The State of Maine may soon begin taxing subscriptions to streaming services such as Netflix, Hulu, and Spotify.
The proposed supplemental budget released by Gov. Janet Mills (D) in February contains language that would impose a 5.5% tax on the cost of Mainers’ streaming service subscriptions.
On page twenty-five of the eighty-page legislation, it states that a 5.5% sales tax is to be applied to “all tangible personal property and taxable services.”
An updated and expanded definition of “taxable services” that now includes “digital audio-visual and digital audio services” can be found on page twenty-one of the bill.
The definition of “digital audio-visual and digital audio services” proffered by Mills on page fourteen of the legislation is such that it includes streaming service subscriptions — described as “the electronic transfer of digital audio-visual works and digital audio works to an end user with the right of less than permanent use granted by the seller, including when conditioned upon continued payment from the purchaser or a subscription.”
Click Here to Read Gov. Mills’ Full Supplemental Budget Legislation
Although the sale of digital media is currently subjected to the state’s 5.5% sales tax, subscriptions to streaming services have thus far been exempted.
Sen. Jim Libby (R-Cumberland) brought attention to the governor’s proposed tax at a press conference held Tuesday.
“Guess who gets hit? My constituents,” Sen. Libby said. “My constituents are all getting hit with a download fee of anything they do that is subscription based.”
Libby explained that this proposal is estimated to bring in an additional $9.5 million in taxation, but said that he “think[s] that’s a low number.”
Because this same legislation also would lower the tax levied against telecommunication and cable service providers from 6 percent to 5.5 percent, Libby suggested that “there’s been a little bit of a deal made” in which the burden has been lessened for corporations at the expense of individual Mainers.
“It’s just outlandish that this got put in the budget, and I haven’t heard a thing about it,” Libby said.
“In this digital age, everything is subscription based. Everything is downloaded,” Libby continued. “You got to think about — down the road — how much we’re going to collect here as a state in this new tax.”
Maine Republicans held a press conference yesterday to speak against tax increases, including a new 5.5% sales tax on streaming services. pic.twitter.com/UGKobBJZ34
— The Maine Wire (@TheMaineWire) March 13, 2024
Sharon Huntley — Director of Communications for the Department of Administrative and Financial Services — told the Maine Wire that the supplemental budget is designed to “streamline, simplify, and modernize provisions of the sales tax to better align it with the practice of other states across the country.”
Huntley went on to explain that “this is not a new proposal,” noting that former Gov. Paul LePage (R) “proposed to include digital streaming services under the sales tax in 2017” and Mills “offered a similar proposal in 2020.”
“This proposal addresses the uneven mix of taxation of digital goods and services under current law to, instead, apply the sales tax more simply and equitably across the different forms of platform delivery, purchase, and use such as by entertainment streaming and subscription services,” Huntley said.
Because the sales tax code currently imposes a tax upon a number of other types of media distribution — such as cable TV and the online sale of music, books, and movies — “the sales tax code is treating the new streaming platforms more favorably than similar older distribution models.”
“The proposal would align the taxation of these various forms of consumption of essentially the same content, regardless of the method in which it is consumed, by applying the sales tax to the sale of digital audio-visual and digital audio services,” said Huntley.
Although the proposed tax is expected to generate about $10 million annually in tax revenue, according to Huntley, “that is offset by the Governor’s proposed simplification of the sales tax exemption for nonprofits.” Huntley also noted that the supplemental budget would “cut taxes for some consumers of media, such as cable, by eliminating the service provider tax and returning those services to the lower 5.5 percent sales tax rate — a half percent reduction.”
Huntely suggests that the changes Mills has proposed to the “sales tax provisions are roughly revenue neutral for the biennium.”
During the Taxation Committee’s meeting on March 6, lawmakers voted 7-1 in favor of keeping the streaming service subscription tax in the supplemental budget legislation.
Voting in support of the new tax were Rep. Ann Matlack (D-St. George), Rep. Micky Carmichael (R-Greenbush), Sen. Ben Chipman (D-Cumberland), Sen. Nicole Grohoski (D-Hancock), Rep. Joe Perry (D-Bangor), Rep. Ed Crockett (D-Portland), and Rep. Thomas Lavigne (R-Berwick).
The lone legislator who voted in opposition to the streaming service subscription tax was Rep. Tracy Quint (R-Hodgdon).
