The flag shown being held by hostages against the window of Lindt Chocolat Cafe is not an Islamic State flag, but is an Islamic flag that has been co-opted by jihadist groups.
http://m.smh.com.au/national/flag-being-held-by-lindt-chocolat-cafe-hostages-is-not-an-islamic-state-flag-20141215-1279s0.html