Apple Backs Down On Lawsuit Against Chicago’s ‘Netflix Tax’

The litigation between Apple and Chicago City over the ‘Netflix tax’ is reported to have reached an amicable end as a report from The Hollywood Reporter says the multinational technology company has settled its lawsuit with the US city.

Chicago had placed a 9 percent levy on “amusements that are delivered electronically” essentially targeting streaming services like Netflix, reason for the coinage: ‘Netflix tax’.

Bloomberg Tax had in 2021 reported that over $30 million were made from revenues from the tax, in the year ending June 30^th, 2021, the first ever of its kind.

Chicago in a bid to make up for the lost revenue in traditional  brick-and-mortal stores had introduced the new levy in 2015 but Apple, one of the many groups and companies objecting to the tax levy had in 2018 sued the Chicago State over the new law. Apple was not the only company who objected to the new tax law as others like Sony Interactive Entertainment, video game trade association the Entertainment Software Association (ESA), and an advocacy group representing Netflix, Hulu, and Spotify also joined the fray.

It appears Apple has now soft-pedalled on its stance as it has offered a settlement, even though the exact terms of the settlement deal haven’t been made public.

Apple though had challenges in the suit as the number of objections facing the tax led to the delay. The litigation was for two years placed on hold, just as the challenge of the various streaming services users worked its way to the courts. The legal pitfalls were over time either decided on behalf of Chicago (or not overturned on appeal), or settled, or dropped.

Apple’s amended complaint in the suit alleging the unconstitutionality of the suit was last week dismissed by a judge with the Hollywood Reporter reporting that the technology company decided against appealing the verdict.

Taking cognizance of the fact that ‘Netflix tax’ revenues constitute just a tiny fraction of Chicago’s $1.5 billion tax income, the city’s revenue has over the past five years roughly tripled, according to Bloomberg Tax.

It notes that the tax brought in about $9.4 million in its first full year in 2017, while it rose to $28.8 million in 2020, and then $31.2 million 2021 from the 47 businesses registered under the rules.