Netflix Streaming May Soon Come With A Tax

Netflix might be heading into a direction that will most likely infuriate some users. After the announcement of a 9.4 percent tax on streaming video, The Pasadena city council has been catching heat for weeks. The council is calling it a utility, so it can be taxed like water and electricity.

A utility? Streaming? Is that a genuine tax?

Netflix N December
(Photo: Netflix)

Pasadena City Councilman Tyron Hampton says the surprise tax was crafted to make up for lost tax revenue from people cutting the cable TV cords and home phones out of the picture.

I read it multiple times, I was like, when did this happen? My constituents do not want this tax. Even if it is just a couple of dollars. It is being taxed twice.

Pasadena voters modernized a law in 2008 to tax cell phones like landlines, not expecting at all that it could be applied to video streaming. Forty California cities now have similar laws.

Internet Association Director Robert Callahan thinks all of these cities could be violating federal law, because the government doesn't allow 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. Utilities are water, and electricity, and sewer and all sorts of other utilities. Websites and apps don't fit that mold whatsoever.

Cities across the country who are looking for more money, though, seem to continue on with this.

Chicago is currently being sued for charging a 9 percent tax on video streaming. And Pennsylvania's charging a 6 percent sales tax on everything, from apps to downloads, to help close a $1.3 billion budget gap.

As of now, Pasadena has put its new tax bill on hold.

Hampton also voiced his concern on where taxes like this will stop.

Where do we stop, is it Hulu, is it Netflix, Pandora, every time you stream music in your car? I mean where does it stop?

And Hampton brings up a highly valid point. If we start taxing one thing in this realm, where will we go next? Will it stop with just one service?

These California cities still haven't started collecting the streaming tax, but when they do (and if they get to that point), it will very likely end up in court.

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Do you think Netflix and other streaming services should be classified as a utility? Sound off in the comments section below.

[H/T CBS News]