The City of Chicago has announced that they intend to slap a 9% tax on cloud services.

This tax applies not only to entertainment, but to any service that is sold online to Chicago residents. According to the Chicago Tribune, anything that requires a user to do a search or make a request is subject to the tax. "There is nothing you can access that's not taxable," said a tax expert.

The effect of this tax is twofold. First, it makes the online services sold by Chicago startups to Chicago residents 9% more expensive. Non-Chicago startups don't have to pay the tax unless they have a "nexus" here, which usually means a physical office.

The second effect is that it forces Chicago companies to implement the ability to tax Chicago residents differently than other customers. This isn't difficult for large companies like Netflix, but it's very difficult for smaller startups. The regulatory and administrative burden is large, particularly for a smaller company with limited technical staff.

The City expects to collect revenues of $12 million per year. This amount of money is tiny compared to the tax revenues that the Chicago startup community generates now and will generate in the future.

This tax will kill jobs and drive companies that sell cloud services out of the city.

This tax came as a result of a ruling by the City's Finance Department, and not as a vote by the City Council. It is a tax imposed by the Mayor and no one else.

We call on the City Council to reverse this decision.