Netflix tax hike, worth up to $1.5 million, could soon fall

Netflix tax hike, worth up to $1.5 million, could soon fall

by
Dustin Hurst
March 2, 2015
Dustin Hurst
Author Image
March 2, 2015

A tax on streaming subscription services like Netflix, Hulu, Pandora and Spotify could soon fall if one lobbyist has his way.

Members of the House Revenue and Taxation Committee introduced legislation Monday morning to end the state’s tax on these services after approving the levy earlier this year.

If lawmakers approve the legislation and Gov. Butch Otter signs it, Idahoans would see a collective $1.5 million sales tax reduction.

The new measure will clean up a loophole in state code that allowed the Idaho State Tax Commission to impose the tax on companies like Netflix.  That loophole came from last year’s House Bill 598, which the Legislature passed to decide how the state would tax certain digital products.

That bill said the state would tax all digital movies, books, music and games, regardless of delivery. That line influenced the commission to decide to tax digital subscription services, even though the customers of companies don’t get to keep the products.

Lobbyist Jason Kreizenbeck seized on that fact, noting Idaho doesn’t traditionally tax services. Because Idahoans don’t actually have control over the content delivered by Netflix, Hulu and others, Kreizenbeck suggested Idaho shouldn’t apply the sales tax to these customers.

One lawmaker expressed concerns the bill gives a competitive advantage to online movie and television purveyors, but Kreizenbeck said the bill only adheres to the previous stance that television and products like it shouldn’t be taxed.

Democrat Mark Nye of Pocatello worried the panel should wait until after the Legislature sets the education budget before slicing another $1 million or so out of the state’s revenue stream.

Kreizenbeck objected, telling the panel the levy shouldn’t exist.

“I think it’s ... a tax that didn’t have the authority to be levied in the first place,” he said.

Associated Taxpayers of Idaho gave initial approval to the measure. “When tax questions surface, policy makers should strive for clear & equitable solutions: The "Netflix" bill accomplishes both,” the group tweeted Monday.

Kreizenbeck’s bill will receive a full hearing within the next week or so.

 

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