Two Idaho Democrats voted Thursday to keep a controversial tax hike on Netflix and other digital music, movie, game and book subscription providers.
The measure, which won support from the rest of the 16-member panel, now moves to the House floor for its next vote.
The bill would repeal a tax hike authorized late last year not by legislators, but by the Idaho State Tax Commission. That move came after lawmakers passed 2014’s House Bill 598, a reform measure reworking how the state taxed digital products, including cloud storage and other products.
The commission felt the law was ambiguous as to how to treat streaming subscription services like Netflix, Hulu, Amazon Prime, Spotify, Pandora and others. After a series of hearings, the commission opted to hike taxes on Idahoans who purchase these services.
The tax hike is worth about $1.5 million annually.
Lobbyist Jason Kreizenbeck pitched the tax hike repeal, telling lawmakers the commission didn’t really have the power or authority to take the action in the first place.
“In short, you did not intend to create a new tax on certain services in Idaho,” the lobbyist told the panel.
He also noted his legislation would classify the products of Netflix and companies like it as services, an important distinction in state law because Idaho doesn’t typically tax them.
Streaming subscriptions fall into this category, he said, because companies don’t “allow the end user to keep, copy or permanently use content.”
During questioning, Erpelding suggested the bill is simply another tax exemption, and warned it might give streaming companies a competitive advantage over movie rental stores or Redbox.
Physical movie rentals, like those distributed by Redbox, will still be taxed even if the legislation finds its way into law.
During the print hearing, Rudolph worried the tax hike repeal would impede government’s ability to properly fund government programs, like education. During questioning Thursday, he worried again about paying for “essential services.”
The repeal comes two months after this same panel voted to approve the tax commission’s rule, a key function of legislative oversight of state agencies.
The Senate Local Government and Taxation Committee took up the rule, too, but declined to approve it due to disparities in how the commission treated entertainment purveyors.
If the bill ultimately works its way into state code, it would save taxpayers more than $300,000 through the end of the fiscal year, which concludes June 30.