And if every city and town has their own tax that's different in some way? Then what?

Or alternatively, could Netflix ban all residents of Chicago?

1. Businesses have to incorporate the local tax code to any area they provide services in. Same as any brick-and-mortar business right now.

2. It becomes burdensome for businesses to comply so they ask the federal government to occupy the field and standardize.

I don't really know why people expect businesses that deliver their products digitally to be treated differently from everyone else.

But we're talking about online businesses here. This isn't isolated to the US. We're talking about complying with the requirements and taxation of any city in the world. There is no federal government to address there.

Welcome to business.

Yes, Netflix chooses to serve Chicagoans, and if they’d prefer not to, they can. There have been a few “make the customers angry, so they write to their representatives” attempts throughout history, but I doubt a 99 cent tax for Netflix is enough to risk it.

As a related thing, look at Spotify vs Apple on the App Store. That 30% is material.

But I don't think this is actually possible in the EU in the long term. They want to do away with companies only serving digital services to some EU member states, but legislation still applies per country. What if the rest of the world decides that this stuff is great for taxation as well? Then you won't be dealing with the tax code of an American city, you'll be dealing with the tax code of a city in some small country.