A lawmaker in Georgia is trying to update the state’s tax code to pull revenue from streaming video services, e-books and other digital products to offset the proposed removal of a franchise fee now placed on internet service providers.
Republican Rep. Jay Powell, who heads the House Ways and Means Committee, introduced HB 887, a wide-ranging broadband bill that intended to encourage investment throughout the state, particularly in unserved or underserved rural areas. Colloquially, the measure is being called the “Netflix tax.”
The levy would apply to all “digital products delivered electronically, including but not limited to software, music, video, reading materials, or ringtones.” A premium Netflix monthly subscription fee that costs $14.99, for instance, would incur an additional 56 cent tax.
The legislation says “it is not necessary that a copy of the product be physically transferred to the purchaser” for the tax to apply. Access to a piece of media alone would be enough to incur the new tax.
The idea is to subsidize investments in the state’s most disconnected regions — 17 percent of Georgia is “underserved,” meaning those areas have access to fewer than two wired providers, according to BroadbandNow, an aggregator of broadband internet information. Nationally, 39 percent of rural Americans lack access to a connection meeting the Federal Communication Commission’s definition of broadband at 25 Mbps download speed/3 Mbps upload speed. Powell says he thinks he may have part of the solution.
The bill in its current form would create a requirement for ISPs entering new contracts to make investments of equal or greater value in underserved areas as the proposed bid. This would be accomplished in conjunction with a broadband expansion plan, agreement with a local government provider or private business, or some combination of all three. In short, it doesn’t matter how the connectivity gets to rural areas — lawmakers are simply intent on seeing that it gets done.
Powell’s bill proposes eliminating an existing franchising fee that providers are required to pay to build in the public right-of-way. It also would end a sales tax paid by ISPs when they buy equipment used to build out their networks. The new tax, meanwhile, would follow Georgia state code 48-8-30, which notes a rate of a 4 percent tax on the price of a product at the time of sale.
Neither the legislature nor analysts have published calculations of how much funding this would raise for the state.