AB 252, a proposal in the California legislature “would prohibit the imposition by a city, city and county, or county, including a chartered city, city and county, or county, of a tax on video streaming services, including, but not limited to, any tax on the sale or use of video streaming services or any utility user tax on video streaming services.
“This bill would make a legislative finding and declaration regarding the statewide concern of the promotion of uniformity in access throughout the state to video streaming services.” (Also see 2/3/17 statement from sponsor Assemblymember Ridley-Thomas.)
That is, the state tells the local governments what they can and can’t tax all in the name of helping an industry grow.
A few quick observations:
—Why doesn’t the state give up its own revenue if it thinks the industry needs help? It could give the industry a new state tax credit, for example.
—Local governments in California already have their hands tied by the state. Local governments are not allowed to impose an income tax, and the sales tax base is defined at the state level (and is very narrow in California).
—Standard Netflix service is about $10 per month. The utility user tax on this would barely be noticed by a customer, but in aggregate can be a helpful revenue stream for a city. For example, the communication user tax in Los Angeles is 4.5% (45 cents per month on a standard Netflix account of a customer in LA). This is unlikely to cause Netflix to lose customers.
As new services arise, they might fall within existing taxes. Or, they might be tax-exempt when similar services are taxable and lead the taxing jurisdiction to modify (neutralize) the law and have it apply similarly to similar taxpayers.
What do you think?
Annette Nellen, CPA, Esq., is a professor in and director of San Jose State University’s graduate tax program (MST), teaching courses in tax research, accounting methods, property transactions, state taxation, employment tax, ethics, tax policy, tax reform, and high technology tax issues.
Annette is the immediate past chair of the AICPA Individual Taxation Technical Resource Panel and a current member of the Executive Committee of the Tax Section of the California Bar. Annette is a regular contributor to the AICPA Tax Insider and Corporate Taxation Insider e-newsletters. She is the author of BNA Portfolio #533, Amortization of Intangibles.
Annette has testified before the House Ways & Means Committee, Senate Finance Committee, California Assembly Revenue & Taxation Committee, and tax reform commissions and committees on various aspects of federal and state tax reform.
Prior to joining SJSU, Annette was with Ernst & Young and the IRS.
2 comments on “Tax Paternalism – California AB 252”
Horrible idea and part of the reason why California is becoming such a hard place to do business. The compliance burden alone for yet another selective tax is reason enough for the state to step in and mandate that local governments should back off. Why not look for less forms of tax than more. We are overtaxed and over-regulated as is. Yet another way to create death by 1,000 cuts
Just what we need, another tax. Agree with the comment above.
Perhaps we should focus on trimming local government spending instead. Recent stories about how much more government employees are receiving than the private sector as well as stories on escalating pension and healthcare costs highlight the real issues we need to address.
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