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Chicago's Netflix Tax Faces Legal Challenge: Chicago Tribune

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The city of Chicago's recent decision to tax streaming entertainment services is not only unpopular, it may be unlawful.

According to the Chicago Tribune, a nonprofit group called the Liberty Justice Center has filed suit in Cook Country Circuit Court aiming at stopping the tax. It argues that the tax was improperly created in two ways.

In June, the Chicago Finance Department announced it was extending the city's amusement tax of nine percent to include music, video, and gaming streamed services, such as Netflix and Hulu. The group argues that this tax was created by the city comptroller, and wasn't approved by the city council or voted on by city aldermen.

Additionally, the lawsuit says the tax is higher for some streaming services than for similar services not delivered online. That, it says, is a violation of the federal Internet Freedom Tax Act.

"If the city wants to tax internet-based streaming media services, then it should put the measure through the political process, and let Chicagoans have their voices heard through the democratic process," said Jeffrey Schwab, an attorney with the Liberty Justice Center, in a press release.

Chicago officials hope to collect $12 million each year from the streaming services tax.

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