Netflix, Streaming Services Dodge Georgia’s Downloads Tax

Though a tax on streaming video services was taken off the table by lawmakers, a 4 percent tax on most other online products, including e-books, iTunes music and video games is moving forward.

by Moriah Sollie / February 26, 2019
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(TNS) — Your Netflix and other streaming video services are safe from state taxes, at least for now.

Georgia lawmakers have removed an unpopular proposal to impose sales taxes on streaming services.

Instead, members of the state House are moving forward with legislation to create a 4 percent tax on most other online products, including e-books, iTunes music and video games. House Bill 428 would also eliminate various fees and taxes on existing phone and cable TV services.

Without the so-called “Netflix tax,” the legislation won’t achieve one of its primary goals — bringing in tax money to subsidize Internet lines in rural Georgia. Now, legislators say the bill isn’t a tax increase and it won’t generate any additional money.

The bill’s sponsor, House Industry and Labor Chairman Bill Werkheiser, said lawmakers listened to customers.

“People didn’t like what has become known as the Netflix tax, so we took that off,” said Werkheiser, a Republican from Glennville. “The effort initially was to help fund broadband. It won’t do that without the Netflix or streaming services tax.”

That leaves no funding to build Internet lines to the 16 percent of Georgia households that lack access to Internet with speeds of at least 25 megabits per seconds.

Legislators representing rural Georgia said Internet expansion is essential for their communities’ survival. Residents and businesses need reliable Internet for economic growth, education and health care, state Rep. Patty Bentley said.

“Are we really helping rural Georgia?” asked Bentley, a Democrat from Butler, southwest of Macon. “I’m a Netflix subscriber, and I was prepared to pay extra to support rural Georgia. Without the money, I don’t know how it’s really helping.”

About 65 percent of Georgians oppose the idea of taxing Internet, TV and phone services to raise money for rural Internet, according to a statewide poll conducted last month for The Atlanta Journal-Constitution.

If streaming services were taxed, the proposed 4 percent digital services tax would have generated $48 million in 2021, growing to $310 million by 2024, according to state estimates. The current version of the bill is revenue-neutral, Werkheiser said.

The bill is still important because it will tax new technologies more fairly, he said. Currently, books and CDs bought in a store are subject to sales taxes, but downloaded e-books and mp3s are tax-free.

Money for rural Internet expansion would have to come from the state’s general treasury or federal grants. There’s no money in Georgia’s proposed state budget to fund rural Internet lines.

House Rules Chairman Jay Powell, who wanted a 4 percent sales tax on digital and communication services, said the bill in its current form still helps modernize Georgia’s tax structure, even though it leaves out streaming services.

“It’s like taxing half a glass of water over no glass,” said Powell, a Republican from Camilla. “I was hoping we could also finance rural broadband. That’s more of the icing on the cake.”

Georgia imposed sales taxes on products sold online starting Jan. 1, but electronic goods remain untaxed.

Both Gov. Brian Kemp and Lt. Gov. Geoff Duncan have expressed reservations about the digital services tax. Werkheiser said he hopes Kemp and Duncan will support the legislation, since it isn’t a tax increase.

“My first inclination is not to look at tax increases to pay for this,” Kemp said in an interview last month with Georgia Public Broadcasting. “If we’re going to have some sort of offset, I’d be open to looking at that. I don’t know that raising taxes is the answer for me.”

Along with the tax on digital products, HB 428 would eliminate a 5 percent franchise fee on cable TV revenue, a 3 percent franchise fee on landline phones, and state and local sales taxes on phones and broadband equipment. Lobbyists for AT&T, the cable industry and others whose clients would benefit from the bill crowded a House Ways and Means subcommittee meeting Monday on HB 428 to show their support.

HOW IT WOULD WORK

A proposed 4 percent tax on digital, phone and TV services would replace a variety of existing sales taxes and franchise fees currently charged on cable TV revenue and phone subscriptions. The communication services tax would cover Internet downloads that currently aren’t taxable.

New taxes:

  • E-books or audio books downloaded from Amazon and Audible
  • Music purchased from Spotify and iTunes
  • Video games
  • Digital photos, newspapers and magazines
  • Eliminated taxes:
  • Franchise fees of 5 percent on cable TV revenue
  • Franchise fees of 3 percent on landline phones
  • Sales taxes of at least 7 percent on landline phones, cellphones and broadband equipment

Source: Georgia House of Representatives Rural Development Council

©2019 The Atlanta Journal-Constitution (Atlanta, Ga.). Distributed by Tribune Content Agency, LLC.