Austin The Latest City To Try And Impose A Netflix Tax

from the gimme dept

Hungry to boost municipal budgets, a growing roster of states and cities have spent the last five years or so trying to implement a tax on Netflix, Hulu, and other streaming services. Sometimes (like in Chicago) this has involved expanding an existing amusement tax (traditionally covering book stores, music stores, ball games and other brick and mortar entertainment) to online streaming. Other times this has involved trying to leverage existing cable TV laws or ordinances to try extract their pound of flesh from Netflix. In both, it involves taking rules written for the physical world, and applying them to the internet. Often haphazardly.

That’s what’s happening in Austin, where the city just joined a growing Texas lawsuit trying to force Netflix to pay the same taxes as local cable providers. Texas law allows cable and video providers to deliver cable TV via publicly-owned utility poles on public land in exchange for remitting 5% of gross revenue to the municipality. So the argument has generally been because Netflix bits technically travel over those same lines, they should also be responsible for paying that tax:

“Streaming services such as Netflix, Hulu and Disney+ have their content moved through those lines, but they do not pay the fees imposed on traditional cable TV providers. Austin officials say they should.

The Austin City Council voted last week to join the coalition lawsuit against streaming providers. It often depends on state law and local guidelines, but such efforts often don’t go very well. Georgia, Indiana, Ohio and Nevada have all pursued similar efforts, and most of them have found themselves bogged down in elaborate legal fisticuffs for trying to apply laws generally written for different technologies and different eras to the modern streaming world.

Cable TV providers generally have a physical presence in the towns and cities they serve. Employees live in these areas, climb physical poles in these areas, and do tech support calls in these areas. By contrast, a company like Netflix may have little to no real physical presence in a town (outside of maybe some CDN hardware at an internet exchange point or regional ISP), so demanding they pay a tax under laws designed decades ago for different technologies often proves logically and legally unsound.

Netflix argued as much last January, making it clear the costs would be passed on to consumers:

“These cases falsely seek to treat streaming services as if they were cable and internet access providers, which they aren?t. They also threaten to place a tax on consumers that the legislature never intended, and we are confident that the courts will conclude that these cases are meritless.”

I suspect a lot of municipalities will continue to struggle to make progress here. Older franchise agreements and state laws in a lot of states exempt any service that doesn’t have significant local physical infrastructure. A mish mash of local court rulings means there’s not a whole lot of federal precedent on this stuff, but eventually this debate is going to wind its way to the Supreme Court, where the efforts could easily be swatted down by an over-arching federal ruling.

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Companies: disney, hulu, netflix

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Comments on “Austin The Latest City To Try And Impose A Netflix Tax”

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Anonymous Coward says:

Re: Re: Re: 'How do we pad the budget without taxes? Ooh, extort

Those are local and we all use them so paying taxes for them is fair enough. But here we are talking about state taxes. The state force us to pay it for things that not all of us want nor benefit all of us nor not all we use. Examples are the expensive wars in Iraq and Afganistan, corporate welfare, financial support for military-industrial complex, military gear for police, etc. If some people want to pay for them, that’s fine but forcibly making other people to pay when they don’t want them and have no use for, I think it’s fair to call this extortion.

This comment has been deemed insightful by the community.
PaulT (profile) says:

Re: Re: Re:2 'How do we pad the budget without taxes? Ooh, ex

Oh, so when you said "taxes are theft", you only mean the taxes you don’t to pay, they’re fine so long as they pay for things that you personally want? What about the people who want to pay for the things you don’t like and not for the ones they do – are their taxes being "stolen" now, even though the thing you do want to pay for needs their contribution as well?

That’s a really, really stupid argument, and it doesn’t affect the concept of taxes in the slightest (you have a problem with how taxes are spent, not on how they’re collected). One day you people might realise you live in a society and work to improve it rather than saying stupid shit about taxes being theft.

Anonymous Coward says:

Re: Re: Re:3 'How do we pad the budget without taxes? Ooh

It’s not so stupid. It’s more than you say. The majority don’t pay voluntarily for corporate welfare, expensive wars in Iraq and Afghanistan, the military industrial complex, militarized police, etc. Who wants them? Did you see them voting for them in the budget? It’s the representatives of the two elite-controlled parties, Democrats and Republicans who did that. This has nothing to with improving society. This is legal armed robbery of the masses by the over-represented elites and their cronies in government to serve the agenda of enriching the corporations and indirectly the elites themselves. It is not just living in a society but a very unequal society where dirty money dominates politics and the masses paying far more taxes in proportion in relation to the 1%ers to serve the agenda of creating utopia for the 1%ers and dystopia for the 99%. Who wants to voluntarily pay taxes to prop up this society except an 1%er? I would say there’s some stealing by the 1%ers.

Do you think that "taxes without representation is theft" is stupid?

PaulT (profile) says:

Re: Re: Re:4 'How do we pad the budget without taxes?

"Who wants them?"

Enough of your fellow citizens that they vote for these things to happen, with "strong" military and "tough on crime" stances being a central plank to at least the Republican party if not across the aisle for several decades now. If some people didn’t actually want these things, the politicians wouldn’t be pandering to those votes like they do.

