Mon. Aug 8th, 2022

Apple has settled its lawsuit with Chicago over the city’s so-called “Netflix tax,” according to a report from The Hollywood Reporter. The tax imposed a 9 percent levy on “entertainment delivered electronically” — essentially targeting streaming services.

The exact terms of the settlement were not made public. Although, Bloomberg Tax last year reported that tax revenue — widely believed to be the first of its kind — grew to more than $30 million in the year ended June 30, 2021.

The decision was long in coming. Chicago introduced the new tax in 2015 as it sought to make up for lost revenue from traditional brick and mortar stores. Apple filed its challenge in 2018 and was one of many groups and companies to object to the law. Others raising legal challenges included Sony Interactive Entertainment, the video game industry association Entertainment Software Association (ESA), and an advocacy group representing Netflix, Hulu and Spotify.

The number of objections to the tax led to delays in Apple’s lawsuit against the city. The case was put on hold for more than two years as the challenge from streaming service users made its way through the courts. But over time, these other legal challenges were either decided on Chicago’s behalf (and not overturned on appeal), settled, or withdrawn. Last week, a judge dismissed Apple’s amended complaint alleging the tax is unconstitutional. Apple chose not to re-archive, according to The Hollywood Reporter.

While the “Netflix tax” revenues are only a small fraction of the city’s roughly $1.5 billion tax revenue, Bloomberg tax notes that revenues have roughly tripled in the past five years. The tax raised $9.4 million in the first full year of 2017, increasing to $28.8 million in 2020 and $31.2 million by 2021 from the 47 companies registered under the rules. By contrast, many of the city’s other local business taxes were hit hard as the pandemic forced the closure of physical locations.

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