How Will the New Netflix Tax Affect Your Monthly Bill?

Netflix has emerged as the predominant choice for most people when it comes to watching films and TV at home. Despite implementing price hikes and introducing ads over the past year, Netflix continues to dominate the streaming wars.

Maine’s governor proposed a new budget that could tax streaming services. According to a survey done by Forbes, 99 percent of American households have at least one streaming service.

Right now, the current legislation in Maine states that a service provider tax applies to cable TV, satellite TV, and online sales of movies, TV shows, and music. However, this tax does not reach the dominant way of watching: streaming services.

At present, service providers are subject to approximately six percent in taxes, whereas users are required to pay the state’s 5.5 percent sales tax on purchases of movies, music, or albums. While purchasing entertainment incurs a fee, streaming costs have remained exempt from taxation.

The proposal calls for a 5.5 percent tax on streaming services and customers. The streaming service subscription payment will include the tax.

Maine’s decision is not illogical by any means. While the streamers have kept their profits and data under tight lips for years, the past strikes during the summer of 2023 have created some transparency about how much streamers are making.

While streaming isn’t as profitable as cable, there are not many young people who are willing to choose a cable package over physical media or a streaming service of their choice.

A spokesperson for the Maine Department of Administrative and Financial Services, Sharon Huntley, told Newsweek that this proposal isn’t a new idea.

Huntley states that the proposal will help tax that mixed bag of digital and physical goods and services that have become staples in day-to-day life in the United States.

The Taxation Committee voted in favor of the bill, with one person on the committee voting against the bill.

“Guess who gets hit? My constituents,” Sen. James Libby, R-Standish, said at a news conference Tuesday (via the Portland Press Herald).

Maine is not the only state that is planning to tax streaming services. 25 other states have proposed a similar tax to Maine’s.

Netflix emailed Florida subscribers in February with a one-week notice that there would be an “additional state services tax” on their bill.

“We’ve notified our members in Florida that they will start to see state services tax applied to their monthly bill beginning February 15,” a spokesperson from Netflix told FOX 35.

However, the streaming service tax is nothing new to Florida watchers. Streaming services like Hulu and Disney+ have already been charging it.

The Institute for Policy Studies and Americans for Tax Fairness, which conducted an analysis of executive compensation data, focus on companies labeled as “notorious corporate tax avoiders.”

Large companies like Netflix paid their executives more in compensation than they paid in federal income taxes between 2018 and 2022, according to a report from the Institute for Policy Studies and Americans for Tax Fairness, two nonprofits that support tax reform.

According to the report, Netflix paid its five top executives $652 million between 2018 and 2022, while only paying $236 million in federal income tax in the same years.

“Executives are rewarded for ‘tax efficiency’—the euphemism for corporate tax dodging—which is often an easier way to raise profits than by creating goods and services more customers want to buy,” the report’s authors write.

Senior fellow at the nonpartisan American Enterprise Institute Kyle Pomerleau said that low corporate tax rates are what allow companies like Netflix to reduce their tax burden.

According to Pomerleau, many corporate tax breaks, including research and development tax credits, target activities that have a wide-ranging positive impact on the economic landscape.

While Netflix executives have been enjoying a rather generous payday over the last several years, the agency is ready to see that “lavish corporate compensation packages and inadequate corporate tax payments are not unrelated phenomena” in the future.

“We seek to provide a range of prices and plans to meet a wide range of needs, including highly competitive starting prices,” Netflix said in a quarterly letter to shareholders.