Local businesses operating physically inside the city consume resources to some extent. They use the roads, sidewalks, buildings, cause people to walk/drive to certain places, etc. They pay for rent and other expenses, but also use/benefit from city resources that they aren't directly charged for.

But netflix obviously doesn't have any physical presence in chicago.

It doesn't matter. Chicago residents now subsidize Chicago services some other way. (Via this Netflix tax.) End of (that) story.

Is it good that Chicago is subsidizing services by taxing some other activity, mainly those that are not really utilizing those services, and taxing residents that might not even use or benefit (directly) from those services? Well, maybe not. But since it only provides a very small selection pressure it's unlikely that residents will move out, or speak out.

Consumption taxes are usually passed on to the consumers even if they are collected by the seller. Making the seller responsible just makes tax evasion harder.