PlayStation users in the city of Chicago will face an extra 9 percent tax on some purchases beginning Wednesday because Sony will begin complying with that city’s Amusement Tax, which some other streaming services have filed lawsuits to stop.
The tax applies to things like rentals, not full sales of video games (where other sales taxes would still apply). Chicago, like many cities, has had an amusement tax for years, and last year moved to increase it (which the public detested) to help shore up a budget deficit.
A ruling in 2015 by the city’s department of finance extended the tax to charges for streaming content — including movies, music and games — paid by customers in the city. It has since been called the “cloud tax,” “Netflix tax,” and even the “Hamilton tax” after the blockbuster musical.
Chicago's nine percent "cloud tax" on streaming services like Netflix and Spotify still faces lawsuits, but at least one company is giving in: Sony. Playstation will start collecting the tax from gamers next week. pic.twitter.com/UJ6IilXgHd— David Lee Matthews (@DavidLMatthews) November 7, 2018
It’s important to note this is for rentals, not full sales, which would already be subject to local and state sales taxes that PlayStation began collecting back in 2016.
PlayStation users with a billing address in the city got a notice this week saying the tax would be applied toward transactions on all of the PlayStation Store’s streaming and rental offerings — PlayStation Plus, Now, Vue, Music, Video on Demand and Video Live Events.
Apple sued the city at the end of August, calling the tax unconstitutional and a violation of the 1998 Internet Tax Freedom Act, which prohibits states, counties and municipalities from imposing discriminatory taxes on electronic commerce.