Village of East Dundee imposes an amusement tax on streaming services
EAST DUNDEE — On April 18, the Board of Trustees for the Village of East Dundee moved a motion to amend the village’s Amusement Tax Ordinance that would require streaming operators like Amazon and Netflix to apply a 5% “local amusement tax” to all streaming purchases, whether they be one-time streaming video rentals or monthly streaming service subscriptions.
“So, currently, if you have a cable package, traditional cable, you would pay a tax on that that the village receives. But if you are savvy enough to cut the cord and use some other provider, you are not being taxed,” explained East Dundee’s Village Administrator Erika Strolie. “So, this, in one sense, is a modern version of the original telecommunications tax but it also equitably distributes the tax amongst all people no matter what they choose for their method of entertainment.”
According to the April 18 meeting packet, this amendment is in response to the village’s attempts at diversifying revenue sources to reduce East Dundee’s reliance on sales tax as the primary source of its revenue.
Village staff state that sales tax can “ebb and flow with economic circumstances,” and continuing to heavily rely on sales tax is one of several reasons why East Dundee’s credit rating is below an A.
Storlie told trustees that the village is estimating receiving approximately $25,000 in revenue this year alone through the tax on streaming services, however, that amount could vary.
West Dundee Trustee Kathleen Mahony asked if other communities have also implemented their own tax on streaming services to which Strolie responded with “yes.”
Chicago and the city of Evanston are two municipalities that currently have a tax on streaming services.
“Interestingly, the analysis of this is a lot of revenue comes from the pay-per-view and the rental. So, if you traditionally went to Blockbuster Video and rented a movie, you would have paid a tax. If you’re renting that same movie on Amazon Prime or some other pay-per-view, you’re not currently getting taxed,” said Strolie. “So, this would apply that same tax if you go to Redbox or whatever currently, [that] same tax would be applied.”
While Brittin seemed to be understanding of the village’s need for a tax on streaming services, others like Trustee Scott Kunze, were against the idea.
“I’m just going to say that I don’t support this. We’re not providing a service here. We’re just saying we’re missing money that we used to get from cable and now it’s going to streaming instead, but we’re not providing the streaming,” said Kunze. “So, I don’t see a justification to a tax for us to collect a tax on it, personally.”
Brittin argued that the village did not provide residents with cable television either despite there being a tax on that. Kunze followed up on Brittin’s response by saying, “No. But a mistake was made in the past,” while also adding that he didn’t feel comfortable approving of a tax on streaming services for the “sake of momentum.”
Since no other board members had any further questions or comments on the amendment to the village’s amusement tax, a motion was made to approve adding a tax on streaming services.
All but Trustees Rich Treiber and Kunze voted in favor of the streaming service tax. The motion passed.
Based on the new amendments to the village’s amusement tax, it’s not only video streaming services that are subject to the 5% tax. Audio streaming and remotely-accessed online games made available to residents on a rental or subscription basis will also be billed by the village.
The tax on streaming services for East Dundee residents will become effective July 1.
