Wednesday, January 26, 2022

Sid Salter: State, Local Governments Coping with Tax Impacts of Cord-cutting & Streaming

 Local TV stations, cable providers, and companies selling satellite or dish technologies – not to mention the major television news and entertainment networks – are increasingly staggering under the rise of competition from new and potent digital news and entertainment competitors.

State and local governments that have in the past collected tax revenues from the interrelationships of these evolving, declining technologies are noticing the trends as well and are reacting to them with new tax strategies.

 

In most Mississippi local governments, the renewal of cable television franchises in those communities was a big deal, both from the tax revenue to the municipalities and the availability of programming and services to the individual cable subscribers. Also impacted were sales tax collections on the sale of cable TV hardware, playback hardware, and digital products like DVDs.

 

The sales of those products – and the subsequent state and local tax revenues – have been in freefall for just over the last decade. Remember, the words “Netflix” or “Hulu” were not part of our vocabulary until 1997 (when Netflix was in the DVD rental shipping business) and Hulu until 2007 (when they began to compete with Netflix) in the streaming business.

 

How significant are these technological changes on consumer behavior from a tax standpoint in Mississippi at both the state and local levels? A 2021 survey by the Pew Research Center found that 76 percent of Americans reported watching television content provided either by cord-connected cable or satellite television in 2015. By 2021, that percentage had plummeted to 56 percent.

 

The Pew Research survey asked the cord-cutters “why?” The response from 71 percent said they dropped cable or satellite because they could get the content they wanted from streaming services like Hulu and Netflix – and in most instances at monthly savings. But doesn’t Mississippi lag behind the rest of the country in terms of broadband access? 

 

As recently as when we entered the COVID-19 crisis in 2019, 60 percent of Mississippians living in rural areas lacked high-speed internet access. That translated into some 368,000 Mississippians who didn’t have access to broadband internet that meets the basic speed standard set by the Federal Communications Commission.

 

At the time, The Northeast Mississippi Daily Journal reported growing parental frustration with how broadband impeded COVID-19 shutdown education: “The average internet speed in the state is 37.5 megabytes per second. Around 80 percent 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 roughly 595,000 Mississippians do not have access to an internet speed with 100 megabytes or more.” Mississippi officials confronted those broadband deficiencies and the numbers are improving.

 

In reaction to cord-cutting and changes in consumer behavior, state and local government began looking at tax revenue losses from old technology and revenue challenges from emerging technologies. In 2013 and again in 2020, the Mississippi Department of Revenue sought changes that addressed selling, leasing or renting digital products. 

 

Likewise, the DOR is proposing changes to increase sales and use taxes on internet-based business services involving computer software classification and definitions, cloud computing, and the designations and taxability of “software 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 nation, state and local governments are looking to replace lost revenues from the declining cable, satellite and digital content sales markets. 

 

This month, Standard & Poor’s Global Market Intelligence reported that pay-TV revenues had declined from $116.9 billion in 2016 to $91.1 billion in 2021 and forecast a drop to $64.7 billion in 2025.

 

In Illinois, California, Georgia, Missouri, and other venues, local and state governments have tried streaming-specific franchise or other taxes. The issue is being fought in the courts, but Chicago is collecting 9 percent on what is dubbed there “the Netflix tax,” and it’s being passed on directly to the consumer. The addition of video games to their services offerings brought higher Netflix sales taxes in Alabama and Louisiana.

 

Eventually, the taxman cometh whether by cable, satellite dish, or broadband stream. Count on it.


Sid Salter is a syndicated columnist. Contact him at sidsalter@sidsalter.com.

17 comments:

Anonymous said...

FQ THE TAXMAN, bunch of greedy bastards. This article is almost proof positive that the local municipalities don't care about the service some of these low rent cable providers pay, but who will pay the municipalities the most for the "franchise royalties".

Anonymous said...

Most of these cable services doomed themselves with outrageous prices and horrible customer service. I still use Comcast/Xfinity for TV and Wifi. I pay about $300/month (I know, I know). Recently, they've started charging $100 for a service call even if your outage is caused by their faulty or outdated equipment. Before they send someone you have to sign a waiver agreeing to pay for the service call. I can see these going the way of the VHS rental companies like Blockbuster etc. I keep stupidly using because at my age the learning curve to learn a new system just seems too daunting.

Anonymous said...

Yes, but online sales tax has more than made up for this. Is Sid a lobbyist for the taxman?

Anonymous said...

Amazon Prime has been editing movies to remove the N when white people say it but they leave it in movies where non-whites say it. This is soviet style revisionist censorship.

Anonymous said...

Oh noes! Tech illiterate baby boomers are dying off and millennials and zoomers don’t even pay for Netflix! However will we find rubes to simultaneously milk for cash while we indoctrinate them with consumerism and globohomo?!

Anonymous said...

Wait until Sid learns about adblockers!

Anonymous said...

@ January 26, 2022 at 9:12 AM - Make the change. Buy a digital antenna for the local channels. If you can use a Jitterbug, you can handle the Amazon Fire Stick or Roku interface. The learning curve isn't that bad, and you'll realize that you were only watching 10% of the channels they offered anyway. There's a big, wonderful world of content out there.

Anonymous said...

Please wake me when it's over.

Anonymous said...

Competition is the hallmark of capitalism. Liberals, like Sid, don't cotton to the notion of making a profit.

Anonymous said...

Not sure why a city should have ever had a right to tax telecommunication signals.

Anonymous said...

