Netflix Inc. in Courtroom Drama About U.S. Taxes on Streaming Services

Kirstin White | Wed Dec 01 2021 | Industry insights

US Tax compliance blog piece

Cities and states reeling from a ghostly pandemic economy are now looking to codify new methods for collection of fees and taxes from subscription-based services such as Netflix, Hulu and Disney+. 

Recently, a town in Arkansas filed lawsuits against Netflix and Hulu. The town alleged that the “streaming service’s use of broadband infrastructure in the public right-of-way means that streaming services are required to pay a percentage of their revenue to all Arkansas municipalities.” 

The lawsuit goes further, stating that the two streaming services, “are required by the Arkansas Video Service Act to pay each of those municipalities a franchise fee of 5% of their gross revenue...”.

Streaming Ain’t Free; Neither Are Lawsuits

The lawsuits were dismissed by a federal district court judge in October of this year. However, similar lawsuits were also filed in Nevada, Missouri and Texas. Other states including: Ohio, Tennessee, Indiana, Georgia, Louisiana, Kansas and New Jersey, are looking to do the same. 

Each state in the U.S. already has its own definition of digital goods based on pre-existing IRL taxable goods, products, and services. These tax rates can vary between cities and states. New fees and taxes may also bring new definitions, new rates and fresh confusion.  

The emergence of these lawsuits for such well-established streaming companies shows just how complex these tax laws really are. Even top industry experts are coming up against tax challenges.

Bringing Light to the Dark Side of Digital Goods & Taxes

The good news is that there is a solution. Cleeng Merchant, the subscriber billing and tax management tool, automatically calculates regional tax rates based on your subscriber’s location. This means less complexity and risk for you.

Cleeng also coordinates with your payment service provider to ensure that payments reflect the correct tax calculation year-round, including tax holidays. 

And finally, Merchant reduces the tedious process of sorting through fees—taxes, revenues, refunds, and surcharges—by consolidating reports from payment service providers. 

With these features in place, you can continue to be worry-free about tax collection in the U.S.


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