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Netflix Users Not the Same as Cable Users in Kentucky

Netflix users in Kentucky can continue to binge on their favorite serial shows tax-free. The Kentucky Board of Tax Appeals recognized that digital streaming services are not subject to the state’s telecommunications taxes. The Board sided with Netflix in its decision, concluding that Netflix does not provide taxable “cable services” and is, therefore, not subject to the levy.

Background. In the state of Kentucky, “multichannel video programming services” are deemed taxable when programming is “generally considered comparable to programming provided by a television broadcast station.” This includes cable service.

The Board focused on the definitions of “programming” and “comparable” to conclude that Netflix was not similar enough to broadcast television to justify the imposition of tax on the streaming service. Although offering on-demand programming, Netflix does not offer live programming, sports or news, which might otherwise make the service more comparable to cable services. In addition, the Board determined that streaming services are not transmitted by facilities owned by a “communications service provider” and are therefore, not taxable as “cable services.”

If appealed, the case will move to the Kentucky appellate system, where the state may face challenges from local and federal jurisdictions that would like to see streaming service reclassified as taxable.

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Judy Vorndran, SALT lead partner at TaxOps, loves to travel and counts 19 countries and 44 United States visited in her worldly adventures. She’d love to hear from you with your SALT questions and concerns at 720.227.0093 or jvorndran@taxops.com.

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