Chicago’s New Cloud Tax: Should Small Businesses Be Concerned?

chicagos-new-cloud-tax-by-accounting-solutions-ltd.Over the past few years, cloud based technology is something that has moved beyond entertainment-centric services such as Netflix, permeating the business world in a number of big ways. Taking this into account, the city of Chicago has recently implemented a 5.25% tax on cloud-centric businesses. This sizeable tax has wreaked havoc on executives and accountants alike, causing a number of serious issues for those who haven’t had time to implement these costs into their financial plans. Accounting Solutions Ltd. (773-267-7500) has been dedicated to ensuring that small businesses are kept up to date with such changes, and have prepared a brief summary of any alterations that you may have to make. Ultimately, there is some good news. It is unlikely that you will be affected. For a bit more information on how we can help prepare your small businesses’ taxes, check out this article.
Although you may be able to breathe a sigh of relief, it is important to clarify some of the background information regarding this new, technology-centric tax. When City Hall first announced their plans to implement this tax, the fees stood at an imposing 9%. This outrageous number was met with widespread outcry and dismay from a multitude of businesses that use streaming and cloud-based services. Enraged by this sudden change, they pushed back. leading to City Hall to reduce the tax to 5.25%.
Despite the percentages taking a significant drop, many businesses are still affected. Just as it is essential to understand the facts associated with the newly implemented labor overtime regulations, it is important that your small business’ accounting has a grasp on this new tax. So here are the three most vital pieces of information that you’ll need to know to ensure that your company is ready to make the necessary adjustments (if any).
Does your company pay the current Amusement Tax associated with forms of entertainment such as Netflix streaming or sporting events? If so, then be ready to dish out that additional 5.25%, as Chicago’s cloud tax has been implemented as an extension of those prior charges now applying to forms of digital and electronic amusement. Or are you, for example, a gas station, that doesn’t use any of these entertainment-and-cloud-based products? If so, then don’t fear. The monthly dues that started on February 15th will not apply to you!
Start-up businesses, many of which already face tight budgets, were among the forerunners to push against this tax. This lead City Hall to create exemptions for enterprises that are less than five years old, or that produce less than $25 million dollars in annual revenues. The business you started at home can use all the streaming services it pleases, free of this additional charge.
The most thorough impacts the cloud tax will have on your life will likely stem from the activities you engage in after work. This is because many large streaming companies that have become encumbered by the tax will try to pass the fees onto their consumers. So keep this in mind the next time you watch Breaking Bad on Netflix (for the fourth time??). Your viewing pleasure may cost you an additional 5.25%.
As a small business accounting firm in Chicago, Accounting Solutions Ltd. (773-267-7500) can assure you that it is likely that these new cloud-based taxes will not affect your enterprise. Nonetheless, it is always important to stay vigilant and ahead of the financial curve, especially in these turbulent times. For further updates and information regarding the Chicago small business accounting scene and accounting in general, be sure to follow our blog. Now go watch some Netflix or jam out to some tunes on Spotify. You’ve earned it.