Apple and Chicago have reached an agreement to drop the tech giant’s lawsuit over the city’s first tax on streaming service users.
In an order issued Wednesday, Cook County District Court Judge Daniel Duffy dismissed the case. Terms of the agreement were not disclosed.
Chicago introduced the so-called “Netflix tax” in 2015, imposing a 9% tax on users of the streaming entertainment service. The revenue program was the result of a reinterpretation of a long-standing tax program that expanded the city’s tax on recreational activities and concert tickets to “electronically delivered entertainment.” It is widely seen as the first fare specifically targeted at Disney+, Spotify and Amazon Prime Video.
Apple was sued in 2018 for violating the Commerce and Due Process provisions of the Constitution, as well as the Federal Internet Tax Freedom Act, which prohibits jurisdictions from imposing discriminatory taxes on certain types of e-commerce. “Consumers are subject to illegal charges,” the complaint read. “If Apple does not collect tax from its customers, it will be directly responsible for a tax that Chicago has no authority to impose or enforce.”
The case was stalled for two years while a separate lawsuit against Chicago by users of Netflix, Hulu and Spotify reached the courts. Chicago won a case closely watched by tech companies and streamers. The appeals court found no violations of the Internet Tax Freedom Act and rejected arguments that the tax discriminates against streaming services compared to live performances, which the city charges at a lower rate.
Apple altered its process after the ruling, arguing that the tax is unconstitutional with respect to its specific services. However, Duffy was not convinced and rejected the case.
The company chose to file the complaint again. The judge never considered the merits of the case. Apple and other streamers affected by the tax chose not to pursue their claims, avoiding a precedent ruling that the revenue program is legal.
Sony also sued Chicago for the charge, but dropped the lawsuit.
Chicago will raise more than $30 million from users of the streaming service in 2021, according to a Bloomberg fiscal analysis of city data.
Local governments are increasingly requiring transmitters to pay fees, once traditionally reserved for cable companies that need to use public rights-of-way to lay their lines, to use public infrastructure. In actions against taxes, the chains were imposed by majority. The judges rejected arguments that streamers can be taxable as they do not use wires, cables or public equipment. In April, Los Angeles Superior Court Judge Yvette Palazuelos upheld a series of rulings across the country that stated that streamers are not subject to state laws governing video service providers.
Apple’s lawyers declined to comment. Chicago representatives did not immediately respond to a request for comment.
Source: Hollywood Reporter
Camila Luna is a writer at Gossipify, where she covers the latest movies and television series. With a passion for all things entertainment, Camila brings her unique perspective to her writing and offers readers an inside look at the industry. Camila is a graduate from the University of California, Los Angeles (UCLA) with a degree in English and is also a avid movie watcher.
