Tax Reform Group Supports Missouri Bill Banning Netflix Tax

Jan 27, 2024

By Ted Hearn, Editor of Policyband

Washington, D.C., Jan. 27, 2024 – A Missouri bill would ban local taxes on Netflix, Hulu, and other streaming services, drawing praise from Americans for Tax Reform (ATR), a group that supports limiting governmental power through lower taxes.

ATR applauded the legislation (H.B. 2057) in the Missouri House for seeking to eliminate the ability of local governments within the state to impose fees or taxes on streaming services as if they were cable television operators that dig up streets to install equipment in publicly owned property.

“Municipal franchise fees are meant to reimburse local governments for costs associated with building on public rights-of-way. Because video streaming services do not require additional physical infrastructure to reach homes, they do not create any new costs for municipalities,” ATR President Grover Norquist said in a letter to the leaders of the Missouri House Utilities Committee.

Taxing streaming services has become common in the U.S., Norquist said in a press release about the letter to the Missouri lawmakers.

Citing the Tax Policy Center, Norquist said 33 of the 45 states “with a general sales tax and the District of Columbia include video streaming services in their sales tax base.”

The Missouri bill, he said, would stand in the way of higher taxes.

“If H.B. 2057 becomes law, it will prevent municipalities from imposing unnecessary franchise fees on streaming services and would be a victory for Missourians. Increasing taxes and fees on streaming services will only result in the costs being passed on to consumers,” Norquist said.

The bill, sponsored by Rep. Ben Keathley (R-Chesterfield), stipulates that the definition of video service provider does not include video streaming content offered over the Internet. Keathley is Vice Chair of the Utilities Committee.

“H.B. 2057 would not inhibit how municipalities have always operated with regard to franchise fees, merely clarifying that they can only apply to providers who make physical improvements to public rights-of-way,” Norquist said.

Under federal law, cable operators can pay up to 5% of gross revenue in local franchise fees.

Last October, a panel of the U.S. Court of Appeals for the 7th Circuit ruled that the city of East St. Louis, Il., could not collect fees from video streamers because Netflix, Hulu, and Amazon Prime Video do not utilize public property as cable operators do.

In 2019, Chicago became the first city to adopt a Netflix tax, calling it an amusement tax that applied to concerts, theaters, sporting event tickets, and amusements that are delivered electronically. The 9% levy was upheld in state court.