More Regions Charging Sales Tax on Netflix Rentals

Michael writes, "My Netflix bill for this month was just debited - $7.99 plus 0.56 sales tax. This is the first time a tax had been levied against my Netflix streaming-only service. When I called Netflix, they said that 20 states recently passed legislation to make digital goods taxable effective 01 November 2011. I can find no news stories or other information online to corroborate their assertion. 

I contacted the SC Department of Revenue, where I live, and they stated that they have no record of this particular tax, and referred me to the DOR Letter of Ruling for Online Subscription Services. I saw a reference to the Digital Goods and Services Tax Fairness Act of 2011, but to my knowledge this is still in Congress, and has not yet become law."

I'm not an expert on sales tax, but it seems like every year more and more states are taxing Netflix rentals.

Comments

[Mike R.]

Can't comment about any new legislation, but because they operate a shipping center in Columbia, SC, it would seem that they would meet the "physical presence" test under the scope of previous court rulings. Even though you are streaming only, Netflix is still one company.

[Tom B]

Interesting that they blamed it on new laws. To my (limited) knowledge, I did not think that type of legislation had been enacted. Perhaps it is just customer service not really knowing what's going on. Or with the recession, we all knew it was (or is) just a matter of time before the governments started looking for new sources of revenue.

[Karen]

Maybe I've just been unlucky, but I've lived in 4 states since I first signed up for Netflix in 2002, and every one of them charged taxes. It's not new.

[lslsls]

For those of you who are charged tax on the streaming only plan, go to your credit card information on the website and check if your billing zip code is there. If it is, you are charged tax, and if its not, usually netflix doesn't charge you tax. When I worked at netflx, I noticed that when the system didn't require customers to enter their shipping address (examples are streaming plans only), then the billing zip code was not included in the payment information. Without the billing zip code, no tax was ever charged. They might have changed this, but that's how it used to be before. And if that's still the case, Netflix is full of it when they say taxes have changed.

[rjm]

lslsls

Interesting. I may use separate accounts just try and save 32 cents a month.

[GeeEmm]

Curious. When entering CC/debit info online for any sort of billing (be it NF, iTunes, or elsewhere), I have always been required to enter the verifiable billing address as well. Didn't know one could register/purchase otherwise. Usually, an error message will direct the user to enter any such missing info before proceeding.

I have always paid sales tax on my NF subscription, but then, I joined before there was a division between DVD and streaming pans. Anyone here sign up exclusively for streaming after the plans were separated? I know NF didn't used to ask for CC info when signing up for the free trial, but if the user stays on, is she/he required to provide the billing address along with the CC/debit info?

[CRB]

Connecticut has a tax on digital downloads. It's only 1%, sales tax is higher. I think (not totally sure) they're taxing the downloads as a service, not as a purchase.

So there are ways a state could be taxing a Netflix subscription without it being actual sales tax and not being concerned with shipping centers.

[Lslslsls]

GeeEmm,

If you initially had dvds coming from netflix or had chosen a dvd plan when you first was signing up for the service it would have asked you for the billing zip code. Even if you had dvds before, and later changed it to where now you are on a streaming only plan, it still has your address and it will bill tax. When the streaming only plan became availale and people were signing up for the first time on the website, the website never asked for the shipping address (for obvious reasons) , which meant it didnt take the shipping zip code and made it your billing zip code on the credit card page. Thats why some people were not billed tax on the 7.99 streaming plan. Wthout a zip code, netflix doesnt know where you are, therefore, doesnt know what to charge for tax. It really comes down to whether you provided your address at the time of your initial sign up or not. Hope that helps.

[Enbrel]

I was on the streaming + 1 DVD out and was charged tax.

After switching to streaming-only I have not been charged tax.

I live in CA.

[Walt D in LV]

I've been with Netflix since 2002, and have always lived in Nevada. I'm quite sure they have always charged me sales tax for my DVD/Blu-ray service.

I believe Netflix opened a distribution center in Las Vegas, Nevada in 2003 or 2004. This would provide a "physical presence" in the state, as Mike R. alluded to earlier.

[Dude]

I am in KY and was on streaming + DVD until the price changes a few months ago. I then went to streaming only. While on streaming + DVD, I was charged tax. After going to streaming only, I was not charged tax, until my November billing. Since I had heard of no new tax laws on digital or streaming media, I called Netflix. The rep told me that it as now a Federal mandate to tax the streaming service and some states that were previously not taxed are now being taxed.

[Jason]

Doesn't every state charge tax for everything? Except maybe groceries. The only other exception, but not really an exception, is online purchases from businesses outside of your state. Though it is my understanding that new tax law is on the verge or has been passed that even that will no longer be an exception due to most people no claiming the purchases on their tax returns to avoid paying taxes.