be taxable. I thought (could be wrong) that no state could tax interstate commerce and it seems moving data between states is interstate commerce.

    The Judge was a Cook County Judge, not state or Federal. I would be surprised to see this hold up as it moves up the judicial ladder toward Federal courts.
    Not advocating for or against the tax, just wanted to say that this isn’t a tax that the city picked an industry for randomly. This was intended to make up for the revenue shortfall created when a similar tax on video rentals disappeared due to the video rental market collapsing. 

    Also not really sure why you think this particular tax is discriminatory. Plenty of industries have taxes that apply just to them. 
    edited March 14 scstrrfwatto_cobra
  • Reply 6 of 28
    viclauyyc said:
    Chicago (Cook county not far behind, and IL too) has been gentrifying the entire city through increased taxes/fees across all aspects of life (property taxes some of the highest in the nation, along with Cigarettes, gas, and at one point any drink with SUGAR!!!). They need to wake up and realize that people aren't beholden to big city life for work anymore. As more and more corporations adopt and keep permanent work from home workforces the city will see all their cash cows dry up really really quick. Looking forward to the day when Chicago becomes an abandoned desert town.
    Did the sugar tax affect liquor too? Most liquor has sugar. 
    No, they already had a separate liquor tax to cover that SMH.

    The "Sweetened Beverage Tax" was 1cent per ounce. So that 99cent 64oz slurpee was hit was a 64% tax!
    watto_cobra
  • Reply 7 of 28
    22july201322july2013 Posts: 2,995member
    Because of this article I researched the average tax rate for individuals in various countries. I won't post any numbers because taxes are very complicated, but the US is by no means the highest or the lowest taxed country in the world. Probably middle of the pack. At least now Americans have taxation WITH representation (except for D.C. and Puerto Rico.)
  • Reply 8 of 28
    So Apple doesn't want to pay a fee for selling their product in Chicago...

    This sound very familiar... Like Epic not wanting to pay a fee for selling their product in the App Store...
    edited March 14 bulk001
  • Reply 9 of 28
    payecopayeco Posts: 526member
    ……………………………………
    edited March 14
  • Reply 10 of 28
    So Apple doesn't want to pay a fee for selling their product in Chicago...

    This sound very familiar... Like Epic not wanting to pay a fee for selling their product in the App Store...
    Brain crippled 
    mike1jony0watto_cobra
  • Reply 11 of 28
    crowleycrowley Posts: 10,247member
    Don't even understand what grounds Apple thought they had.  Pay your taxes.
    blastdoor
  • Reply 12 of 28
    tommikele said:
    Shameful money grab by Chicago government. Doesn't seem much different than class action lawyer looking for a deep pocketed defendant to file a lawsuit against.

    Not a lawyer, but it certainly seems bogus and discriminatory to single out streaming services. If the tax is valid everything going through the internet pipes should be taxable. I thought (could be wrong) that no state could tax interstate commerce and it seems moving data between states is interstate commerce.

    The Judge was a Cook County Judge, not state or Federal. I would be surprised to see this hold up as it moves up the judicial ladder toward Federal courts.
    In the 2018 South Dakota v. Wayfair decision the U.S. Supreme Court opened the door to states taxing interstate commerce as long as it wasn’t penalized more so than intrastate commerce.
    jony0watto_cobra
  • Reply 13 of 28
    Because of this article I researched the average tax rate for individuals in various countries. I won't post any numbers because taxes are very complicated, but the US is by no means the highest or the lowest taxed country in the world. Probably middle of the pack. At least now Americans have taxation WITH representation (except for D.C. and Puerto Rico.)
    Per the IRS if you're a bona fide resident of Puerto Rico during the entire tax year, you generally aren't required to file a U.S. federal income tax return if your only income is from sources within Puerto Rico.
    scstrrf
  • Reply 14 of 28
    crowley said:
    Don't even understand what grounds Apple thought they had.  Pay your taxes.
    🙄
    This is a tax you pay, not Apple. 
    mike1scstrrfjony0
  • Reply 15 of 28
    This has to be about the most ignorant comment I’ve seen here. Don’t misunderstand, I said the comment was ignorant.  It is not a judgement about you personally. I do not know you. Chicago is not making api’s, they aren’t making phones, operating systems, or hosting anything from apple on their servers. Chicago also is not constantly upgrading the operating system to make it more secure. Hell, they have done a poor job of trying to make the city safer for residents. I suspect the comment was more meant to troll.  It’s not well thought through

    dantheman827 said:
    So Apple doesn't want to pay a fee for selling their product in Chicago...

    This sound very familiar... Like Epic not wanting to pay a fee for selling their product in the App Store...

    watto_cobra
  • Reply 16 of 28
    davidwdavidw Posts: 1,607member
    crowley said:
    Don't even understand what grounds Apple thought they had.  Pay your taxes.
    Remember, the USA is no longer part of the British Empire because we refused to pay the tea tax that was levied on us by the British. That was the spark that led to the Revolutionary War. Otherwise, if we had listened to the British telling us to ...... pay your taxes ........, we here would be driving on the wrong side of the road. :)  
    scstrrf
  • Reply 17 of 28
    danoxdanox Posts: 1,061member
    The Tax will be payed by the pheasants, not Apple….
  • Reply 18 of 28
    davidwdavidw Posts: 1,607member
    So Apple doesn't want to pay a fee for selling their product in Chicago...

    This sound very familiar... Like Epic not wanting to pay a fee for selling their product in the App Store...
    FYI- The tax is not levied on Apple. It's levied on the streaming service subscribers (like a sales tax). Apple only collects the tax for the county (if the subscribers pays using iTunes.).  Do you also think its the liquor store that pays the alcohol tax, when you buy a six pack of beer or a bottle of wine? 
    watto_cobra
  • Reply 19 of 28
    bsimpsenbsimpsen Posts: 374member
    danox said:
    The Tax will be payed by the pheasants, not Apple….
    Now I’m imagining them holding pennies in their little beaks. 
    bestkeptsecretblastdoorscstrrfDogpersonjony0watto_cobra
  • Reply 20 of 28
    blastdoorblastdoor Posts: 2,697member
    crofford said:
    crowley said:
    Don't even understand what grounds Apple thought they had.  Pay your taxes.
    🙄
    This is a tax you pay, not Apple. 
    Point still applies though. No grounds, taxes must be paid. 
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