If you want to argue that things like gerrymandering, the electoral college, etc., artificially sway the voting power too far to one side I’m fully with you, but under the current system of government, people not only vote for this stuff, that vote is heavily pandered to.

"It’s the representatives of the two elite-controlled parties, Democrats and Republicans who did that"

The two parties that the majority of Americans vote into office? Erm, yes, that’s how it works, the representatives voted for by the citizenry do the things they campaigned on. It’s a problem that you don’t have a viable 3rd party of the type that exists in other forms of government, but while you don’t have that it’s rather dumb to be complaining that the only 2 major parties hold most of the power is somehow unjust.

"Do you think that "taxes without representation is theft" is stupid?"

No, but that’s not what’s happening to you in reality, so the stupidity is pretending that it is.

You may not like the representatives that have been voted for, you may not even believe there was a real choice as to who was presented as options during the relevant elections, you may not agree with the dual party form that the US government currently takes. But, you have representation… If you dislike that then work toward changing that representation, don’t sit around whining that taxes are theft because they pay for things other people want that you don’t.

Anonymous Coward says:

Re: Re: Re:5 'How do we pad the budget without ta

Fair enough.
Okay, how about this? "Taxes without adequate representation is theft" is that stupid? Is there adequate representation? I wonder. It’s all well for the representatives to pass spending bills that they have a mandate for, but the representives passing spending bills without a mandate is another thing. I wonder the pork and barrel government spending that Congress loves to spend for the special interests adequately represent the political will of the majority of Americans.
Anyways, thanks for putting this in perspective for us. It’s clear enough that "Taxes is theft" is too simple and stupid.

PaulT (profile) says:

Re: Re: Re:6 'How do we pad the budget withou

"Is there adequate representation?"

Define "adequate". Define "representation".

I know it can be frustrating in many circumstances, but the fact that the representatives you have where you live don’t agree with your values does not necessarily mean you didn’t have representation. It may just mean that you live among people who don’t share your values. Or that the people who share your values don’t vote as often as your ideological opponents.

"It’s clear enough that "Taxes is theft" is too simple and stupid."

It is. Ultimately, taxes are the cost of living in a society and unless someone comes up with a better way of funding it, that’s what it takes. But, if you have representatives who prefer to push for tax cuts for the rich and support for the military industrial complex while taxpayers elsewhere have healthcare and worker rights, the problem isn’t the concept of taxes.

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That One Guy (profile) says:

Re: Re: 'How do we pad the budget without taxes? Ooh, extortion!

Damn right, why the government trying to steal from people via taxes is no different than the thieves at movie theaters or amusement parks who try to demand that people pay them for coming in and making use of what they are providing!

Blatant robbers the lot of them and I don’t give a damn how they try to justify their evil ways by claiming that if people don’t pay for something it won’t be able to exist or be maintained, that’s their problem to deal with!

Scary Devil Monastery (profile) says:

Re: Re: Well, it doesn't exactly come as a surprise.

That only makes it worse, really. Means that shit is happening among texans who are a fair bit sharper than the rest of the knives in that drawer.

I suppose I ought to apologize for assuming that people voting republican these days are dumb.

Nah…I think they get to own that bit.

migi says:

because Netflix bits technically travel over those same lines

Then presumably this wouldn’t apply to anyone who watches Netflix via a mobile internet connection, AFIK that infrastructure has been set up by private providers.

Cable TV providers generally have a physical presence in the towns and cities they serve

I don’t see what this has to do with the rights or wrongs of the case.

Finally it seems to me that they would have been better off going after the ISPs (assuming there is more than one) for providing access to the streaming services, although the obvious attack on that argument would be that the ISP isn’t selling the streaming service, the access is incidental.

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PaulT (profile) says:

Re: Re:

"I don’t see what this has to do with the rights or wrongs of the case."

It seems quite simple to me. Taxes on commercial activity within a city is meant to help with paying to maintain the infrastructure used by the employees and customers to support that activity. If Netflix don’t have employees in the city and their customers don’t leave home to access their service, there’s no additional wear and tear on that infrastructure. The only possible maintenance is on the upkeep on the lines themselves, and that’s already paid for by the ISPs and their customers.

migi says:

Re: Re: Re:

I agree with you about why taxes should be created.
But the article doesn’t state that the taxes in question only apply to cable providers who have a physical presence, in fact it implies the opposite, that a physical presence is not required.

So if the rationale for the tax is "data is flowing through public cables" then the root cause of the data flow is not Netflix, it is the ISP and customer. So the tax should be levied on the ISP, who could pass that cost on to customers who live in the relevant area.

The other thing would be to look into the contracts governing use of the public cables and adding some sort of pricing based on the amount of data used. My guess is that the risk of this is the lone ISP pulls out of that area, people get cut off, and then blame the local government for the mess.

PaulT (profile) says:

Re: Re: Re: Re:

"But the article doesn’t state that the taxes in question only apply to cable providers who have a physical presence"

It states that the tax is for the usage of utility poles. How do you do that if you’re not physically there?

