United States

Alabama: Proposed Rule Would Tax Streaming Services as Rentals of Tangible Personal Property

Mar 13, 2017
From KPMG TaxWatch

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The Alabama Department of Revenue has proposed to amend a regulation addressing the “Leasing and Rental of Tangible Personal Property” (Rule 810-6-5-.09) to extend the rental tax to streaming services. The proposed amendments provide that tangible personal property includes “personal property which may be seen, weighed, measured, felt, or touched, or is in any other manner perceptible to the senses.” The rule next states that “digital transmissions” such as “on demand” movies, television programs, streaming video, streaming audio, and other similar programs, regardless of the period of the rental or the method of transmission, are considered tangible personal property subject to the rental tax. Cable or satellite television providers, on-line movie and digital music providers, app stores, and other similar providers of digital transmissions will, therefore, be considered engaged in the business of leasing tangible personal property and will be subject to the rental tax under the proposed rule.

Rental tax will be based on the gross receipts derived from charges for digital transmissions which are used in Alabama, and a digital transmission will be considered used in Alabama if the customer’s service address is within Alabama.  The proposed rule also provides that monthly cable television subscriptions whereby the customer must view pre-set programming, on the providers pre-set schedule, will not be subject to the rental tax regardless of the number of programming channels available. Furthermore, cable television boxes that are used solely to access basic cable services are not subject to the rental tax. Multi-purpose cable boxes that function as digital video recorders (DVR) and/or perform other functions in addition to accessing basic cable are subject to the rental tax.  Other accessories including, but not limited to, remote controls, modems, internet routers, etc. not related solely to delivery of basic cable service are subject to the rental tax, as well.

A hearing on the proposed rule will be held on April 11, 2017. If adopted, the rule would become effective July 1, 2017. In 2015, identical amendments to the rule were proposed by the Department, but were subsequently withdrawn. If finalized as proposed, the changes would be effective July 1, 2017. Please contact Scott Jackson at 404-614-8688 with questions.


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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.