Pennsylvania has joined several states in enacting a tax on digital streaming and download services. The 6 percent sales tax on services like Spotify, which went into effect on Aug. 1, is part of a revenue package introduced earlier this year, designed to plug a $1.3 billion budget shortfall, as CBS Pittsburgh reported. (Also relevant to the music industry, that package included a $4 million pool in tax credits for concerts and rehearsals produced in the state.)
Magazines, newspapers, and digital version of the Bible are exempt from the new Pennsylvania tax.
Pennsylvania joins several other states in enacting the tax, though varying definitions of what constitutes a digital good leaves some room for legal challenges to emerge over whether streaming services are included or exempt from the rules. Last year, the city of Chicago enacted a 9 percent “cloud” tax on streaming services. Connecticut taxes digital “downloads” at 1 percent — though its definition of a digital download as a transmission containing no “tangible personal property” would ostensibly include streaming services. North Dakota, meanwhile, specifically exempts digital goods from taxation. In 2009, Washington state enacted its own definition of digital goods, bringing streaming under the digital sales tax umbrella.
The European Union changed the rules for digital good taxation in 2015, determining rates based on the listener/viewer’s location instead of the company, as The New York Times reported. Australia is joining the party, too, with its own version set to take effect next year.