7 ms·

I'm always curious how taxes like this are enforced, presumably the City of Chicago can just sue companies like Netflix and Spotify if they think they're not ge

by saarons 11y ago

I'm always curious how taxes like this are enforced, presumably the City of Chicago can just sue companies like Netflix and Spotify if they think they're not getting their share. If I have my own small-time video streaming business does that mean I have to worry potentially about any municipality coming after me for unpaid taxes? That could get a little nuts if there are thousands of cities that could potentially have ordinances like this. How do I keep up? Am I just not understanding the scope of this?

ourmandave 11y ago
From the article: Wynne said the additional fees, applied in a city already known for high taxes, could be enough to push individuals and companies over the edge. He said that since the taxes will be levied based on Chicago billing addresses, there’s nothing to stop individuals from moving outside city limits or listing billing addresses in other towns. The same is true for businesses. “Let’s say I sign up for streaming business data in the city but I have offices throughout the country,” Wynne said. “I will definitely make sure my billing goes through a different office.”
- stickfigure 11y ago
  This doesn't answer the question. Who actually pays the taxes to the city? How does the city come after either the consumer or the provider, especially if the provider is in California/Europe/Russia/etc? I read the article and I don't understand how this works.
  - maemilius 11y ago
    From the article: "But those companies could start collecting taxes sooner to avoid paying the taxes themselves." This is also how I understand other, similar taxes (like Sales Taxes) work. The business whose service/good would have incurred the tax is also responsible for paying the tax. You're liable for it, regardless of it you collect it from the consumer or not.
    - tedunangst 11y ago
      That does answer the question in the narrow, but more broadly: what are the practical implications for a company with no other presence in Chicago if they don't pay?
      - CydeWeys 11y ago
        They can be sued in a Chicago court, and if they don't defend themselves, a default judgment will be rendered, and then the fees will be collected directly out of the company's bank account, wherever it happens to be. The United States is a pretty monolithic entity as far as laws and enforcement goes. You don't get away with, e.g., assault by fleeing to a different state; you'll simply be caught by that other state and turned over to the first state to face charges. Similarly, you don't get away with tax evasion any more easily. Now if your company is based in another country, then you might have a better chance.
        tzs 11y ago
        This sounds like a good argument to use a local bank that only operates in your state, rather than a national bank. That way, if someone gets an out of state default judgement from a court that does not have personal jurisdiction over you, they will have to bring that judgement to your state and file it with a court in your state in order to get something enforceable in your state. That should give you an opportunity to challenge the validity of the judgement on jurisdiction grounds. States are required to recognize the judgements of the courts of other states, but only if the court rendering that judgement had jurisdiction. My Civil Procedure recollection is rather hazy. Suppose Chicago sued, in Chicago courts, a small entertainment company that clearly does not have sufficient contacts with Chicago to meet the Constitutional requirements for giving Chicago courts personal jurisdiction. I believe that as part of its pleadings, Chicago would have to tell the Court why it believes that Court is the proper place for the suit, and part of that is explaining to the Court how it has personal jurisdiction. Here's what I do not remember. If the defendant did not appear to dispute that, would the Court simply accept plaintiff's theory of jurisdiction, or does the Court review on its own whether or not it does indeed have jurisdiction? I have a vague recollection that it is the latter, because the issue of whether or not the court has jurisdiction is not an issue between the parties, but rather determines whether the court even has authority to adjudicate the case, but I could easily be confusing this with something else. PS: not a lawyer, yadda yadda
  - ourmandave 11y ago
    You're right, it doesn't. =( Maybe they can only really collect on U.S. companies. From the article: The change adds a 9 percent tax to Chicago residents’ subscriptions to streaming services such as Netflix and the paid version of Spotify.
chatmasta 11y ago
Legislation breeds opportunity. You could probably make a good business around collecting taxes from customers. Piggyback on stripe, provide an API to take in address and service type, then return the appropriate tax amount.
cjensen 11y ago
IANAL... Within the US, you are only responsible for paying taxes in the jurisdictions you reside in. It's pretty simple to cover those cases and ignore the rest. For example, a business with offices in California and Nevada must collect sales tax when selling mail-order stuff to California and Nevada addresses, but are not required to collect sales tax for selling mail-order stuff to the other 48 states.
- ghaff 11y ago
  Unless you're Amazon, which has yielded to pressure to collect sales tax in some states where it does not have a physical presence. Note "collect sales tax." In at least some states, e.g. Massachusetts, residents and (I assume) businesses are asked on their state tax returns to report out-of-state purchases consumed within the state on which they are then responsible for use taxes equivalent to sales taxes.
  - tsotha 11y ago
    Amazon "yielded" to that pressure because they intend to have same-day delivery in every state. There's no way to do that without a presence in every state. So Amazon was going to be paying sales taxes anyway. Since they've decided to pursue a business strategy that has them paying sales taxes, they're pushing for an agreement that has competitors paying taxes even without a presence in that particular state.
- gamblor956 11y ago
  That's wrong. You are responsible for paying taxes in any jurisdiction in which you have sufficient nexus to justify taxation. For individuals, residence is the generally accepted means for establishing residence, but some states also use employment as a nexus (such as New Jersey). For businesses, nexus is much broader, and generally includes any state in which the business is incorporated or registered to do business, any state in which it has facilities or employees, and (for sales and GST taxes) generally any state in which a customer is located. The Chicago tax would be most similar to a sales/GST tax. Under well-established state and local tax principles Netflix, et al, could generally be required to collect the Chicago tax on sales/services to Chicago customers.

