The Pasadena City Council has been taking heat after the controversial decision.
Pasadena, California recently announced that they would be taxing their residents for streaming video services at a rate of 9.4%. Streaming video is being labeled by the city council as a utility so that it can be taxed in the same manner that water, or electricity is taxed. The residents are outraged, and the council has been taking heat for weeks. Pasadena City Councilman Tyron Hampton said “My constituents do not want this tax. Even if it is just a couple of dollars. It is being taxed twice.”
Hampton explained that the new tax has been put in place to make up for lost tax revenue as a result of people getting rid of their cable TVs and landline phones. “I read it multiple times, I was like, when did this happen?” said Hampton. The new tax likely has its roots in a 2008 law modernization, in which Pasadena voters allowed cell phones to be taxed in the same way that home phones are. This paved the way to modernize cable TV tax by applying tax to streaming services as well. Forty California cities have enacted similar laws thusfar.
“People are going to wake up and see tax line items on their Netflix and Hulu bill and they are not going to be happy,” said Internet Association Director Robert Callahan. He believes the cities may be violating federal law, because the US government does not allow taxation of the internet. “Utilities are water, and electricity, and sewer and all sorts of other utilities. Websites and apps don’t fit that mold whatsoever,” Callahan said.
Three people enjoying a basic utility, according to Pasadena’s City Council.
This hasn’t stopped cash hungry cities across the US from attempting something similar, however. Chicago has also enacted a 9% tax on video streaming services, while Pennsylvania has enacted a 6% statewide tax on everything, from downloads, to apps, to streaming, in order to help pay for their $1.3 billion deficit.
Cities in California haven’t yet started collecting the controversial tax, and following stiff opposition in Pasadena, the city has decided to put its version of the new tax on hold. “Where do we stop, is it Hulu, is it Netflix, Pandora, every time you stream music in your car?” Hampton said. “I mean where does it stop?”