Local TV stations, cable companies and companies selling satellite or dish technology – not to mention the major TV news and entertainment networks – are increasingly faltering in the face of increasing competition from new and powerful digital competitors in the world. information and entertainment.
State and local governments that in the past collected tax revenue from the interrelationships of these evolving and declining technologies are also noticing the trends and responding to them with new tax strategies.
In most local governments in Mississippi, the renewal of cable television franchises in these communities was a big issue, both in tax revenue to municipalities and in the availability of programming and services for individual cable subscribers. Sales tax collections on the sale of cable television equipment, reading materials and digital products like DVDs have also been affected.
Sales of these products — and the resulting state and local tax revenues — have been in freefall for just over the past decade. Remember, the words “Netflix” or “Hulu” weren’t part of our vocabulary until 1997 (when Netflix was in the DVD rental business) and Hulu until 2007 (when they started compete with Netflix) in the streaming business.
How important are these technological changes to consumer behavior from a tax perspective in Mississippi at the state and local levels? A 2021 survey by the Pew Research Center found that 76% of Americans said they watched TV content delivered either by connected cable or satellite in 2015. By 2021, that percentage had dropped to 56%.
The Pew Research survey asked cord cutters “why? The 71% response said they ditched cable or satellite because they could get the content they wanted from streaming services like Hulu and Netflix — and in most cases with monthly savings. But isn’t Mississippi lagging behind the rest of the country in terms of broadband access? As recently as we entered the COVID-19 crisis in 2019, 60% of Mississippians living in rural areas lacked high-speed internet access. This resulted in some 368,000 Mississippi residents not having access to high-speed Internet that met the basic speed standard set by the Federal Communications Commission.
At the time, the Northeast Mississippi Daily Journal reported on growing frustration among parents about how broadband was preventing COVID-19 shutdown education: “The average internet speed in the state is 37.5 megabytes per second. About 80% of Mississippians have access to Internet speeds of 100 megabytes per second, a speed that would allow a user to perform more activities. These statistics mean that approximately 595,000 Mississippians do not have access to internet speeds of 100 megabytes or more. Mississippi officials have been grappling with these broadband gaps, and the numbers are improving.
In response to the cord-cutting and changes in consumer behavior, state and local governments have begun to examine the tax revenue losses associated with old technologies and the revenue challenges of emerging technologies. In 2013 and again in 2020, the Mississippi Department of Revenue requested changes regarding the sale, rental, or rental of digital products.
Similarly, DOR is proposing changes to increase sales and use taxes on Internet-based commercial services involving the classification and definitions of computer software, cloud computing, and “software on the fly” designations and taxation. as a service, platform as a service or infrastructure as a service”. .”
Mississippi and most states with general sales taxes already tax streaming services through general sales taxes. But for the most part, that’s about it. Across the country, state and local governments are looking to replace lost revenue in declining markets for cable, satellite and digital content sales.
This month, Standard & Poor’s Global Market Intelligence reported that pay-TV revenues fell from $116.9 billion in 2016 to $91.1 billion in 2021 and forecast a decline to $64.7 billion. dollars in 2025.
In Illinois, California, Georgia, Missouri and other places, local and state governments have tried streaming-specific franchises or other taxes. The issue is being argued in court, but Chicago collects 9% on what is dubbed “the Netflix tax” there, and it is passed on directly to the consumer. The addition of video games to their service offerings has resulted in increased Netflix sales taxes in Alabama and Louisiana.
Eventually, the taxman comes whether it’s cable, satellite dish or broadband stream. Count on it.
Sid Salter is a syndicated columnist. Contact him at [email protected]