Apple has dropped its lawsuit against Chicago’s “Netflix tax” after the two parties reached a settlement. The terms of the settlement were not disclosed.
Chicago introduced a 9% tax on streaming platform subscribers in 2015. Apple sued the city in 2018 for allegedly violating the federal Internet Tax Freedom Act and the U.S. Constitution.
‘Netflix tax’ will continue for now
Cook County Circuit Judge Daniel Duffy dismissed the case Wednesday without revealing the settlement terms, according to The Hollywood Reporter. This means that Chicago residents will continue to pay an additional 9% tax on top of their subscription fees.
Apple’s case was on hold for two years as the court was hearing another lawsuit from a group of subscribers over the same streaming tax.
Apple sued Chicago in 2018 — a year before Apple TV+ launched. The lawsuit claimed the law violated the federal Internet Tax Freedom Act and that customers were subjected to an “illegal tax.”
Chicago’s ‘Netflix tax’ is one of a kind
Chicago’s “Netflix tax” is an extension of the city’s tax program that levied a tax on tickets for recreational activities “delivered electronically.”
It led to Chicago residents paying extra for Netflix, Spotify and other streaming services. And it is the service provider’s responsibility to collect the tax, failing which it would be liable to pay the same.
The law’s introduction led a group of subscribers to band together to sue the city. Eventually, the court ruled in Chicago’s favor. An appeals court stated that the law did not violate the Internet Tax Freedom Act.
Apple amended its lawsuit soon after the ruling claiming it was unconstitutional in regards to its services. However, Duffy dismissed this case, with Apple deciding not to refile its complaint. Sony also sued Chicago over the tax but eventually dropped its suit.
Apple likely decided not to pursue its complaint further as a ruling could have set a “precedent that the revenue program is legal.”
