Chicago Residents Get Stars, Stripes and Taxes for Independence Day

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Chicago’s 9% “Cloud Tax” became effective July 1 for all city of Chicago consumers, including businesses

If you’re like most people, you probably look forward to the July 4th holiday to celebrate and reconnect with family, friends and close business associates. If you planned on enjoying the holiday with a streaming movie service or hosted VoIP phone to call on clients with well wishes, then Chicago’s latest move is sure to rain on your parade this holiday weekend.

Buying virtual products or services via the web now comes with an extra financial burden for Chicagonians, since a new “Cloud Tax” was voted into existence by local tax authorities in the city’s Finance Department to reap $12 million in new revenue. The new tax took effect on July 1, extending existing tax rules by adding a new tax on “electronically delivered amusements” and “non-possessory computer leases“. The added 9% tax on entertainment services like streaming movies and music from Spotify, Netflix, Amazon and others also effects businesses that use services based on cloud technology, like SaaS (software-as-a-service), PaaS (platform-as-a-service) and IaaS (infrastructure-as-a-service), also face the same 9% tax increase.

Telephony, VoIP and Cloud Services providers in Chicago, like DLS-Internet, will also be forced to collect the new tax on behalf of local tax authorities. Our Chicago customers are really going to feel the sting of the new tax law, since they were already burdened by a 27% telecom tax rate before the new cloud tax rules became effective. So much for optimized efficiency to support business growth.

How does the prospect of paying a 36% tax in the cloud make you feel this 4th of July holiday? Probably not very patriotic. I wouldn’t even be surprised if you now have a few fireworks of your own, going off in your head, as you’re reading this. Chicago’s new cloud tax is just another example of how the freedom that the Internet once offered, continues to slip-away, and how the consumer continues to pay the price.

As local authorities in the city overstep regulatory policy to increase tax revenues, Chicago residents and businesses alike have a lot less to celebrate, this 4th of July. It is hardly a move that supports business growth in the city and serves as incentive to stall innovation and growth for the local economy.