United States

California: Local Jurisdictions Consider Imposing Utility Users Tax on Streaming Video Services

Oct 10, 2016
From KPMG TaxWatch

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It has been reported that numerous California localities are exploring the possibility of taxing streaming video services and over-the-top television services under the existing Utility Users Tax (UUT). The City of Pasadena, California, recently made a tentative decision to tax such services under the UUT as of January 1, 2017. However, the City subsequently clarified that it is still considering the adoption of an administrative ruling that would tax steaming services and that the City would be reviewing the matter thoroughly.

Under Proposition 218, voter approval is required when a local government imposes, extends or increases a tax. In the past 10 years, many California cities have adopted, with voter approval, modernized UUT laws with “technology-neutral” language. As such, there is a position that the voter-approved UUT ordinances in these jurisdictions would allow taxation of online streaming services. According to MuniServices, a tax consulting firm that works with many of the UUT-imposing municipalities, as many as 45 local UUT jurisdictions are exploring the option of taxing streaming video services. A jurisdiction would implement the tax on streaming video services by issuing an administrative ruling and formal interpretation of the UUT as applied to streaming. A draft ruling has been circulated that interprets the definition of “video services” under the UUT ordinance to include charges of all types regardless of the technology used, including cable, IP-TV, wireless, and over-the-top video programming. The draft ruling also provides a specific list of service providers to which the ruling would apply. Opponents of these efforts argue that the application of the UUT to streaming video services would require voter approval under Proposition 218. The expansion of the tax to such services also raises potential Internet Tax Freedom Act and nexus issues. For more information about the proposed expansion of the UUT to streaming services, please contact Lindsay McAfee at 415- 963-7294.


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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.