Society

California Cities To Tax Netflix, Other Streaming Sites

| by Zach Cohen

In California, 46 cities have been advised to begin taxing online streaming services like Netflix, Hulu, and HBO Go, under the existing rate for cable providers. 

Pasadena's finance department announced Nov. 3 that beginning on Jan. 1, a 9.4 percent tax would be applied to video services, according to The Mercury News.

The cities of Benicia and Indio adopted streaming taxes in October. They are both clients of MuniServices, a company that collects taxes on behalf of municipalities. MuniServices clients also include San Bernardino, Glendale, Santa Monica, Culver City, and Pico Rivera. Their video services tax rates range from 4.5 to 11 percent.

Attorney Don Maynor, who is assisting MuniServices' clients, says that "as companies begin to provide services that look more and more like cable services, those fall under taxable services."

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Only voters in California can increase their taxes, but cities like Pasadena are arguing that previous tax votes mean that these new streaming taxes already existed, but no one sought them out until now. Tax ordinances written in 2000 were left open-ended to account for technological changes. 

Pasadena's ordinance allows the city to tax video service suppliers, "whatever their technology."

Today, proponents of the taxes are using similar language. "We knew these technologies would be coming out," Maynor said. "There is just no way you can write an ordinance today and know exactly what things will look like three years down the road. The goal is to treat everyone the same, regardless of technology."

Jon Coupal, president of the Howard Jarvis Taxpayers Association, calls the new taxes "very suspect." 

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"We will be taking a very close look at this," he said. "If we determine this is an extension of an existing tax, then under the Constitution, they need voter approval. They can put as much lipstick on this pig as they want, but the pig is still a tax increase.

Pennsylvania instituted a 6 percent "digital downloads" tax in August, which covered Netflix, Hulu, e-books, apps, online games, and ringtones, according to KDKA. Magazine and newspaper subscriptions, as well as downloadable bibles, are exempt from the tax.

France's legislature passed a YouTube tax in October which, Fortune reports, covers all streaming video, including Netflix and Vimeo. The tax charges 2 percent on all video streaming, based on subscription or advertising revenue. For pornographic films, or films that could incite violence, the tax jumps to 10 percent. The criteria for defining such films is unclear.

Sources: The Mercury News, KDKA, Fortune / Photo credit: The Huffington Post

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