Netflix and cigarette both are quite addicting, though in different senses. And now, Pennsylvania residents will have to pay more to smoke and to use the streaming service. Beginning Monday, the state is filling its revenue gap by taxing movie streamers and smokers.
Netflix to get costly
Until now, the digital industry of buying and selling has evaded the traditional definition of a taxable product in the Pennsylvania state. For the first time, a new budget passed by state lawmakers in July includes a sales tax on digital products. The increased tax comes weeks after Netflix increased its streaming rates.
According to pennlive.com, the tax will hit only those with a Pennsylvania billing address. Tom Wolf, the Governor, allowed the budget to go into law without his signature, but he signed off on the Legislature’s approval of a $1-a-pack tax on cigarettes, and the addition of digital downloads, including music and streaming services like Hulu and Netflix. According to pennlive.com, now those products are covered by the state’s 6% sales tax.
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The new taxes are part of a revenue package to fill a $1.3 billion hole in the state’s new $31.5 billion budget. According to the estimates, the extension of the sales tax to digital products is possibly worth an additional $47 million for the state, while the cigarette tax could generate about $431.1 million in revenue, says pennlive.com.
What all is included and exempted?
The tax also applies to music (Google Play, Audible, satellite radio, iTunes, Spotify, ringtones), ringtones, apps, e-books (Barnes & Noble’s Nook Press, Amazon Kindle, Scribd) and online games. However, newspaper and magazine subscriptions, as well as digital versions of the Bible, will not be included in the digital downloads tax. Businesses are responsible for collecting the tax, and submitting them to the state Department of Revenue.
Other exemptions to the digital tax include purchases done by volunteer fire companies, nonprofit educational institutions, religious organizations and charitable organizations, textbooks purchased from or through accredited schools, and resale of a digital product.
In addition, the pennlive.com said the wholesale price of e-cigarette supplies gets a 40% tax and smokeless tobacco gets a tax of 55 cents per ounce on Oct. 1. “Vape shop owners across the state have said the latter tax will lead to the inevitable closing of their stores. The problem, they say, is the law’s “floor tax,” on the inventory left in their shops on the first day of the tax,” says pennlive.com.