nginx: gzip on server is lost during proxy

Using nginx as a reverse proxy/load balancer in front of iis/.NET application servers.

Our servers are configured to gzip response payloads. Works fine.

When we stick gzip in front, responses are no longer gzipped.

Question 1: We need to reconfigure gzip in nginx?

Question 2: Is it appropriate to be doing the gzip work twice?

• nginx passes request to web server
• web server gzips response
• (I think) nginx unzips response, re-gzips response

What is the right thing to do here?

(I feel like gzip should happen only at one layer, though there is a benefit of reducing load on the wire, even behind nginx.)

Here is my current config params for gzip (in http section, before first upstream block)

# ******************************  begin gzip section ********************
# Compression 
gzip on;     # Enable Gzip compressed.

# Enable compression both for HTTP/1.0 and HTTP/1.1.
gzip_http_version  1.1;

# Compression level (1-9).
# 5 is a perfect compromise between size and cpu usage, offering about
# 75% reduction for most ascii files (almost identical to level 9).
gzip_comp_level    5;

# Don't compress anything that's already small and unlikely to shrink much
# if at all (the default is 20 bytes, which is bad as that usually leads to
# larger files after gzipping).
gzip_min_length    1000;

# Compress data even for clients that are connecting to us via proxies,
# identified by the "Via" header (required for CloudFront).
gzip_proxied       any;

# Tell proxies to cache both the gzipped and regular version of a resource
# whenever the client's Accept-Encoding capabilities header varies;
# Avoids the issue where a non-gzip capable client (which is extremely rare
# today) would display gibberish if their proxy gave them the gzipped version.
gzip_vary          on;

# Compress all output labeled with one of the following MIME-types.
# text/html is always compressed by HttpGzipModule
gzip_types
    text/css
    text/*
    text/javascript
    message/*
    application/x-javascript
    application/json
    application/xml
    application/atom+xml
    application/xaml+xml;
# ******************************  end gzip section ********************