The city council of Pasadena, California has come under fire recently after announcing a plan to implement 9.4% tax on video streaming services – a Netflix tax.
CBS reports that the tax, which was designed to generate revenue that had been lost due to the recent trend of people “cutting the cord” and cancelling cable TV services, was met with widespread disapproval from Pasadena residents.
The new law is based around a 2008 ruling that allowed the city council to tax cell phones as they taxed home landlines, this however set an unforeseen precedent that allows the city to apply a similar tax to digital streaming services. As many as forty other California cities have a similar law.
“My constituents do not want this tax,” Pasadena City Councilman Tyron Hampton said. “Even if it is just a couple of dollars. It is being taxed twice.”
Internet Association Director Robert Callahan believes that many cities that institute this law may be violating federal law which does not allow for a tax on the Internet.
“People are going to wake up and see tax line items on their Netflix and Hulu bill and they are not going to be happy,” Callahan said reiterating that the tax doesn’t seem to fall under the guideline of a utility. “Utilities are water, and electricity, and sewer and all sorts of other utilities. Websites and apps don’t fit that mold whatsoever.”
This is not the first attempt to introduce laws like this. Chicago attempted to implement a 9 percent tax on video streaming, for which the city is now being sued. In an attempt to close a $1.3 billion dollar budget gap, Pennsylvania has begun charging a 6% sales tax on as many digital items as possible, from regular file downloads to apps.
Councilman Tyron Hampton has warned about the slippery slope that such a tax can cause. “Where do we stop, is it Hulu, is it Netflix, Pandora, every time you stream music in your car?” Hampton said. “I mean where does it stop?”