Sony didn’t immediately reply to a request for comment from CBS News. The company, which is headquartered in Tokyo, had previously argued it didn’t have a physical presence in Chicago, according to Bloomberg.
While Chicago seems to be the first city to successfully tax streaming services, it probably won’t be the last. Rhode Island’s governor proposed a budget this year that includes new sales taxes on digital videos, books and music. Virginia last year considered a similar proposal, which ultimately failed.
“Cities and states are beginning to experiment with this,” Mark Mazur, director of the Urban-Brookings Tax Policy Center, told CBS News. “People are buying more and more services and fewer goods, so the sales tax pace is getting reduced, and you end up trying to find ways to raise revenue from services,” he said.
Last year’s Supreme Court decision allowing states to collect sales tax from all online purchases by their residents is likely to increase such efforts. As economic activity increasingly shifts online, digital taxes could provide a sizable revenue source for states and cities, Mazur said. The potential downside for consumers is that companies could raise prices in response.
Chicago’s expanded digital entertainment and services tax could raise up to $12 million per year, according to estimates issued at the time it passed in 2015. A lawsuit filed by a libertarian group on behalf of Netflix, Spotify and Amazon Prime customers is currently in the appeal stage.