It seems to be just another example of badly written, short-sighted rule. My presumption is that it was written when cable TV was expanding and was intended to focus on taxing them rather than traditional telephone providers. They’re now suffering revenue problems because the cable TV business is dying in favour of services supplied by ISPs run by the old telephone providers.

But, the only sane solution is to start taxing the ISPs, not the services that have no physical presence in the city. No matter what Netflix do, they can’t operate without ISPs providing its customers bandwidth, and they can’t provide that themselves without a physical presence, so the correct thing to tax is the people physically using the poles which the tax in intended to fund.

DannyB (profile) says:

Why only Netflix?

Why tax only Netflix?

What about:
HBO
Showtime
Amazon Prime
Starz
Hulu
Disney+
Peacock (nbc)
(many others… Pluto, Tubi, etc)
YouTube TV
and for that matter . . . YouTube

News sites: CNN, CBS, NBC, etc because they have videos.

From there we could add Vimeo.
Twitter (has videos)
Facebook

Idea: why don’t we just create different taxes for every possible site on the intarweb tubes! A new government agency could be created (with adequate funding) to provide a web site with all of the different tax rates that apply to every site on the internet. (Including taxes to look at the government internet tax site.)

To ensure proper enforcement, all ISPs could be required to monitor every internet site you visit to ensure the correct taxes are paid. This also makes is super convenient for you because your ISP can now consolidate all of the taxes into a single item on your bill, along with a new fee for doing this!

It seems like a win-win solution for everyone!

James Burkhardt (profile) says:

Re: Why only Netflix?

Why tax only Netflix?

Or, if you read the Techdirt article, you’d have read this quote from the source:

"Streaming services such as Netflix, Hulu and Disney+ have their content moved through those lines, but they do not pay the fees imposed on traditional cable TV providers. Austin officials say they should.

Your list shows you didn’t read that quote. 90% of your post is railing against a strawman.

Anonymous Coward says:

Re: Why only Netflix?

Why only streaming sites? And why only commercial sites? If you’re serious that "your bytes go through our lines", why not also…

Amazon.com
walmart.com
ihop.com
npr.org
texastribune.com
texasconservativerepublicannews.com
texasgop.com
gop.com
democrats.org

And… http://www.texasouthouse.com, because when you gotta go, you gotta go.

Glenn says:

Gubmint: "We need money!"
People: "Stop subsidizing ISPs and allowing them to double- and triple-bill us for service. No more monopolies!"

(Aside: About 15 years ago my state instituted a "cable tax" on DirecTV. I mean, really… no physical presence at all–consumer-owned receivers and dishes don’t count. I cancelled my service. [This was before AT&T bought it and ruined it.])

Just another example of "the government" trying to tax people while providing no associated service whatsoever, which is the exact opposite of why taxes exist. If the govt. wants more tax money, then it should legalize everything people do by choice and tax sales appropriately. no more money problems! (And no more "wars on [this and that because we say so].")

Anonymous Coward says:

Why Netflix because Netflix has no presence in Texas, Texas attracts real company’s by having low taxs and regulations, it cost billions in extra gas fees cos there’s no winterisation regs on electric generators providers it costs money. To pay cops civil servants maintain roads

So taxing tech company’s is tempting
Texas is facing a crisis
Bitcoin mining company’s are moving there even though the electric grid is badly maintained and not ready for climate change
It costs money to maintain infrastructure
More people are moving to low tax states working from home at some point they’ll have to increase taxs just to
pay for roads water etc

Anonymous Coward says:

The mediocre state of the Texas electricity network and lack of winterisation procedures has pushed up the price of gas in Texas and other American states this increases cost for all users including government service users non texans are paying the cost of the last winter storm disaster in Texas that shut down the electric supply

Anonymous Coward says:

i’d really like to see this supposed 5% cablecos are paying to every city they run lines through. i honestly do not believe it.

If they are paying anything, i am sure it is more than made up for by being able to use the right-of-way (especially when the cities own the poles and conduits), and the local gov signing on with every other level to keep any pesky competition away.

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OGquaker says:

Hay, Karl, you sleeping?

Elon is gobbling up good Texas employees to build his stupid Cybertruck in Austin, the aerospace and aviation industry is collapsing there because Boeing decided to make money more important then their customer’s lives (a common flaw of "Capital-izm") and can’t get it up in space. That 2,500 acre factory in the heart of Austin was useless wilderness that Teledyne Technologies (the queen of un-taxed "agriculture" properties) had been sitting on for five decades.
P.S. The National Labor Relations Board (in 2019) said Musk illegally threatened workers in a May 2018 tweet. The message read “Why pay union dues & give up stock options for nothing?” & he was ordered to delete the tweet by the Board. If anyone was still working at Tesla (nobody is) their stock has multiplied 20+ times.
P.P.S. TSLA got a $465m loan from the government to build E-cars in 2010 & repaid that loan nine years early with $interest; Ford received a $6b loan at the same time… that Ford has yet to repay.
P.P.P.S. Your whipping boy looks to be paying $10b in federal taxes next year on the money fools are throwing at him; Rommney said that in 2011 46.4% of Americans payed no income tax: they would rather buy TSLA stock and let Musk pay the tax /s

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