States are increasingly looking to tax cloud computing and streaming services, like Netflix, (NFLX) as means of counteracting the slow growth of traditional sales tax revenues, according to a report Friday in the Wall Street Journal.
The rise of e-commerce, which is difficult for many states to tax if the web-based merchant doesn’t have a physical presence in that state, has in part led to state sales tax revenue growing, on average, at a 1.3% per year versus 3.1% annually ten years ago.
“There’s a concern when you have something that the state as a policy matter has clearly chosen to tax, but it starts not being taxed because of changes in technology,” David Gerregano, deputy revenue commissioner of Tennessee, told the Journal. Last month, the state of Tennessee extended its sales tax to include “software and digital games that are accessed remotely.”
In July, Chicago enacted a “Cloud tax” which placed a levy on Netflix, Amazon, and other streaming services. Netflix says that its services are now taxable “in roughly half of U.S. states and certain municipalities,” according to the WSJ.