Sangamon Sun

A resolution that would bar a budget agreement from applying a 6.25 percent sales tax to internet streaming services like Netflix, Spotify and Xbox Live is expected to reach the House floor soon, a non-profit public advocacy group says.

According to an article from Illinois Policy, House Resolution 192, filed in early March by state Rep. David McSweeney (R-Cary), recently emerged from committee with bipartisan support, including 12 Democratic and three Republican cosponsors. 

The resolution is a response to Senate Bill 9, part of that house's grand bargain on the budget. SB9 would expand the state sales tax of 6.25 percent to services that are not currently taxed, such as repairs, laundry, tattoos, body piercings and tanning. An amendment by Sen. Toi Hutchinson (D-Chicago Heights) would expand the tax to cable and satellite TV and internet streaming services.

“Illinois should not increase taxes on citizens who depend on cable TV and satellite services for news and entertainment…” HR192 states. “We oppose expanding the State sales tax to cover the delivery of audio and video services, by cable TV, satellite dish, or other infrastructure, to Illinois homes and households… .” 

Illinois Policy says the resolution has an easy path to the House floor for a vote and supports its adoption.

It argues that SB9 would add further tax pressure on Illinois residents, particularly Chicagoans. The city already imposes a 9 percent amusement tax on internet streaming services, meaning that Chicagoans would bear a high compounded rate of taxation if SB9 stays as is and the budget deal goes through. 

Chicago also provides a test case for the legal challenges the tax expansion would likely face if passed. In response to the city’s amusement tax, the Liberty Justice Center filed a legal challenge on the grounds that it is unconstitutional. The suit, filed on behalf of streaming service customers in the city, is proceeding despite a city request for dismissal that a Cook County circuit court judge denied in July 2016. 

A statewide tax on streaming services would likely face a similar challenge in court, according to Illinois Policy, especially considering the amendment's vague language. The amendment says the tax would apply to “the privilege of using [the taxable service] in this State,” but does not further define what constitutes use in Illinois. The Illinois Policy article points out that, based on the current language, it is not clear whether the tax would apply equally to someone using a streaming service in transit at O’Hare International Airport and Illinois residents using the services outside of the state’s borders. 

A further legal challenge that could emerge is how the tax revenue would be collected. As written the amendment can be interpreted to suggest that companies throughout the world would become tax collectors on behalf of Illinois if they have any customers in the state. This requirement would likely be struck down by the courts, following a precedent set by a 2013 case in which Illinois sought to force online retailers to collect state taxes regardless of their physical presence in the state.

While these factors have led to opposition to the SB9 amendment, Illinois Policy pushes in its article for a further reconsideration of the bill as a whole and other grand bargain measures that would increase income taxes.