More than half the states and dozens of cities now levy taxes or fees on digital streaming services such as Netflix and Hulu, aiming to recoup the revenue they lose when people cut the cable cord. Cable customers pay sales taxes and a variety of other taxes and fees imposed by state and local governments. For example, states and localities require cable companies to pay franchise fees—up to 5 percent of gross receipts, under federal law—for the easements allowing them to run cable in public rights-of-way. Cable companies recover these costs by adding charges to customers’ bills. But as more consumers drop their cable and satellite television subscriptions, the amount of money that governments can collect from these companies and their customers is shrinking. States and cities argue that they shouldn’t be deprived of taxes on video services just because people have changed how they watch video. But some of their new taxing strategies have landed them in court.
Source: Governing