by saarons 11y ago

ourmandave 11y ago

From the article: Wynne said the additional fees, applied in a city already known for high taxes, could be enough to push individuals and companies over the edge. He said that since the taxes will be levied based on Chicago billing addresses, there’s nothing to stop individuals from moving outside city limits or listing billing addresses in other towns. The same is true for businesses. “Let’s say I sign up for streaming business data in the city but I have offices throughout the country,” Wynne said. “I will definitely make sure my billing goes through a different office.”

stickfigure 11y ago
This doesn't answer the question. Who actually pays the taxes to the city? How does the city come after either the consumer or the provider, especially if the provider is in California/Europe/Russia/etc? I read the article and I don't understand how this works.
- maemilius 11y ago
  From the article: "But those companies could start collecting taxes sooner to avoid paying the taxes themselves." This is also how I understand other, similar taxes (like Sales Taxes) work. The business whose service/good would have incurred the tax is also responsible for paying the tax. You're liable for it, regardless of it you collect it from the consumer or not.
  - tedunangst 11y ago
    That does answer the question in the narrow, but more broadly: what are the practical implications for a company with no other presence in Chicago if they don't pay?
    - CydeWeys 11y ago
      They can be sued in a Chicago court, and if they don't defend themselves, a default judgment will be rendered, and then the fees will be collected directly out of the company's bank account, wherever it happens to be. The United States is a pretty monolithic entity as far as laws and enforcement goes. You don't get away with, e.g., assault by fleeing to a different state; you'll simply be caught by that other state and turned over to the first state to face charges. Similarly, you don't get away with tax evasion any more easily. Now if your company is based in another country, then you might have a better chance.
      - tzs 11y ago
        This sounds like a good argument to use a local bank that only operates in your state, rather than a national bank. That way, if someone gets an out of state default judgement from a court that does not have personal jurisdiction over you, they will have to bring that judgement to your state and file it with a court in your state in order to get something enforceable in your state. That should give you an opportunity to challenge the validity of the judgement on jurisdiction grounds. States are required to recognize the judgements of the courts of other states, but only if the court rendering that judgement had jurisdiction. My Civil Procedure recollection is rather hazy. Suppose Chicago sued, in Chicago courts, a small entertainment company that clearly does not have sufficient contacts with Chicago to meet the Constitutional requirements for giving Chicago courts personal jurisdiction. I believe that as part of its pleadings, Chicago would have to tell the Court why it believes that Court is the proper place for the suit, and part of that is explaining to the Court how it has personal jurisdiction. Here's what I do not remember. If the defendant did not appear to dispute that, would the Court simply accept plaintiff's theory of jurisdiction, or does the Court review on its own whether or not it does indeed have jurisdiction? I have a vague recollection that it is the latter, because the issue of whether or not the court has jurisdiction is not an issue between the parties, but rather determines whether the court even has authority to adjudicate the case, but I could easily be confusing this with something else. PS: not a lawyer, yadda yadda
- ourmandave 11y ago
  You're right, it doesn't. =( Maybe they can only really collect on U.S. companies. From the article: The change adds a 9 percent tax to Chicago residents’ subscriptions to streaming services such as Netflix and the paid version of Spotify.

chatmasta 11y ago

Legislation breeds opportunity. You could probably make a good business around collecting taxes from customers. Piggyback on stripe, provide an API to take in address and service type, then return the appropriate tax amount.

cjensen 11y ago

IANAL... Within the US, you are only responsible for paying taxes in the jurisdictions you reside in. It's pretty simple to cover those cases and ignore the rest. For example, a business with offices in California and Nevada must collect sales tax when selling mail-order stuff to California and Nevada addresses, but are not required to collect sales tax for selling mail-order stuff to the other 48 states.

ghaff 11y ago
Unless you're Amazon, which has yielded to pressure to collect sales tax in some states where it does not have a physical presence. Note "collect sales tax." In at least some states, e.g. Massachusetts, residents and (I assume) businesses are asked on their state tax returns to report out-of-state purchases consumed within the state on which they are then responsible for use taxes equivalent to sales taxes.
- tsotha 11y ago
  Amazon "yielded" to that pressure because they intend to have same-day delivery in every state. There's no way to do that without a presence in every state. So Amazon was going to be paying sales taxes anyway. Since they've decided to pursue a business strategy that has them paying sales taxes, they're pushing for an agreement that has competitors paying taxes even without a presence in that particular state.
gamblor956 11y ago
That's wrong. You are responsible for paying taxes in any jurisdiction in which you have sufficient nexus to justify taxation. For individuals, residence is the generally accepted means for establishing residence, but some states also use employment as a nexus (such as New Jersey). For businesses, nexus is much broader, and generally includes any state in which the business is incorporated or registered to do business, any state in which it has facilities or employees, and (for sales and GST taxes) generally any state in which a customer is located. The Chicago tax would be most similar to a sales/GST tax. Under well-established state and local tax principles Netflix, et al, could generally be required to collect the Chicago tax on sales/services to Chicago customers.