As states and cities face massive budget shortfalls from the coronavirus recession, they may begin to reevaluate the need for taxing streaming services. Vertex Principal Economist & Tax Policy Advisor George Salis notes that bridging the gap and targeting the inequities in our digital infrastructure is the role governments can play. That includes using taxes to get the private sector more involved.
Earlier this year, a handful of cities took steps that would allow them to tax streaming services. Four cities in Indiana, including Indianapolis, as well as New Boston, Texas, have sued streaming platforms like Netflix and Hulu, claiming they’re owed municipal franchise fee payments. The localities claim that the services should be required to pay a 5% franchise fee of gross revenue because they use internet equipment in the public right-of-way to transmit programming.
The other Indiana cities on the class action suit are Fishers, Valparaiso and Evansville. Last year, Creve Coeur, Missouri filed a similar lawsuit seeking to require streaming services pay local franchise fees. That case is pending.
The suit comes as more Americans are cutting the cord, a trend that has been highlighted by the pandemic. Streaming business has boomed this year — Netflix added an eye popping 25 million subscribers during the first six months of 2020, for example.