Alabama might soon force companies to pay a tax on every movie and TV show streamed through their service if a proposed rule passes. The rental tax concept is nothing new. Back in the day when brick and mortar rental stores existed customers did pay a rental tax when they took home a tape. With video stores effectively being run into the ground by online services Alabama is losing millions in tax revenue and it’s looking to make that up some place else.
Alabama’s revenue department has proposed a new rule which will make it mandatory for companies to pay a 4 percent state tax on digital transmissions that include on-demand streaming of TV shows, movies and even music.
Deputy Revenue Commissioner Joe Garrett said “When you went to Blockbuster and rented a movie it was always subject to rental tax, new economy versions of renting a movie have replaced that”
Garrett explains that this won’t be a new tax but simply a clarification of existing tax code which the department now considers to be outdated.
He further points out that the revenue Alabama is losing out on by not collecting tax on digital transmissions is “not insignificant,” and while he doesn’t put an exact number on it, estimates are as high as $10 million.
The proposed rule could be enforced on October 1st if the state legislature doesn’t throw a wrench in the works.