When it comes time to relax with your favorite show, where do you go to find it? Over the last decade, more and more people have made the choice to look online and utilize streaming services like Netflix and Hulu instead of depending on traditional cable or satellite TV.
This trend is in line with digital transitions in many industries, and like those other industries, it presents new tax challenges for regulatory agencies and streaming companies alike.
In this article, we’ll share the brief history of streaming taxes, where we are today and our predictions for the future.
As the most famous of the streaming services, Netflix paved the way for those that followed in its wake. First offering its “Watch Now” video on demand service in 2007, Netflix has more than 208 million paying subscribers, with 74.4 million of those in the U.S. and Canada.
Hulu followed soon after and was launched in 2008, with other streaming services like Disney+, HBO Max and Peacock, appearing in the market over the last decade.
With these services becoming more widely available, and televisions now coming with built in “smart” functionality, many households have chosen to cut the cable cord altogether. Since 2015, the percentage of American’s who say they “watch television via cable or satellite” has dropped from 76% to 56% in 2021, according to a new Pew Research Center survey of U.S. adults.
As a result of the popularity of these services, and declining revenue from the taxation of traditional cable television, around half of U.S. states have implemented legislation that adds a tax to streaming services. More states are in the process of introducing similar legislation.
The taxation of the digital economy has grown over the last several years and hold out states are starting to jump on the bandwagon. Maryland is one such example. They recently enacted taxation on a number of digital products and services.
Other hold out states include Georgia, which introduced digital taxation legislation during this year’s legislative session, Missouri and North Dakota.
Cities in the U.S. are also taking steps to secure their own cut of the streaming-related profits by suing streaming services for lost revenue due to the decline in cable users.
As streaming platforms and other digital services continue to gain popularity, we expect that hold out states, which are missing out on potential tax revenue, will make the transition to taxing these products relatively soon.
Within just the last few years, we’ve seen huge change in this area and we expect the next few years to be just as tumultuous.
Do you have questions regarding the taxation of streaming services, or any other state tax situations? If so, please contact us today. We’re happy to clarify any multi-state tax issues you’re trying to navigate.
