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Chicago successfully taxes streaming services

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Re: Chicago successfully taxes streaming services

#11

This stuff makes sense for cities, it’s just frustrating how much more difficult it makes it to operate a “mom and pop” software business. The complexity of potentially complying with hundreds of state and municipal governments - not where you are located but where online purchases originate - is a pretty significant deterrent to setting up a small side business. Imagine if every food truck had to pay taxes based not…

It was only recently added to SmugMug's processing.

Having owned two businesses, I can say it's a lot more complicated than most people realize. Tax rates and reporting don't fit neatly into city, state, or even simple ZIP Code boundaries. Plus different products, even sold from the same food truck to use your example, can have different tax rates.

The whole retail taxing system is a mess.

Re: Chicago successfully taxes streaming services

#12

I thought the main reason states collect tax on Amazon purchases is because they have a presence in a state (distribution centers, warehouses, etc)? I'm confused how the legal thinking goes that a company not based in Chicago, offering services on the internet, can be taxed. (They don't even ship DVDs to most customers, whereas Amazon was shipping physical goods)

It's an entertainment tax. Netflix supplies entertainment to people in the city of Chicago, and so the city of Chicago taxes that entertainment.

Same thing with concert tickets and other forms of entertainment.

Re: Chicago successfully taxes streaming services

#13

I thought the main reason states collect tax on Amazon purchases is because they have a presence in a state (distribution centers, warehouses, etc)? I'm confused how the legal thinking goes that a company not based in Chicago, offering services on the internet, can be taxed. (They don't even ship DVDs to most customers, whereas Amazon was shipping physical goods)

South Dakota v. Wayfair [1] last year overturned the requirement of a physical presence for a state to levy taxes.

Most states with sales tax have since passed legislation to tax online purchases.

[1] https://en.wikipedia.org/wiki/South_Dakota_v._Wayfair,_Inc.

edit: It seems as though HN's linkification drops trailing periods, so that link doesn't work when clicked.

Re: Chicago successfully taxes streaming services

#14
Chicago is in the hole for nearly thirty billion dollars. They have been floating the idea of a ten billion dollar bond with the debt structured in a way which lets current politicians escape the fallout from its payment and not having to raise property taxes. The state of Illinois is not well off either with debts estimated at the low of one hundred thirty billion to two hundred fifty billion. An Illinois proposal just to fix state pensions would result in a forty four percent property tax increase for thirty years.

Chicago has a narrower group of people to draw from so besides tourist and sin taxes they have to go after any product consumed by residents of the city and that includes digital.

Why is this all happening, because there is a well hidden largess in government employee payroll and worse in their pension system. Illinois alone is estimated to have over twenty three thousand retirees pulling down one hundred thousand dollars a year or more. A lot of this is from the higher end positions in city and county governments but you can find police and fire there too.

People complain about the disparity in corporate executive level pay to employee should also take a look at the disparity between the same in state and city governments let alone the disparity in retirement to even every day workers in the state. A 100k retirement not counting full benefits is equivalent to nearly forty eight dollars an hour.

So expect more digital taxes in your future.

PS: the Chicago debt is only for pensions, they are down tens of billions more in deferred maintenance and similar debts.

Re: Chicago successfully taxes streaming services

#15
For what it's worth - the title is a bit misleading.

The tax began its life as an extension/adaptation of an existing 9% "amusement tax" on patrons of amusements (movie theaters, bowling alleys, etc) in the city. But until 2015 it only included physical businesses, not any of the new online replacements. The definition is now expanded to include online games, streaming movies, movie tickets sold online, etc.

Also, this has been in effect for a while now (e.g. my Netflix bill went up by $0.99 a year ago) and all the various online businesses have already implemented it. Not sure why the article is bubbling up now, just as the new mayor is about to take office. :)

For more history see https://www.forbes.com/sites/kellyphillipserb/2018/05/29/chi...

Re: Chicago successfully taxes streaming services

#16

Chicago is in the hole for nearly thirty billion dollars. They have been floating the idea of a ten billion dollar bond with the debt structured in a way which lets current politicians escape the fallout from its payment and not having to raise property taxes. The state of Illinois is not well off either with debts estimated at the low of one hundred thirty billion to two hundred fifty billion. An Illinois proposal j…

Pulling or cutting the pensions of retired public service workers (many of whom who risked their lives to protect the public) would, beyond the ethical questions, eliminate the credibility of the city's promises to those who sign up for such jobs and hence would likely greatly reduce the quantity and quality of recruits.

Re: Chicago successfully taxes streaming services

#17

I thought the main reason states collect tax on Amazon purchases is because they have a presence in a state (distribution centers, warehouses, etc)? I'm confused how the legal thinking goes that a company not based in Chicago, offering services on the internet, can be taxed. (They don't even ship DVDs to most customers, whereas Amazon was shipping physical goods)

South Dakota v. Wayfair [1] last year overturned the requirement of a physical presence for a state to levy taxes. Most states with sales tax have since passed legislation to tax online purchases. [1] https://en.wikipedia.org/wiki/South_Dakota_v._Wayfair,_Inc . edit: It seems as though HN's linkification drops trailing periods, so that link doesn't work when clicked.

Interesting. Is there a limit on what level of entity can do this? (Ex: in PA it feels like every two feet you're in a new township, then there's the county and state)

I'm not necessarily anti-tax, but I don't envy a developer who needs to track down to the township level who taxes what in what way while providing goods across the entire USA.

Re: Chicago successfully taxes streaming services

#18
post #16

Chicago is in the hole for nearly thirty billion dollars. They have been floating the idea of a ten billion dollar bond with the debt structured in a way which lets current politicians escape the fallout from its payment and not having to raise property taxes. The state of Illinois is not well off either with debts estimated at the low of one hundred thirty billion to two hundred fifty billion. An Illinois proposal j…

Pulling or cutting the pensions of retired public service workers (many of whom who risked their lives to protect the public) would, beyond the ethical questions, eliminate the credibility of the city's promises to those who sign up for such jobs and hence would likely greatly reduce the quantity and quality of recruits.

The current proposed solution is just to cut back benefits on new job offers - though obviously if they cut back too much no one decent will want to work there.

Re: Chicago successfully taxes streaming services

#19
Basic question: what is the legal basis for cities to tax something? I understand physical goods sold within a city benefited from infrastructure and security the city government offers, and agree to a tax on them.

But digital goods and services? The city already taxes internet connectivity, property tax, ... Taxing digital goods further is just double taxation, with no benefit provided in return by the city to the consumer, or producer of digital goods

Re: Chicago successfully taxes streaming services

#20
post #16

Chicago is in the hole for nearly thirty billion dollars. They have been floating the idea of a ten billion dollar bond with the debt structured in a way which lets current politicians escape the fallout from its payment and not having to raise property taxes. The state of Illinois is not well off either with debts estimated at the low of one hundred thirty billion to two hundred fifty billion. An Illinois proposal j…

Pulling or cutting the pensions of retired public service workers (many of whom who risked their lives to protect the public) would, beyond the ethical questions, eliminate the credibility of the city's promises to those who sign up for such jobs and hence would likely greatly reduce the quantity and quality of recruits.

Just pay them market rate and give them 401ks like everyone else - what am I missing? Why do we keep doing this to ourselves with government jobs?
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