For years cable TV has been a major profit center for states and cities. Now as more and more Americans are switching to streaming it is affecting many states tax revenues.
Some states, such as Pennsylvania, have already started to tax streaming services such as Netflix, Spotify, and Hulu. Even live TV services, such as Sling TV, PlayStation Vue, and DIRECTV NOW, have been hit by these taxes. Many have called this type of tax the Netflix Tax.
Now Illinois is looking at joining the few states that tax these services. State Senator Toi Hutchison, a Democrat from the Chicago Heights area, has filed an amendment to apply the 6.25% sales tax, which is already applied to cable and satellite TV, to streaming services. Now not only would this hit TV services such as Sling TV and Netflix but this tax would also be applied to music services such as Spotify and even gaming services such as Xbox Live.
That is a huge increase in what would be taxed under this law. As not only are they trying to replace the tax on TV services but branch out to tax new non-TV services that stream music or gaming subscriptions.
If you live in Chicago you already pay a 9% amusement tax on streaming services such as Netflix. So if this law passes your $9.99 subscription to Netflix will jump to $11.50 a month when you add in the 9% amusement tax and the 6.25% state sales tax.
Some states are pushing back. Recently a bill was put forward in California that would prevent cities from taxing streaming services.
Sadly the government will do its best to tax; however, the good news is it still is less expensive to be a cord cutter. With Comcasts average triple play coming in at $150 a month, a 6.25% sales tax would be $9.38 a month. The same tax on a $9.99 Netflix subscription works out to be just $0.62 a month.
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