Here Come The Digital Taxes
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2019-05-23 07:40 by Karl Denninger
in States , 116 references Ignore this thread
Here Come The Digital Taxes
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Hmmmmm....

Four years ago, Chicago imposed a 9% tax on streaming entertainment services, leading to a flurry of lawsuits. Now, the city has collected $2 million in sales tax from Sony and two online ticketing services, making it the first major city to collect such a tax successfully, Bloomberg reported.

This gets interesting for a number of reasons.  Chicago was once known as extremely friendly when it came to online services in their (and Illinois) tax code, dating back to the Telenet/Tymnet days (yes, I do go back that far -- into the old X.25 networks!)

Now of course they're the exact opposite; the city has become a voracious tax-grabber via virtually anything it can get its hands on, and that now extends to any sort of "streaming" service which was hit with what amounts to a surtax.

The means by which Chicago did this was through their existing "amusement tax" framework; if you've ever played a video or pinball game in many if not most jurisdictions you'll note that there's a tax sticker under the glass somewhere.  "Amusement" devices are typically levied at a fixed amount per-machine per-year, although some jurisdictions have a "coin drop percentage" tax -- which is much more burdensome to comply with.

When this tax was announced a number of lawsuits were immediately filed and many of the targets refused to pay.  But the court history on these cases hasn't gone the challenger's way at all; to the contrary, they have been rebuffed at every turn.  While there are decisions still out on appeal the jurisdictional record doesn't look good for the challengers at all.

This is certainly something to watch; pure services, with a few exceptions, are frequently not subject to sales and use taxes in various states, but the exception list keeps getting chipped away at, especially in places that are high tax-cost and those with severe budgetary pressures.  Taxing someone's Netflix subscription looks like low-hanging fruit to me, and it seems Chicago thinks so too.

That's what you get when you think you can have everything you want from a government but pay nothing.

Life doesn't work like that.

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Whitehat
Posts: 1090
Incept: 2017-06-27

The People's Republic of New York
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the coffin corner on this should get interesting. in my market they toyed with sales taxes on pure services but the issue kind of got dropped for the time being. here is where they are ****ing themselves. people can always find some economic activity to cut back on which triple screws the tax revenue system. it requires no dishonesty.

the last and only option for the strapped taxing authority is property tax and registration of property fees (i.e. car registrations, permits and recording taxes.) this is the last vestige of slavery and should have been fought to the end decades ago. without property tax a person with the discipline and fortitude to pay off property could literally live off his land with minimal interaction with society and even to a great extent on small property within a metro area. the property taxes require work, past or present and often future for basic shelter.

for example in my climate my house without insulation in most of its walls will maintain at least 60 degrees without any mechanical heating on colder than our average days. sunny winter days even more. dramatically sustained cold would take over two weeks to freeze pipes and only requires minimal heat to work. let's just say that in the over priced utility ****hole, my gas bill is astonishingly low. yes, i did smart things with house wrap, foam board and filled siding and an attic insulating system. windows are pretty good too and the house is well positioned. i barely use electric lights and live with the normal cycle of the day. the house stays very nice in summer for the same reasons.

the above example is to drive home the point that there is no easy way out of the system unless and until ownership means just that and additional taxation is not possible. more efficient cars are challenged by the potential of mileage taxes. what business is it of the authorities how much i travel. phrased that way the danger of this data is apparent. one does not own one's body if his work can be taxed. you are a slave and must report, albeit indirectly, how much you work. property taxes mean that you must work to keep what you worked for after you were taxed on the work that paid for those things. and better yet, one must pay taxes on the work needed to pay taxes. if the government wants to eliminate any type of ownership or make it difficult, it merely needs to tax it.

in high tax states people must often sell houses when they retire as they do not have the income to pay the property taxes. this has affected cultures where there is less link across generations.

just something to consider, but if times got tough, i would like the option to camp in my own property as long as i do not make myself a nuisance or offend my neighbor's sensibilities which can be done. even in the worst of time, people can scrape together enough to buy some basic food. this happened before in the depressions which is why we were always cautioned to pay off the house and cars. think of how much safer people would drive if insurance was not mandatory, possibly another tax if one thinks about it, just collected by others.

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Radiosity
Posts: 227
Incept: 2009-03-05

Sunny UK
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Meanwhile, the dumbasses at Google, Sony, MS, and others are all desperately scrabbling to put together streaming gaming services. It's a big publisher's wet dream, having complete and utter control over ALL users, being able to shove ads down their throats with ad-blockers being ineffectual, and removing what remains of the concept of ownership.

They don't seem to understand the problems, however. Like so much of the world still having garbage internet, or the INSANE bandwidth requirements for anything approaching a reasonable level of smooth gameplay without massive lag and latency, which makes the bandwidth used by Netfux et al look like ******n childs play by comparison.

Add in the potential for huge consumption/entertainment taxes, and I rather think these big companies are going to have a rude awakening when these services crash and burn horrible. And I will simply point and laugh.
Wa9jml
Posts: 401
Incept: 2017-04-29

DeKalb, Illinois
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Chicago is desperate for revenue, and since Chicago rules this doomed state, they are trying to tax everything. All that will do is drive more taxpayers out of the state. Most of the people moving in to Illinois are tax consumers, not tax payers. An airliner full of people leave this state every single day. I hope to be among them in a few months.
Jfms99
Posts: 327
Incept: 2009-10-06

Msumelle, Ar
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Radiosity, you are correct in your prediction I believe.

I cut the cord over a year ago and have saved a tome money and I don't miss any of it. I have an antenna and there are enough channels OTA that I get that I have plenty to watch. I do have ROKU and use some of the other services like Netflix, Amazon, and Hulu. I am finding though it's easy to get board with them and then I may try other things. I dropped one service so I could get Epix to watch two great spy series, "Deep State" and "Berlin Station". I will probably continue to do that, just jump around dropping and picking up different streaming companies.

I will say the day I start getting taxed on them is when I will get even more selective and trim it down further. Frankly I can find a lot of YouTube to watch and pay nothing. I live in Arkansas and they haven't started taxing anything like that yet, but give them time they will.
Inline
Emg
Posts: 384
Incept: 2012-11-20

Canada
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"They don't seem to understand the problems, however."

Don't forget that games are increasingly moving to VR, where 20ms lag can be the difference between convincing and nauseating.

My new VR headset pushes 368,640,000 pixels a second with a phone chipset. That would require 300:1 compression just to get it through my Internet connection, and as soon as you add compression you add huge amounts of lag (not to mention lots of compression artifacts on a screen that's an inch from your eyes).

Game streaming makes about as much sense as fully self-driving cars. By the time it's possible, few people will want it.

But, hey, rent-seeking.
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