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California Bill Aims to Stop Local Netflix Tax Ordinances

California assembly member Sebastian Ridley-Thomas wants to make sure that you won’t have to pay taxes on binge viewing any time soon: Ridley-Thomas, who is representing Southern California’s District 54 in the State Assembly, recently introduced a bill that would stop local municipalities from taxing streaming services like Netflix, Hulu and HBO Now.

California bill AB 252, also known as the Streaming Tax Relief of Entertainment And Movies (STREAM) Act of 2017, would bar local streaming taxes until 2023.

“Video streaming companies like Netflix and Hulu are entertainment providers, not local utilities akin to electricity, sewer, or even cable television,” said Ridley-Thomas in a statement. “Taxes should not be applied to their services without careful consideration.”

The bill is in part a response to recent plans by the city of Pasadena,Calif.  to introduce a streaming tax for its residents. The city had planned to add a 9 percent Utility User Tax to streaming services, and in effect treat them the same way as cable services. Pasadena eventually abandoned those plans after some push-back from the public, but there are 45 other municipalities that could introduce similar taxes, according to Ridley-Thomas.

Doing so would be a mistake, the assembly member argued. “California must ensure that its tax and regulatory environment spurs, rather than impedes, continued growth in this vital sector of the economy.  The STREAM Act takes an important step in this direction by adjusting state and local tax regulation and allowing streaming service to continue to be untaxed until stakeholders develop an alternative.”

California municipalities aren’t the only ones looking to tax Netflix. Canada is currently considering extending its sales tax to foreign digital goods and services. The country is already charging local streaming providers sales tax, which is why some, including University of Ottowa law professor Michael Geist, believe that an eventual taxation of Netflix is inevitable.

“The extension of sales taxes to foreign digital providers appears to be a question of when, not if,” Geist recently wrote. But he also questioned whether such a tax would be instated any time soon, and without international cooperation: “The ‘when’ depends largely on developing international standards on the issue.”

 

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