Netflix tax

A controversy is brewing in California over the taxation of streaming services.

Officials and lawmakers in California are squabbling over whether to tax streaming services, and how to best go about it. In Pasadena, the services are already subject to the city’s utility users tax (UUT). Several other California cities also apply UUT to video streaming services, and others want to follow suit. But this is a controversial tax, and a bill to prohibit local taxation of video streaming services has been introduced in the California Legislature.

Local governments and agencies are currently permitted “to impose various taxes and fees.” AB 252 would prohibit the imposition by any local government “of a tax on video streaming services, including, but not limited to, any tax on the sale or use of video streaming services or any utility user tax on video streaming services.”

“Video streaming services” are defined as “the provision of video content sent in compressed form over the Internet and displayed by the viewer in real time for a fee on a subscription basis.”

Matthew Hawkesworth, Director of Finance for Pasadena, maintains that “these types of video services have always been eligible to be taxable” under the city’s utility user tax. But AB sponsor Assemblymember Sebastian Ridley-Thomas questions the wisdom of that stance: “Video streaming companies like Netflix and Hulu are entertainment providers, not local utilities akin to electricity, sewer, or even cable television. Taxes should not be applied to their services without careful consideration.” His bill would prevent the taxation of these services until Jan. 1, 2023.

Ridley-Thomas points out that many new technologies are “developed and nurtured right here in California,” and he maintains that “California must ensure that its tax and regulatory environment spurs, rather than impedes, continued growth in this vital sector of the economy.” However, he isn’t entirely opposed to taxing these services, perhaps with “a sales tax or a special fee on subscription services.”

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