Alabama legislative leaders reject proposed tax hike on cable TV customers

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April 14, 2015

MONTGOMERY, Ala. — The Alabama Legislative Council, a body made up of representatives from both the Alabama House and Senate, has signaled its disapproval of a rule proposed by the Alabama Department of Revenue, the state’s version of the IRS, that would have levied a tax on films and television shows streamed online.

The Legislative Council has the ability to reject any proposed rule change by any administrative agency. By sending a letter to the Revenue Department last week, the Council signaled that any attempt to push forward with the tax would be met with opposition, effectively killing it.

Yellowhammer first broke the news that the Department of Revenue was considering the tax in an exclusive report two weeks ago.

In addition to raising taxes on digital transmissions, like on-demand movies, television programs and streaming video, the Revenue Department’s new tax would have also applied to rentals of “multi-purpose cable boxes that function as digital video recorders (DVR) and/or perform other functions in addition to accessing basic cable” and “other accessories… not related solely to the delivery of basic cable service.” These cable boxes had previously been excluded from the rental tax because cable providers pay sales or use tax at the time they purchase the cable boxes.

The tax would have been implemented unilaterally by the Department of Revenue, without going through legislative process, had the Legislative Council not sent the letter halting the action.

“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.”

House Speaker Mike Hubbard, Senate President Pro Tempore Del Marsh, House Speaker Pro Tempore Victor Gaston, and Senator Jimmy Holley, the chairman of the Council, all signed the letter.

The rejection of the video rental tax proposal comes at a time when tax increases are being heavily debated across the state. Alabama Gov. Robert Bentley recommended a $541 million tax increase as part of his budget proposal.

With less than two thirds of the regular session remaining, the Legislature has yet to approve any of the Governor’s tax increase proposals.