According to Yellowhammer, a blog covering everything from business and politics to sports and culture in Alabama, the state’s Department of Revenue is looking to increase the taxes paid by cable customers by charging a new “digital transmission” fee for movies, television programming, and other services people may access through their set top boxes. As Cliff Sims noted –
In addition to raising taxes on digital transmissions, like on-demand movies, television programs and streaming video, the Revenue Department’s new tax would also apply to rentals of “multi-purpose cable boxes that function as digital video recorders (DVR) and/or perform other functions in addition to accessing basic cable” and “other accessories… not related solely to the delivery of basic cable service.” These cable boxes had previously been excluded from the rental tax because cable providers pay sales or use tax at the time they purchase the cable boxes.
Currently, rental taxes apply only to people or businesses renting or leasing tangible personal property. If the Alabama Department of Revenue prevails with its proposed amendment to current rental law, that tax burden will flow to digital goods that are rented for a limited period of time. For instance, if approved, the new rental tax would apply every time you rent a movie on demand, even if the rental lasts for just a few days. Extending the rental tax to “digital transmissions” implicates a variety of services including “on-demand” movies, television programs, streaming video, streaming audio and other similar programs, no matter the method of transmission or duration of the rental. The proposed amendment could also apply to certain cable television boxes and related accessories.
As explained by attorneys at Sutherland Asbill and Brennan LLP, “the regulatory proposal would treat cable or satellite television providers, online movie and digital music providers, app stores, and other similar providers of digital transmissions as engaging in the business of leasing tangible personal property and would subject them to the rental tax. The proposed regulation would also apply the rental tax to multipurpose cable boxes that function as digital video recorders or perform other functions in addition to accessing basic cable. Under the proposal, cable television boxes that are used solely to access basic cable are not subject to the rental tax.”
Alabama’s Department of Revenue will host a public hearing about the proposed expansion of the state’s rental tax on April 8, 2015.