United States

Alabama: Commissioner Withdraws Proposed Amendment to Tax Digital Transmissions

Jul 20, 2015
From KPMG TaxWatch

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Recently, the Alabama Commissioner of Revenue withdrew a proposed amendment to Alabama Rule 801-6-5-.09, which would have subjected “digital transmissions” to the state’s rental tax beginning in October. Under Alabama law, rental tax is imposed on persons engaged in the business of leasing or renting tangible personal property. If amended as proposed, the rule would have provided that digital transmissions, including on-demand movies and television programs, streaming video, streaming audio, and similar programs, whether provided by subscription or on-demand, were considered tangible personal property subject to the rental tax. The economic impact statement for the proposed rule reported that the intent of the change was to recover a portion of the Alabama sales tax base that has dwindled due to the closure of many bricks and mortar video rental stores.

The Department of Revenue received numerous comments from business advocates and state legislators regarding the proposed amendment. Many commentators considered defining digital transmissions as tangible personal property to be a stretch of the Commissioner’s rule-making authority and pressured Commissioner Magee to withdraw the amendment, which she did. In the closing paragraph of her withdrawal letter, the Commissioner appeared to suggest that the Department may still attempt to subject digital transmissions to tax without the proposed amendment. For more information on the proposed amendment or the taxation of digital transmissions in Alabama, please contact Marc Grossman at 404-222-3508.

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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.