Illinois House adopts resolution to oppose Senate’s internet streaming tax

With bipartisan support, members of the Illinois House adopted a resolution opposing the internet streaming tax proposal – which might not even be legal — in the Senate’s “grand bargain.”

The Illinois House passed a resolution April 5 opposing the Senate’s proposed internet streaming tax, which is one of the proposals in the Senate’s “grand bargain.”

House Resolution 192, introduced by state Rep. David McSweeney, R-Barrington Hills, opposes the expansion of the state sales tax to include video and streaming services. The resolution even had bipartisan support, with 14 Democrats and three Republicans co-sponsoring.

The legislation responds to a proposal from state Sen. Toi Hutchinson, D-Chicago Heights, that 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. Hutchinson brought forward that proposal in an amendment to Senate Bill 9, part of the package of bills that make up the Senate’s “grand bargain.” 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 particularly hit Chicagoans 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 a 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. 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. In 2013, the Illinois Supreme Court ruled the state’s “Amazon tax” unconstitutional. Like the Senate’s bill, the “Amazon tax” forced online retailers to collect Illinois taxes regardless of whether they had a storefront or other physical presence in the state.

The House’s move to adopt a resolution opposing this harmful, and possibly illegal, tax is a positive step. 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. Any pressure from dissenting lawmakers is needed to ensure the proposal never becomes law.

Calling out the Senate’s damaging tax hike proposals should also lead lawmakers to conversations on economic reforms the state truly needs, instead of a laundry list of tax hikes.