Thursday, 1 October 2015

Digital Content Delivery Bombshell – Chicago Implementing ‘Cloud Tax’

To those of us residing in the United Kingdom, America’s system of taxation can be downright confusing – federal taxes, state taxes, city taxes … the list goes on. However, the latest taxation amendment in Chicago should have us all – and by all we mean anyone/thing connected to digital, including data centres – quaking in our boots.

Apparently, the city of Chicago has a whole raft of taxes in effect, one of them being an ‘amusement tax’ – basically, anything related to entertainment is taxed at nine per cent. Forbes have described this tax in a recent article as a tax “upon the patrons of every amusement within the city.” The city has recently ‘amended’ this tax to now include content-related services in the digital world. What do we mean by content-related services in this instance? Well, subscription streaming service Netflix is a good example. In the same article as mentioned above, Forbes describes this as “any paid television programming, whether transmitted by wire, cable, fibre optics, laser, microwave, radio, satellite or similar means.”

But this is where it gets interesting – the tax could also apply to a whole raft of cloud-service providers as well. Anything from cloud apps all the way up to cloud infrastructure such as data centres. The irony of this means that a company that actually hosts its content-based streaming service is in real danger of being taxed twice – both as a provider and a user!

What Effect Will This Really Have?

In trying to break this down, though, what effects will this really have on both users and providers? Well, for starters, it will no doubt put off new digital streaming service start-ups from setting up shop in Chicago. The extra costings will simply not be worth it for smaller organisations.
And should a new service provider bite the bullet and set up shop, the end user is going to ultimately suffer due to higher subscription rates. So Chicago residents could end up paying way more for the same service received by users elsewhere in the States.

At the end of the day, why would any data centre, cloud content delivery service or streaming service set up in a city that is going to over-tax them for the privilege?

Where is this Going?

The worry for such services in the States, but especially data centres, is that this type of tax is going to spread like a contagion. Other cities (and states?) are bound to sit up and take notice, especially in light of the fact that the way content is being processed and consumed digitally is evolving at a fast rate of knots.

The future of content delivery is entrenched in the digital; this means more providers will be required to deliver this content. In the end, it could mean the services we take for granted today being taxed to the hilt, putting them out of reach for many.

For the sake of the British data centre industry, let’s hope we do not suffer the same fate that could eventually sweep America. Fingers crossed!!!

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