Tax on Streaming Service Subscriptions Rejected by Maine Lawmakers

State lawmakers have rejected Gov. Janet Mills’ (D) proposal to impose sales tax on Mainers’ streaming service subscriptions for platforms such as Netflix, Hulu, and Spotify.

The Appropriations and Financial Affairs (AFA) Committee unanimously agreed last month to remove the proposed tax from the final version of the supplemental budget, and both the Democrat and Republican Committee reports are reflective of this decision.

Consequently, this expansion of the state sales tax was not passed into law through either the supplemental budget or any other legislative vehicle this session.

Although cable television premiums and digital media sales are currently subjected to the state’s 5.5% sales tax, streaming service subscriptions have thus far been excluded.

[RELATED: Streaming Service Subscriptions May Soon Be Taxed in Maine]

The proposed supplemental budget released by Gov. Mills in February contained language that sought to impose a 5.5% sales tax on the cost of Mainers’ streaming service subscriptions.

On page twenty-five of the eighty-page legislation, it stated that a 5.5% sales tax would be applied to “all tangible personal property and taxable services.”

An updated and expanded definition of “taxable services” that included “digital audio-visual and digital audio services” could 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 was inclusive of 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

Sen. Jim Libby (R-Cumberland) brought attention to the proposed tax at a press conference held in March.

“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.”

“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 in March that the supplemental budget was 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,” Huntley explained.

“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.

“There are plenty of ideas within the governor’s budget proposals that we accept, and also plenty that we modify or reject,” Rep. Daniel J. Ankeles (D-Brunswick) — member of the 131st Legislature’s AFA Committee — said in an April statement to the Maine Wire.

“Even though multiple streaming services already collect this money anyway so that their billing is uniform across the country, other services do not collect this sort of tax as part of their billing process,” Rep. Ankeles explained.

“It would be great to have consistency across every service,” said Ankeles, “but the cost of that consistency is making something many families like to do to relax more expensive at a time when prices are already not great on a number of other things.”

“Plus the tax would be flat, which makes it potentially regressive even though it’s just a small amount of money,” Ankeles continued.

“Maybe there is a better way to do this if we have to look at this idea again in the future, but it is something that definitely needs bipartisan buy-in,” Ankeles concluded.

Note: Comments provided by Rep. Daniel J. Ankeles (D-Brunswisk) are reflective only of his thoughts on this subject and are not intended to be representative of the AFA Committee’s position as a whole.

The Maine Wire reached out to the other members of the AFA Committee for comment but did not immediately receive a response.