This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies.
Daily Tax Report: State provides authoritative coverage of state and local tax developments across the 50 U.S. states and the District of Columbia, tracking legislative and regulatory updates,...
Virginia lawmakers are putting off efforts to tax audio and visual streaming on communication services like Netflix and Hulu.
The state House Committee on Finance unanimously agreed to “indefinitely” shelve a bill ( H.B. 1051) that would have levied sales and use taxes on Netflix Inc., YouTube TV, Hulu LLC, Spotify, and other online streaming services. Fiscal notes accompanying the legislation, which also would have added prepaid calling services to the expansion of such taxes, estimated it would have brought in about $7.9 million in annual revenue.
The Jan. 29 vote “shows there is no appetite in the Commonwealth for expanding the tax base to digital content streaming and similar services,” Mark Nebergall, president of the Software Finance and Tax Executives Council, an industry-focused advocacy group based in Washington, told Bloomberg Tax Jan. 31. State legislatures are moving away from such taxes, he said.
However, Max Behlke, director of budget and tax for the National Conference of State Legislatures, told Bloomberg Tax in early December that he expected the taxation of such services to be a focus of state tax efforts during 2018.
“More and more people will cut the cable cord and start streaming channels and video. This is the future,” Behlke said. “Currently, telecommunication taxes are a big revenue source for states, so when it comes to streaming services, states will begin to identify specific services, then decide whether or not to apply a tax to it.”
Behlke also said he expects significant pushback from a potential tax levied on streaming services and that states must make it a priority to revisit and modernize their tax codes.
The District of Columbia, Florida, North Carolina, Pennsylvania, and Washington are among jurisdictions that impose a tax on streaming entertainment. Efforts to capture such revenue through legislation or rulemaking have also recently been tried or considered in Alabama, Kentucky, and Maine, as well as certain local jurisdictions.
Stephen Kranz, partner and tax attorney at McDermott Will & Emery in Washington, agreed with Nebergall that “there appears to be a trend away from imposing such taxes on streaming services, at least at the legislative level.”
One example is Arizona, where lawmakers are considering a bill that would expressly exclude streaming content from taxation, Kranz said. Similar bills were introduced in the Florida Legislature in 2017 but weren’t finalized.
Such pushback “is a reaction to business and consumer concerns,” Kranz told Bloomberg Tax.
“There may be some rogue revenue departments that have attempted to administratively expand the tax base, but they are subject to attack as outside the legislative tax imposition which, generally, only applies to sales of tangible personal property and certain enumerated services,” Nebergall said.
With assistance from Chris Marr in Atlanta, Ryan Prete in Washington, and Paul Shukovsky in Seattle.
To contact the reporter on this story: Andrew M. Ballard in Raleigh, N.C., at aballard@bloomberglaw.com
To contact the editor responsible for this story: Ryan C. Tuck at rtuck@bloombergtax.com
Text of H.B. 1051 is at http://src.bna.com/v3Y.
The bill's fiscal note is at http://src.bna.com/v3Z.
Copyright © 2018 Tax Management Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to books@bna.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to research@bna.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)