Downloads, streaming taxes debated in states
Georgia lawmakers are considering expanding the state’s 4% sales tax to cover digital downloads of books, music, movies and other media, which would make it the latest state to begin taxing digital downloads or streaming services such as Hulu, Netflix and Spotify.
Georgia’s sales tax must change with the times, bill sponsor Rep. Kasey Carpenter (R) said in an interview.
“I’m not a big tax and spend guy,” he said, “but I do think it’s important to make sure that our tax code is up to date and actually reflects how consumers are consuming products.”
Carpenter said he would like to tax streaming subscriptions as well as digital downloads, but that there’s not enough support for doing so this year. “I just don’t think we have the bandwidth to get that through.”
Nineteen states and Washington, D.C., tax digital audio and video downloads and streaming, according to the Tax Foundation, a conservative-leaning think tank. An additional three states tax digital audio and video purchases but not subscriptions to streaming services. Estimates by other tax policy experts have put the number of states that tax streaming services as high as 33.
Most states with such taxes have simply applied their sales tax to digital downloads and subscriptions. Delaware, which doesn’t have a sales tax, requires streaming companies to pay its gross receipts tax. Florida levies a 7.44% tax on a range of “communications services,” including streaming video, cable and satellite television and telephone services.
Lawmakers in at least one other state this year have proposed taxing digital downloads or streaming services. The Democratic leaders of the New York Assembly want to apply the 4% state and 4% local sales taxes to some streaming services to raise money for public transit.
Cities and counties are also trying to tax streaming companies — and getting into messy legal fights. Some localities have sued streaming companies to force them to pay taxes originally levied on cable companies. Meanwhile, several streaming companies sued Chicago over its 2015 move to apply a tax on electronic concert tickets to streaming services.
Local governments tax cable companies through deals that allow those companies to build and operate cable infrastructure, said Richard Auxier, a senior associate in the Urban-Brookings Tax Policy Center, a joint venture between two D.C. think tanks. That makes it hard to simply extend existing taxes to streaming services.
“Some cities and counties have tried to shoehorn in the streaming services,” he said, “but they’ve gotten in a lot of trouble, with the courts basically saying that’s not what this tax was designed to do.”
Applying state sales taxes to streaming services is an administratively simple change, Auxier said, but it can be politically challenging.
Carpenter said he didn’t include streaming services in his bill because doing so would have prompted a wider debate over taxing television and movie providers.
“When you start taxing streaming, [people] want to sit down and have an actual communication services tax conversation,” Carpenter said. That means discussing local taxes on cable companies and satellite TV providers and how to ensure similar taxes apply to similar services, he said.
Georgia lawmakers have tried and failed to tax streaming companies in the past. But Carpenter’s digital downloads bill easily passed the state House and is now moving through the Senate.
Many of his GOP colleagues say it makes sense to apply the same tax to similar products regardless of where they are purchased.
“We’re seeing traditional brick-and-mortar businesses suffer because of the unequal playing field that internet sales have caused,” Rep. David Knight (R) said during a Ways & Means subcommittee hearing this month.