California cities’ move to tax streaming services undermines transparency and innovation

OPINION – Nearly 50 years ago, the utility user tax was developed to help cover the cost of infrastructure associated with utilities like gas and electricity. Years later, the tax expanded to cover cable TV and related video. Now, however, some California cities such as Glendale and Santa Barbara are looking to extend this tax to streaming services — a move that strays far from the tax’s original purpose.While streaming has steadily overtaken other methods of watching TV, its growing market share has not come with the same burden on public infrastructure as cable. Applying the utility user tax to streaming services is a tax on the internet that is prohibited under the Internet Tax Freedom Act and will lead to double taxation, as consumers would be taxed twice—once for internet service through the franchise fees via their ISP and again for each streaming subscription they have through a novel interpretation of the utility users tax. This new and retroactive tax burdens not only consumers but also stifles innovation in the streaming industry, which has been a major driver of growth in the entertainment sector.Despite streaming’s inapplicability to the utility user tax, local officials are now seeking to retroactively assess...