Netflix tax

Maine looks at taxing Netflix and similar video streaming services.

Netflix and Hulu are exempt today in Maine, but that could soon change. The budget proposed by Gov. Paul LePage seeks to “Modernize Maine’s sales tax base to reflect current consumer habits.” To achieve this, it would tax a variety of currently exempt services, such as streaming subscription services like Netflix and Spotify. It would also require transient rental platforms such as Airbnb and VRBO to collect and remit tax on behalf of their clients. If all proposed services are taxed as Gov. LePage envisions, the state could bring in an extra $75 million in 2018.

Maine has one of the narrowest sales tax bases in the country. A 2007 study by the Federation of Tax Administrators noted that Maine taxes only one personal service, six business services, three admissions or amusement services, nine utility services, and no computer or professional services. The sales tax was expanded to many services in 2009, but residents voted to repeal it. The current budget proposal would expand tax to many of the following services:

  • Household services
  • Installation, repair, and maintenance services
  • Personal services
  • Personal property services
  • Prepaid calling service
  • Recreation and amusement services
  • The rental of living quarters in a hotel, rooming house, or tourist or trailer camp
  • The transmission and distribution of electricity

Household services

The budget proposal would tax the following “household services”:

  • Interior home decorating, painting, design services, cleaning, and organizing services
  • Property maintenance, including but not limited to cleaning and maintenance of hot tubs, swimming pools, and the exterior of the home, and snow plowing or removal
  • Landscaping and horticultural services
  • Insect and pest control services
  • Home automation services (e.g., audio-visual design and installation services)
  • Locksmithing, alarm services, and home security and monitoring services
  • Private waste management services and remediation services
  • Domestic staffing services (e.g., caretakers, cooks, gardeners)

Installation services

All services involved in the installation, repair, and maintenance of tangible personal property would be taxable, except those performed on aircraft, motor vehicles, and watercraft. Repair and maintenance services on snowmobiles and all-terrain vehicles would be taxable.

Personal services

The following “personal services” would be taxable under the budget proposal:

  • All services provided by barber shops and hair salons, nail salons, tanning salons, massage parlors, spas, and body piercing and tattoo parlors
  • Dating, escort, and social introduction services
  • Diet and nonmedical weight-reducing services
  • Event planning services
  • Personal delivery services
  • Psychic reading, tarot card reading, astrology, reflexology, and palm reading services
  • Travel arrangement and reservation services

Personal property services

The budget seeks to tax the following “personal property services”:

  • Dry cleaning, laundry, and diaper services, not including self-service laundry
  • Embroidery, monogramming, silk screening, and clothing alterations
  • Vehicle cleaning and detailing services
  • Pressure cleaning and washing
  • Pet services (e.g., exercising, sitting, training, grooming, and boarding for nonmedical purposes)
  • Mounting and framing services
  • Furniture and rug cleaning
  • Stripping and reupholstering of furniture
  • Restoration services, including art restoration and conservation services, and photographic restoration services
  • Warehousing and storage fees (e.g., the rental of storage units, warehouse space, watercraft slips, and watercraft mooring space)
  • Motor vehicle parking and garaging services provided on a contractual, hourly, or other periodic basis
  • Moving services, including packing and crating
  • Vehicle towing

Residential parking services and charges collected through on-street parking meters would not be taxable. Nor would fabrication services.

Recreation and amusement services

The following recreation and amusement services would be taxable under the proposed budget:

  • Admissions to an amusement venue or event of any kind (e.g., aquariums, amusement parks, concerts, and stadiums)
  • Admissions as a spectator to an athletic event of any kind
  • Admissions to a show or exhibition of any kind (e.g., arts and crafts, antique, books, camping, home, and trade shows)
  • Charges to participate in a sport, game, or recreational activity of any kind (e.g., archery, golf, swimming, tennis, zip lining, and bungee jumping)
  • Charges for membership in an association, club, or other organization where athletic, fitness, or sports facilities of any kind are available for the use of its members

Certain exemptions would be maintained, such as for admissions to many events sponsored and operated by schools.

Streaming services — taxing Netflix

The budget proposal seeks to tax “the sale of access to streaming video or audio content, whether single use or by subscription” at a rate of 6 percent beginning Jan. 1, 2018. This tax rate would also apply to guided recreation services for amusement, recreation, or sight-seeing purposes (e.g., balloon, bus, train, and wagon rides).

Lodging tax

In addition to taxing more services, the budget proposes a lodging tax rate increase. The rate of tax for the rental of living quarters in any hotel, rooming house, or tourist or trailer camp would increase from 9 to 10 percent, effective October 1, 2017.

Finally, owners or operators of transient rental platforms (e.g., Airbnb, VRBO) would be required to collect and remit tax on “all consideration received for the rental of living quarters located in this State, including any service charge or other charge or amount required to be paid as a condition for occupancy.”

Gov. LePage argues that a broader sales tax will capture more tax revenue from tourists. But some in Maine are concerned that broadening the sales tax will make the state less welcoming. Neighboring New Hampshire has no sales tax, and the proposed 10 percent tax on lodging would be higher than in Massachusetts, New Hampshire, and Vermont. Additional details are available in the 2018–19 Budget Proposal.

A balanced budget must be enacted by June 30, 2017, or the state government will shut down.

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photo credit: Day 81 via photopin (license)