from the you-owe-me-money-just-because dept
Hungry to boost municipal budgets, a growing roster of states and cities have spent the last five years or so trying to implement a tax on Netflix, Hulu, and other streaming services.
Sometimes (like in Chicago) this has involved expanding an existing amusement tax (traditionally covering book stores, music stores, ball games and other brick and mortar entertainment) to online streaming.
Other times this has involved trying to leverage existing cable TV laws or ordinances to try extract their pound of flesh from Netflix. In both, it involves taking rules written for the physical world, and applying them to the internet. Often haphazardly.
That’s what’s been happening in Texas, where nearly a dozen different towns have joined forces to sue Netflix, Disney, and Hulu for failure to pay millions in franchise fees:
The cities are alleging that the streamers should be paying annual franchise fees back to 2007, as they said is required by the Public Utility Regulatory Act (PURA). Those are the fees that cable/broadband operators provide that go toward city services.
The Texas law allows cable and video providers to deliver cable TV via publicly owned utility poles on public land in exchange for remitting 5% of gross revenue to the municipality. So the argument has generally been because Netflix bits technically travel over those same lines somewhere in the tangle of data flowing over them, they should also be responsible for paying that tax.
Cable TV providers generally have a physical presence in the towns and cities they serve. Employees live in these areas, climb physical city poles in these areas, and do tech support calls in these areas. By contrast, a company like Netflix may have little to no real physical presence in a town (outside of maybe some CDN hardware at an internet exchange point or regional ISP), so demanding they pay a tax under laws designed decades ago for different technologies often proves logically and legally unsound.
Regardless, Texas towns and cities are hopeful the law doesn’t care about all that, and they can just get what they view as a lucrative windfall, grabbing money they don’t really deserve for services they don’t actually have any meaningful authority over.
Filed Under: cable tv, competition, franchise fee, Hulu tax, netflix tax, streaming, taxation, texas, video
Source by www.techdirt.com