Only the latest of too many 'new taxes are coming' doom and gloom columns that ol' Sid has written over the decades. The dude loves taxes and govt spending.

Anonymous said...

11:21. liberals? who's producing the content? hollywood. liberals. if you have money to pay, all those hollywood liberals have cameras that can roll...

who's pushing back on this--business owners. (Cable TV companies)

cable tV is a dinosaur industry on its last breath...

Anonymous said...

I'm 64 years old and unless I'm having false memories, I remember when cable TV first came to town that it was billed as being basically commercial free since you were paying for the service. Now, there are the same, if not more commercials on Cable TV as there are on free network TV and you pay out the ass.

Ping Pong on a Cathode Ray Tube said...

Take A Trip Down Memory Lane With Me...

The year was 1979. Mr. Marshall, the local TV Cable manager, called me at work. He said they have a car that can ride the neighborhoods and detect who, in which houses, are splitting their signal and connecting more than one TV set to the cable. He threatened to 'put me in jail' if I didn't get right with them.

So, I then had to pay for three, instead of one, cable connections at my house. That ran my monthly bill up from seven to around 22 dollars, a hefty chunk for a family just starting out 43 or so years ago. At least we learned how to unscrew the water meter 'odometer' and hook it back up just before the meter-reader came 'round.

Anonymous said...

@6:08
So you admit that 20th century water thieves really are to blame for Jackson’s current water issues and not the current Mayor and 21st century residents.

Anonymous said...

7:42 : City folks gone be city folks. Loser city folks who steal............

Anonymous said...

The worst I've seen lately is the HHS vax commercial with the adolescence boy in his mom's high heels shaving his face. Doubt that gins up many new customers. And that's just the top of heap.

Built a digital TV antenna and hung it in my attic, figured out which direction to orient it, getting almost 30 channels free and not subsidizing any trash programing.

Lots of books and DVDs to check out at the library.


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In the spirit of helping those who are less fortunate, Trollfest '09 adopts a cause for which a portion of the proceeds and donations will be donated: Keeping Frank Melton in his home. The “Keep Frank Melton From Being Homeless” booth will sell chances for five dollars to pin the tail on the jackass. John Reeves has graciously volunteered to be the jackass for this honorable excursion into saving Frank's ass. What's an ass between two friends after all? If Mr. Reeves is unable to um, perform, Speaker Billy McCoy has also volunteered as when the word “jackass” was mentioned he immediately ran as fast as he could to sign up.


In order to help clean up the legal profession, Adam Kilgore of the Mississippi Bar will be giving away free, round-trip plane tickets to the North Pole where they keep their bar complaint forms (which are NOT available online). If you don't want to go to the North Pole, you can enjoy Brant Brantley's (of the Mississippi Commission on Judicial Performance) free guided tours of the quicksand field over by High Street where all complaints against judges disappear. If for some reason you are unable to control yourself, never fear; Judge Houston Patton will operate his jail where no lawyers are needed or allowed as you just sit there for minutes... hours.... months...years until he decides he is tired of you sitting in his jail. Do not think Judge Patton is a bad judge however as he plans to serve free Mad Dog 20/20 to all inmates.

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Relax at the Fox News Tent. Since there are only three blonde reporters in Jackson (being blonde is a requirement for working at Fox News), Megan and Kathryn from WAPT and Wendy from WLBT will be on loan to Fox. To gain admittance to the VIP section, bring either your Republican Party ID card or a Rebel Flag. Bringing both and a torn-up Obama yard sign will entitle you to free drinks served by Megan, Wendy, and Kathryn. Get your tickets now. Since this is an event for trolls, no ID is required. Just bring the hate. Bring the family, Trollfest '09 is for EVERYONE!!!

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Jackson Jambalaya is the home of Trollfest '07. Catch this great event which promises to leave NE Jackson & Fondren in flames. Sonjay Poontang and his band headline the night with a special steel cage, no time limit "loser must leave town" bout between Alan Lange and "Big Cat"Donna Ladd following afterwards. Kamikaze will perform his new song F*** Bush, he's still a _____. Did I mention there was no referee? Dr. Heddy Matthias and Lori Gregory will face off in the undercard dueling with dangling participles and other um, devices. Robbie Bell will perform Her two latest songs: My Best Friends are in the Media and Mama's, Don't Let Your Babies Grow up to be George Bell. Sid Salter of The Clarion-Ledger will host "Pin the Tail on the Trial Lawyer", sponsored by State Farm.

There will be a hugging booth where in exchange for your young son, Frank Melton will give you a loooong hug. Trollfest will have a dunking booth where Muhammed the terrorist will curse you to Allah as you try to hit a target that will drop him into a vat of pig grease. However, in the true spirit of Separate But Equal, Don Imus and someone from NE Jackson will also sit in the dunking booth for an equal amount of time. Tom Head will give a reading for two hours on why he can't figure out who the hell he is. Cliff Cargill will give lessons with his .80 caliber desert eagle, using Frank Melton photos as targets. Tackleberry will be on hand for an autograph session. KIM Waaaaaade will be passing out free titles and deeds to crackhouses formerly owned by The Wood Street Players.

If you get tired come relax at the Fox News Tent. To gain admittance to the VIP section, bring either your Republican Party ID card or a Rebel Flag. Bringing both will entitle you to free drinks.Get your tickets now. Since this is an event for trolls, no ID is required, just bring the hate. Bring the family, Trollfest '07 is for EVERYONE!!!

This is definitely a Beaver production.

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