It’s not very often that staunchly conservative Alabama follows the lead of a liberal city like Chicago, but that appears to be exactly what is happening with a tax hike being unilaterally pushed by the Alabama Department of Revenue, without approval from the Legislature.
Fusion News explains what is happening in Chicago:
A ruling by Chicago’s Department of Finance allows the city to add an extra nine percent tax onto “electronically delivered amusements” and “nonpossessory computer leases.”
In an odd combination, buying a subscription to streaming media, such as Netflix or Spotify, would qualify, as would using a cloud computing platform, such as Amazon Web Services. Each would be subject to 9% tax; Chicago is the first major American city to levy a tax on either streaming services or cloud computing services.
This isn’t an actual new tax, rather an expanded definition of the city’s already-existing nine percent amusement tax.
Similarly, the Alabama Department of Revenue claims to have the authority to expand the state’s “rental tax” to now include “digital transmissions.”
For decades in Alabama, patrons of video rental stores were charged an additional “rental tax” for each transaction. But with many of those stores now out of business, the state’s video rental tax revenue has drastically declined. As a result, the Revenue Department is seeking to extend its reach to cable and satellite customers by taxing them for “digital transmissions,” including movies and television shows accessed on-demand through digital video recorders (DVR).
The Alabama Legislative Council, a body made up of representatives from both the Alabama House and Senate that oversees executive branch agencies, sent the Revenue Department a letter reminding them that the legislative branch maintains authority over tax policy.
“We have received concerns from several members of the legislature and other interested parties that the amendments may be overly expansive and may also be considered a new tax,” the letter stated, “in which case the Alabama Legislature would be the proper governmental body from which to make such a determination or enactment.”
But Revenue Commissioner Julie Magee responded to the Legislative Council with a letter of her own, claiming her department was not creating a new tax, but was instead just applying an existing tax in a new way.
“Please know that although this initiative would likely increase general fund revenues, it is not about raising taxes, but rather it is about the current wording of the Code of Alabama as it relates to an evolving technology,” she wrote.
Commissioner Magee says 21 other states already tax streamed video, and expanding Alabama’s rule would increase taxes on the state’s residents by an estimated $6 million annually.
The Department of Revenue has repeatedly ignored Yellowhammer’s requests for comment.
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— Cliff Sims (@Cliff_Sims) June 9, 2015
