Netflix Tax Could Hit 1 Million Americans

If you have a Netflix subscription, you may want to double-check how much you will soon be paying.

According to the governor's latest budget proposal, the state of Maine may begin taxing streaming services. With most families using at least one streaming service, many of the state's 1.3 million residents could soon be paying a Netflix or Spotify sales tax.

Under current Maine legislation, the service provider tax applies to cable TV, satellite TV, and online sales of movies, TV shows and music but not to streaming services. Governor Janet Mills' supplemental budget proposal aims to level the tax code, which presently only targets cable and satellite providers.

Newsweek reached out to a spokesperson for Netflix via email and Spotify via their websites for comment on Thursday.

The decision would increase revenue by an estimated $10 million per year but would be offset by an expanded sales tax exemption for nonprofits.

Currently, service providers pay a 6 percent tax, while users pay the state's 5.5 percent sales tax on movies, music or albums purchased in either physical or digital format. Streaming costs are exempt.

The proposal calls for a 5.5 percent tax on both service providers and customers, as well as an expansion of the consumer sales tax to include streaming subscription payments. For example, a $20 monthly subscription cost for a streaming service would include $1.10 in taxes.

Sharon Huntley, a spokesperson for the Maine Department of Administrative and Financial Services, told Newsweek that this isn't a new proposal. In fact, this is the third time that the tax has been proposed in Maine; Mills proposed the change in 2020, and her predecessor, Paul LePage, proposed it three years prior.

"On March 6, the Legislature's Committee on Taxation held a work session about the proposal. Ultimately, the Committee voted in a bipartisan fashion (7-1)—including Republicans—to include the proposal in the supplemental budget," Huntley explained.

"More specifically, the proposal addresses the uneven mix of taxation of digital goods and services under current law to, instead, apply the sales tax more simply and equitably across the different forms of platform delivery, purchase, and use such as by entertainment streaming and subscription services."

Huntley said 25 other states have a sales tax or equivalent on streaming services, adding: "The supplemental budget proposes to streamline, simplify, and modernize provisions of the sales tax to better align it with the practice of other states across the country."

Elsewhere, according to a new report, Netflix was one of a string of companies revealed to pay more in annual salaries to their top executives than they hand over in taxes each year.

The Institute for Policy Studies and Americans for Tax Fairness analyzed executive pay data for what it describes as "some of the country's most notorious corporate tax dodgers," finding that 64 firms paid more to their top five executives than they did in U.S. taxes in at least two of the five years studied.

Based on information from the Institute on Taxation and Economic Policy, the research found that 35 U.S. companies paid less in federal income taxes between 2018 and 2022 than they allegedly paid to their top brass.

"Lavish corporate compensation packages and inadequate corporate tax payments are not unrelated phenomena," the report, which is authored by Sarah Anderson, Zachary Tashman, and William Rice reads.

"Executives are in part reaping rewards for the corporate tax avoidance strategies they pursue, and corporate boards have more money to spend on their highest-paid employees when they don't have much or anything to pay in taxes. Until this self-reinforcing cycle is broken, we'll have a corporate tax and governance system that works for top executives—and no one else."

Netflix was one of the top 10 companies listed in the report, which said over five years executive pay amounted to $652 million. In the same period, Netflix made $15.1 billion in the U.S. and the company's five-year federal income tax was $236 million (1.6 percent), according to the report.

Update 03/15/24, 3:37 a.m. ET. This article was updated with comment from Sharon Huntley.