AUGUSTA, Maine — Maine could become the latest state to tax streaming services such as Netflix and Spotify as part of a measure recently floated by the administration of Gov. Janet Mills that would be largely offset by two other income and nonprofit tax breaks.
The bill from the Maine Department of Administration and Financial Services would make several adjustments to the state’s tax code, placing streaming under the same tax as phone and internet service and video rentals. It also adjusts corporate and individual income taxes.
Under current law, video and audio rentals and purchases are subject to a state sales tax, but the same digital media is not taxed when it is consumed via a streaming service.
Michael Allen, the Mills administration’s associate commissioner for tax policy, testified last week the increased prevalence of streaming has cut into the state’s tax base. Maine would follow 22 states and Washington, D.C., if it puts a similar streaming tax in place, he said.
The proposed tax would generate $3.7 million in revenue in 2021 and up to $6 million by 2023, according to Maine’s finance department. That revenue gain would be largely offset by adjustments to individual income taxes and a reduction in taxes collected from nonprofits. Netflix customers paying $12.99 for a monthly subscription would pay a 78-cent tax on that bill.
It is not the first time Maine has considered a tax on streaming services. Former Gov. Paul LePage, a Republican, suggested a similar tax as part of a proposal to broaden the sales tax in exchange for income tax cuts in 2017 but was unsuccessful.
On the income tax, the bill would make two adjustments for inflation resulting in a $2.1 million reduction in state revenue by 2023. That loss would be partially offset by a provision aligning Maine income tax with the federal limitation on net operating loss.
The bill would also create an across-the-board exemption to sales and service provider taxes for nonprofits. Allen said while many nonprofit organizations are already exempt from both taxes, the bill aimed to simplify the process by replacing the “current patchwork” with a single exemption at a cost to the state of $4 million by 2023.
Minority Republicans in the Legislature, however, remain skeptical of creating a new streaming tax. Mills rankled some Democrats by floating no new taxes in her two-year state budget plan last year, though Republicans have assailed the final level of spending at just below $8 billion.
“At a time with surpluses in the state budget, I don’t think we need to raise more revenue,” said Sen. Matthew Pouliot, R-Augusta, who serves on the tax committee.
The streaming tax portion of the bill also received pushback from the telecommunications industry for technical reasons. Scott Mackey, a lobbyist for AT&T, Sprint, T-Mobile, U.S. Cellular and Verizon, argued during the hearing that a streaming tax should be classified as a traditional sales tax rather than a tax on service providers.