With DVD Sales Down, States Look to Tax Streaming Video: WSJ
Will consumers soon see new taxes on streaming video services like Netflix, Hulu, and Amazon Prime? According to a report published yesterday by the Wall Street Journal, state sales tax revenue has taken a hit as sales of CDs, DVDs, and physical software for video games have plummeted. The Journal estimates that states have lost hundreds of millions, perhaps over $1 billion, from those three categories alone.
Consumers are now more likely to stream their entertainment, and states are trying to catch up. The Journal notes that Tennessee expanded its sales tax last month to cover software and digital games, and that Chicago will soon place a tax on streaming entertainment and cloud computing.
States aren't finding it easy to create streaming taxes. Alabama studied the area for months, then tabled the idea. Vermont planned on taxing cloud computing, but decided it provides a service and not a tangible good.
Netflix says that its services are taxable in approximately half the states and in some municipalities. The subscription video-on-demand leader is willing to fight to keep streaming tax laws off the books. When Idaho created a tax on online video, music, books, and games, Netflix lobbyists fought it, arguing that the company provides a service and not product sales or rentals. Idaho legislators then voted to exempt streaming services that didn't give consumers a permanent right to content.
SVOD isn't the only game in town. Many people rent or purchase movies or TV shows, and that audience likes physical video discs.
By enacting a tax on streamed video, audio, and gaming services, the city bypassed a necessary city council vote, the lawsuit argues.
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