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      Netflix subscriptions may soon be taxed just like cable subscriptions

      Netflix subscriptions may soon be taxed just like cable subscriptions Netflix subscriptions may soon be taxed just like cable subscriptions Netflix subscriptions may soon be taxed just like cable subscriptions
      (AP Photo/Dan Goodman, File)

      Internet

      Netflix subscriptions may soon be taxed just like cable subscriptions

      By Brendan James

      For a lot of cord-cutters, Netflix is the equivalent of a cable TV company. Now a growing number of cities want Netflix to start paying taxes like one too.

      The city of Pasadena, California, is debating whether to tax Netflix and Hulu with its municipal utility tax code, usually applied to cable subscribers, the LA Times reported. Dozens of other cities in California could follow suit.

      Pasadena would join Chicago — which in 2015 passed a 9 percent "cloud tax" on digital services like Netflix, the same kind of sales tax applied to movie and sports tickets — and the state of Pennsylvania, which expanded its 6 percent sales tax to include digital streaming services this summer.

      The tax has fired up opposition from the Internet Association, a trade group representing Netflix, Airbnb, Amazon, and Uber. "We are the unified voice of the Internet economy," goes its slogan.

      "There are a number of questions we have about the legality of this," the Internet Association's director told the Times, hinting at a stand against any proposed law.

      "It's a dangerous precedent to start taxing internet apps and websites using laws intended for utilities like water and electricity," said Netflix spokeswoman Anne Marie Squeo.

      Over in Chicago, the local chamber of commerce opposed its city's version of the tax. "This is one piece of a whole picture that impacts why business would not want to locate here," said Michael Reever, vice president of government affairs.

      In each of these places, the move is both a formal recognition that the digital businesses are a taxable industry like any other and a practical move to scoop up lost tax revenue from people ditching cable for streaming subscriptions.

      The difference is cable and broadband companies laid cable and fiber as part of franchises awarded by municipalities, and over 50 percent of the U.S. has just one cable or broadband company to choose from. Netflix and other digital services simply provide a service delivered over cable and telco pipes.

      But Netflix may still have the upper hand: Governments are struggling to use old laws to regulate a "new" type of business. As Slate points out, the "Netflix tax" is a utility tax in California, a sales tax in Pennsylvania, an amusement tax in Chicago, and an unsuccessful rental tax in Alabama.



      Topics: business, netflix, internet, taxes, california, cable tv

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