Maine may impose a tax on Netflix and other streaming subscriptions

August – Govt. Janet Mills' budget proposal includes a new sales tax on Netflix, Spotify and other streaming services.

The move would bring in additional revenues of about $10 million annually, but would be offset by expansion Sales tax exemption for non-profit organizations.

Administration officials say the proposal, which comes as the state experiences a series of revenue surpluses, aims to make the tax code more consistent and fair.

Some Republicans criticized the proposal Tuesday, accusing the governor of helping businesses at the expense of Maine consumers because the same budget proposal would cut current taxes on telecommunications and cable providers, including Spectrum, from 6% to 5.5%.

“Guess who's going to hit?” My constituents,” Sen. James Libby, R-Standish, said at a news conference Tuesday. “All of my constituents are charged a download fee (tax) on anything they do that is subscription-based.”

Libby serves on the Tax Committee, which voted in favor of the proposal 7-1 last week, with some support from Republican members.

The committee's Republican leaders, Rep. Mickey Carmichael, R-Greenbush, and Rep. Thomas Lavin, R-Berwick, voted in favor of the resolution. Rep. Tracy Quint, R-Hodgdon, opposed the bill, while Libby and two other Republicans, Rep. Laurel Libby of Auburn and Rep. Shelley Rudnicki of Fairfield, were absent.

Sharon Huntley, a spokeswoman for the Department of Administration and Finance, said the proposal aims to “simplify, simplify and modernize” the state's sales tax.

Under current law, providers pay a 6% tax, while customers pay a 5.5% state sales tax on movies, songs or albums they purchase, either as a physical copy or as a download. Broadcast fees are exempt.

Under the proposal, both service providers and customers would pay a 5.5% tax and the consumer sales tax would be expanded to include streaming subscription fees. The $20 per month subscription fee for the streaming service will have a $1.10 tax added to it.

Mills previously proposed the same change in 2020, three years after the governor proposed, Huntley said. This was suggested by Paul LePage. It was rejected both times.

“The proposal addresses the unequal mix of taxes on digital goods and services under current law, instead applying sales tax more simply and equitably across different forms of delivery, purchase and use of platforms, such as streaming entertainment and subscription services,” Huntley said.

Huntley said 25 other states apply a sales tax or similar tax on digital services.

Mills said during her 2022 re-election campaign that she would not support any new taxes. Last year, she supported funding for a statewide family and medical leave program that would be funded through an additional tax on workers and employers.

When asked if the sales tax proposal also backed away from that pledge, spokesman Scott Ogden emphasized that it was “not a new proposal.”

Huntley also noted that the combined changes to the sales tax law would be revenue neutral during the two-year budget cycle.

The proposal also comes from Maine Expected revenue surplus of $370 million During the current two-year budget period.

Tax revenues have repeatedly exceeded expectations in Maine since the height of the COVID pandemic, resulting in an influx of federal funding to support workers, businesses and state and local governments that has boosted state revenues. Surpluses were also driven by consumer spending that led to higher sales tax revenues and strong hiring that led to increased income tax collections.

The Mills administration warns that revenues are now expected to stabilize and that the Legislature should avoid investing in ongoing programs or services.