[Originally published September 21, 2021. Updated February 2025]
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 chosen to look online and utilize streaming services like Netflix and Hulu instead of relying on traditional cable or satellite TV.
This trend aligns 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 explore the brief history of streaming taxes, where we are today, and our predictions for the future. Here’s what we’ll be covering:
- A Brief History of Streaming Services
- Netflix’s impact and early competitors
- Rise of smart TVs and cord-cutting trends
- The Rise of Streaming Taxes in the U.S.
- Decline of traditional cable tax revenue
- State-by-state variations in streaming taxation
- The Expansion of Digital Taxation
- Growth of digital taxes across states
- City-level efforts to tax streaming services
- International Efforts to Tax Streaming Services
- Global approaches to digital taxation
- Case studies: Philippines and Canada
- The Future of Streaming Taxes
- Predictions for evolving tax policies
- Expected legislative changes
Not what you’re looking for? We can help. Reach out to us at info@milesconsultinggroup.com
1. A Brief History of Streaming Services
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 now boasts more than 300 million paying subscribers, with over 89.6 million of those in the U.S. and Canada as of 2023.
Hulu followed soon after, launching in 2008. Over the past decade, streaming services like Disney+, HBO Max, and Peacock have entered the market, further expanding digital entertainment options.
With these services becoming more widely available—and televisions now featuring built-in “smart” functionality—many households have cut the cable cord altogether. Since 2015, the percentage of Americans who say they watch television via cable or satellite has dropped from 76% to 56% in 2021, according to the most recent Pew Research Center survey of U.S. adults.
2. The Rise of Streaming Taxes in the U.S.
As streaming services have gained popularity, traditional cable TV tax revenue has declined, prompting many states to impose new taxes on digital services. Today, around half of U.S. states have implemented legislation that adds a tax to streaming services, with more considering similar measures.
However, how states tax streaming services varies significantly. Here are a few standout examples:
- Florida: The state levies a Communications Services Tax (CST) on streaming services. As of 2021, this tax rate is 7.44% on providers’ revenues, with local governments adding their own rates, often resulting in a total CST exceeding 13%.
- Kentucky: The state imposes a 6% sales tax on “prewritten computer software access services,” which includes streaming services. This is not a special video tax but rather an inclusion of streaming under taxable services.
- Chicago, Illinois: The city extends its 11% Amusement Tax, originally designed for events like concerts and sporting events, to electronically delivered amusements, including streaming services.
- Iowa: The state classifies streaming services, including those bundled with packages like Amazon Prime, as “pay television,” making them subject to applicable sales taxes.
- South Carolina: The state taxes streaming transmissions of television programs, movies, and music accessed via the internet, treating them as taxable communication services.
As states look for ways to recover lost tax revenue, more are expected to follow suit in the coming years.
3. The Expansion of Digital Taxation
The taxation of the digital economy has grown significantly in recent years, and holdout states are starting to jump on the bandwagon.
For example, Maryland recently enacted taxation on a variety of digital products and services. Other states considering similar measures include:
- Georgia, which introduced digital taxation legislation during this year’s legislative session.
- Missouri and North Dakota, both of which are exploring new ways to tax streaming platforms.
Cities are also stepping in to recoup lost revenue due to declining cable subscriptions. Some municipalities have even sued streaming services for lost tax income.
4. International Efforts to Tax Streaming Services
The issue extends beyond the U.S., as countries worldwide grapple with how to fairly tax digital services. For example:
- Philippines has implemented a 12% value-added tax (VAT) on digital services offered by non-resident tech giants, including streaming platforms, to create fair competition with domestic businesses.
- Canada has proposed a 5% tax on revenue generated by streaming services to fund local content, leading to legal challenges from major streaming companies.
As digital entertainment becomes increasingly global, many other nations are considering similar tax measures to regulate and profit from streaming services.
5. The Future of Streaming Taxes
As streaming platforms and other digital services continue to gain popularity, states and countries that have yet to implement taxation are likely to follow suit soon.
In just the last few years, we’ve seen major shifts in tax policies, and the next few years are expected to be just as tumultuous.
Need Help Understanding Streaming Taxes?
Do you have questions regarding the taxation of streaming services, or any other state tax issues, for that matter?
At Miles Consulting, we’re happy to clarify – this is what we do. Book a consultation, drop us a line, or send us an email at info@milesconsultinggroup.com.
