Cook County Circuit Court Judge Carl Anthony Walker allowed a lawsuit challenging Chicago’s 9 percent tax on internet-based streaming media services, such a Netflix, Spotify and Xbox Live, to proceed this afternoon. The lawsuit, which the Liberty Justice Center filed in September on behalf of customers of these services, challenged the application of the city’s expansion of the Amusement Tax to internet-based streaming media services. The lawsuit argues that the expansion of the tax is unconstitutional and illegal under state and federal law. 

Walker denied the City of Chicago’s request to dismiss the counts challenging the ordinance as a violation of the Illinois Constitution’s Uniformity Clause, the U.S. Constitution’s Commerce Clause and the federal Internet Tax Freedom Act. The court also dismissed claims that the city comptroller exceeded his authority in extending the city’s amusement tax to internet-based streaming media services because of later action taken by City Council. 

Liberty Justice Center Attorney Jeffrey Schwab offered the following comment on today’s court actions: “We are pleased that the court allowed these claims to proceed. The City of Chicago cannot tax services such as Netflix and Spotify in a discriminatory manner or outside of its constitutional bounds.” 

BACKGROUND: Chicago has a 9 percent “amusement tax,” which traditionally has applied to concerts, sporting events and other entertainment or recreational activities. But in June 2015, the city’s Finance Department unilaterally expanded the scope of the amusement tax to also include online streaming media services such as Netflix, Spotify and Xbox Live.

Chicago residents who use online streaming media services are now forced to pay an additional 9 percent surcharge “for the privilege” of using these services. The Liberty Justice Center filed a lawsuit seeking to strike down the new tax because the city does not have the authority under the Illinois and U.S. constitutions to impose taxes on online streaming media services.

The lawsuit also alleges the new tax violates the federal Internet Freedom Tax Act and the Uniformity Clause of the Illinois Constitution because it taxes some internet-based streaming media at a higher rate than similar services not delivered via the Internet.

View court documents here: http://illin.is/2aghioa

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