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Current Behavior

When the DISABLE_CUSTOM_CORS_S3=1 env variable is set, this affects LocalStack's handling of S3 PutObject calls with a Content-Encoding: gzip. Attempting to put an object like this (see commands below) results in a checksum error:

An error occurred (BadDigest) when calling the PutObject operation: The CRC64NVME you specified did not match the calculated checksum.

The reason for this appears to be the object has seemingly been decoded ahead of being stored in LocalStack. The reason this appears to be the case is that when disabling payload verification via an SDK and putting the object, the object is stored in LocalStack successfully but like so from HeadObject response:

AcceptRanges: bytes
ContentEncoding: identity
ContentLength: 6
ContentType: text/plain
ETag: '"605f1ecb0bf8fc6fdef2a4e4983e7478"'
LastModified: '2025-07-11T00:19:01+00:00'
Metadata: {}
ServerSideEncryption: AES256

The original text file is hello (6 bytes) and when gzipped is 35 bytes. Running GetObject on this object returns the decoded text and not the gzipped content which was sent and should have been stored.

The ContentEncoding: identity is non-standard behaviour - production AWS (and LocalStack itself when DISABLE_CUSTOM_CORS_S3=0) stores this with ContentEncoding: gzip and the object remains encoded when stored/retrieved.

This doesn't appear to affect either br or deflate codings - these are stored correctly and don't fail checksum validation on PutObject when DISABLE_CUSTOM_CORS_S3=1 is set.

Expected Behavior

Behaves like production AWS (and LocalStack itself when DISABLE_CUSTOM_CORS_S3=0): an object put with Content-Encoding: gzip is stored as-is and when retrieved, is returned with the same gzip encoding.

How are you starting LocalStack?

With a docker-compose file

Steps To Reproduce

How are you starting localstack (e.g., bin/localstack command, arguments, or docker-compose.yml)

services:
  localstack:
    image: localstack/localstack:4.6.0
    ports:
      - 4566:4566
    environment:
      - DEBUG=1
      - DISABLE_CUSTOM_CORS_S3=1

Client commands (e.g., AWS SDK code snippet, or sequence of "awslocal" commands)

$ echo 'hello' > test.txt
$ gzip test.txt
$ awslocal s3api create-bucket --bucket test
$ awslocal s3api put-object --bucket test --content-encoding gzip --content-type text/plain --key test.txt --body test.txt.gz 
An error occurred (BadDigest) when calling the PutObject operation: The CRC64NVME you specified did not match the calculated checksum.

Environment

- OS: Ubuntu 24.04
- LocalStack:
  LocalStack version: `4.6.0`
  LocalStack Docker image sha: `sha256:467827579d31ecce01c13eccc57961d02424a87911b0ba96df8a2801183c8f59`
  LocalStack build date: `2025-07-03`
  LocalStack build git hash: `b16cabc9b`

Anything else?

No response