House resolution would oppose Illinois Senate’s internet streaming tax

Legislation with bipartisan support in the House would oppose the internet streaming tax proposal – which might not even be legal – in the Senate’s “grand bargain.”

Taxing internet streaming is one of the proposals that make up the Illinois Senate’s grand bargain negotiations, but a resolution that could soon hit the Illinois House floor would oppose it.

State Rep. David McSweeney, R-Barrington Hills, filed House Resolution 192 March 3. The measure opposes the expansion of the state sales tax to include video and streaming services and made its way out of committee March 29 with bipartisan support – 12 Democrats and three Republicans cosponsored HR 192.

State Sen. Toi Hutchinson, D-Chicago Heights, filed an amendment to Senate Bill 9, one of the pieces of legislation that comprise the “grand bargain,” March 2. Hutchinson’s proposal would apply a 6.25 percent sales tax to cable and satellite TV, as well as internet streaming services such as Netflix, Spotify and Xbox Live. SB 9 would expand the 6.25 percent statewide sales tax to an array of other services, including repairs, landscaping, laundry, tattoos, body piercings, tanning and much more.

In response, HR 192 explicitly states, “Illinois should not increase taxes on citizens who depend on cable TV and satellite services for news and entertainment … we oppose expanding the State sales tax to cover the delivery of audio and video services, by cable TV, satellite dish, or other infrastructure, to Illinois homes and households…”

A statewide tax on internet streaming would hit Chicagoans particularly hard, as city residents with subscriptions to internet-streaming services already pay a 9 percent citywide “amusement tax” on them. That citywide tax has been met with legal challenge from the Liberty Justice Center, which filed a lawsuit on behalf of customers against the city, arguing that the tax is illegal and unconstitutional under state and federal law. A Cook County Circuit Court judge denied the city’s request to dismiss the lawsuit in July 2016, allowing it to proceed.

Likewise, the Senate’s statewide tax on streaming services could be legally dubious, as well. The Senate’s tax would be imposed on “the privilege of using [the taxable service] in this State,” according to the proposed legislation. But that ill defines what using a streaming service in Illinois means. Does it apply to a person with a layover at O’Hare International Airport who is passing the time watching Netflix on her tablet? Or does it apply to any resident of Illinois regardless of whether she is within state lines when she uses Spotify or Netflix? The bill doesn’t say.

The Senate’s bill would also require any company in the world that offers streaming services on the internet to become an Illinois tax collector simply for having a customer in Illinois – a likely illegal requirement. The Illinois Supreme Court in 2013 ruled unconstitutional the state’s “Amazon tax,” which forced online retailers to collect Illinois taxes regardless of whether they had a storefront or other physical presence in the state.

Whether pointing out the legal ambiguity or the economically harmful nature of them, challenges to the multibillion-dollar tax hikes in the “grand bargain” are an encouraging sign for taxpayers. The internet streaming tax proposal – which also applies to an array of other services – is regressive in nature and only adds to the burden created by the income tax and corporate income tax hike proposals in the Senate has put forward.

HR 192’s bipartisan support should push it along to the House floor for a vote. Calling out the Senate’s damaging tax hike proposals should also lead lawmakers to have conversations on the economic reforms the state truly needs – instead of a laundry list of tax hikes.