Apple settles lawsuit with Chicago city over 'Netflix tax'

SAN FRANCISCO: Apple has settled a lawsuit with the city of Chicago in the US over so-called 'Netflix tax' that places a 9 per cent levy on "amusements that are delivered electronically", targeting streaming services.

Chicago introduced 'Netflix tax' in 2015, extending the city's tax on tickets for recreational activities and concerts to digital entertainment platforms.

The tax was meant to make up for the lost revenue from traditional brick-and-mortar stores.

It's widely regarded as the first tax specifically targeting the likes of Disney+, Spotify and Amazon Prime Video, reports Hollywood Reporter.

"Apple and Chicago have come to terms on a deal to drop the tech giant's lawsuit challenging the city's first-of-its-kind tax on users of streaming services," it added.

The terms of the settlement weren't disclosed.

Chicago collected over $30 million in revenues from the 'Netflix tax' in the year ending June 30, 2021.

Apple first challenged the tax in 2018.

Other streaming giants that raised legal challenges against the tax included Sony Interactive Entertainment, the Entertainment Software Association (ESA), and an advocacy group representing Netflix, Hulu and Spotify.

An appeals court found no violations of the Internet Tax Freedom Act, rejecting arguments from the advocacy group.

Sony also later dropped its lawsuit.