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Video Game Group Files Lawsuit Against Chicago Amusement Tax

6 Jun, 2017 By: Erik Gruenwedel


Michael Gallagher, CEO of Entertainment Software Association

Tax affects city residents streaming Netflix and playing video games online


The Entertainment Software Association has filed a lawsuit challenging Chicago’s 9% Amusement Tax for online games and subscription video-on-demand services such as Netflix, Amazon Prime Video and Hulu.

Washington, D.C.-based ESA, whose members include Nintendo and Disney Interactive, filed suit in Illinois Circuit Court of Cook County, alleging Chicago’s 2015 reinterpretation of the Amusement Tax violates the Internet Tax Freedom Act.

Specifically, the group contends the tax unfairly affects people playing online games and streaming video and music. Indeed, the tax does not apply to purchases of packaged media, including music CDs, movie, TV show and gaming discs.

“This discriminatory tax makes Chicagoans’ lives more expensive, just because they live in the 21st century and choose to play video games online,” Michael Gallagher, CEO of ESA, said in a statement.

Simon Rosenberg, digital policy expert and president of NDN, a progressive think tank and advocacy organization, says the explosion of e-commerce in the U.S. is going to require lots of rethinking of the old ways of doing business.

Indeed, the Alabama Department of Revenue in 2015 nixed a regulatory amendment that would have effectively imposed a 4% rental tax on streaming services such as Netflix.

Chicago’s amusement tax has existed for years, levied upon amusement parks, professional sports ballparks, stadiums and movie theaters. City lawmakers, who expanded the tax to include electronic media due to the popularity of online entertainment, say it generates about $12 million annually in additional revenue. 

“We remain confident that the amusement tax properly applies to streaming video, music and games, and that we will successfully defend against these suits,” a spokesperson for the city’s legal department told The Chicago Tribune.

 


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