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Netflix to pass on cloud tax to subscribers

netflixNetflix has said it will pass on the cost of a new ‘cloud tax’ that will come into force in Chicago later this year to its subscribers.

The 9% tax, which will be levied on streaming services such as Netflix and Spotify but not download-to-own services such as iTunes, was approved approved by City authorities last week and comes into force in September.

“We will be adding it to the cost we charge subscribers,” a Netflix spokesman told DTVE sister title TBI.

“Jurisdictions around the world, including the US, are trying to figure out ways to tax online services. This is one approach.”

The new charge is effectively an extension of Chicago’s ‘amusement tax’, which is applied at cinemas and concerts.

The new tax, which was enacted last week and comes into force in September, will be levied on ‘electronically delivered amusements’, covering Netflix and its media streaming counterparts. It applies to all Chicago residents.

The city already charges an ‘amusement tax’ at cinemas and music concerts and the new tax is an extension of this to account for new technology, City officials said.

The new rules only apply to streaming services, dubbed ‘rentals’ in the official documentation, not electronic sales, or permanent downloads.

The tax will generate about US$12 million a year, according to estimates.