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Are Cloud Taxes on Streaming Services Unfair?

Chicago needs money, and it seems the best way to get it is by making digital media aficionados cough up more money. Two new tax laws in the Windy City have conspired to impose additional taxes on streaming services like Netflix and Spotify. Although the taxes target the companies in questions, it looks like everyday users are the ones who will have to foot the bill.

The Verge reported on the new "cloud tax," which imposes a 9-percent tax on "electronically delivered amusements" and "nonpossessory computer leases." In layman's terms, this covers services that stream media from the cloud into a user's home: everything from Amazon Instant Video to PlayStation Now to Pandora. As long as a company has servers in Chicago, it will have to cough up additional money to stream content to users there.

Chicago is a huge market, and companies with servers in the city are not eager to start losing profits. As a result, Netflix is already making plans to pass the cost onto its customers in Chi Town. Just how much additional money Chicagoans will have to pay is anyone's guess, but somewhere in the neighborhood of 80 cents per month (9 percent of $9, the monthly fee) seems possible.

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Although consumers will likely cry foul about this monetary imposition, Chicago is (probably) not levying the tax out of sheer greed. As Sam Goody, Tower Records and their ilk went the way of the passenger pigeon, their stores closed up shop. Cities like Chicago lost revenue not only from sales tax, but from often-substantial property taxes as well.

Whether a city has any legal or moral right to impose on entertainment that comes via the Internet is, of course, an issue with which scholars and Internet rights advocates will have a field day over the next few weeks. Tom's Guide has already reached out to some digital media consumer rights organizations for comments.

In the meantime, start tightening your belt if you live in Chicago. If you're in another big city, keep an eye on Lake Michigan, because the taxman may come to your place of residence next.

Marshall Honorof is a senior writer for Tom's Guide. Contact him at mhonorof@tomsguide.com. Follow him @marshallhonorof. Follow us @tomsguide, on Facebook and on Google+.