If you live in Pennsylvania, your Netflix subscription is about to get more expensive. The state has implemented what’s widely being referred to as the “Netflix tax.” It’s basically an extension of Pennsylvania’s six percent sales tax to digital downloads as well as online subscription services like Netflix. As you probably would have guessed by now, this six percent hit is also felt by other services.
This six percent sales tax is going to apply to all streaming and downloads for e-books, music, and applications. The same goes for music streaming services like Netflix rival Hulu. Only digital versions of magazines, newspapers, and the Bible have been exempt from the Netflix tax.
Pennsylvania has now joined the handful of states that have taxed digital services. For example, Minnesota taxes digital services, while Chicago already imposes a nine percent “cloud tax.” As always, there is a workaround, it may not be completely illegal but many would consider it to be in a gray area.
The tax is charged when the customer is using a billing address that’s located in a city or state where digital services are taxed. To avoid the Netflix tax users simply need to borrow a billing address that’s outside of Pennsylvania. Again, not completely illegal, but in sort of a gray area.