Recently, a coalition of legislators and advocacy groups prevented the Alabama Department Revenue from imposing sales tax on streaming content. The Department proposed to amend Administrative Code Rule 810-6-5-.09 to include “digital transmissions.” The Department’s logic was that the sales tax statute, § 40-12-220(8), defines “tangible personal property” as anything which may be “seen or otherwise perceptible to the senses.” Furthermore, Department officials recalled that Blockbuster rentals were taxable, and, due to that history, had the authority to tax its technological successor.
The business community, led by the Business Council of Alabama and Alabama Cable Telecommunications Association, voiced their concerns to the legislature. The legislature instructed the Department to “withdraw the proposed regulation for further analysis and discussion of the issue with the state legislature.” The legislature cited concern for administrative overreach and the possibility that the draft rule constituted a new tax, which only the legislature may enact.
While technologists have won a victory, the Department’s last communication on this issue has been: “. . .we will continue to move forward with enforcing the laws of which we are charged to administer. As a result, the prospective protections afforded by the amended rule will not be available to businesses.” Department officials have not explained if they will start retroactively assessments, start regulations passing regulations in secret, or just exactly what they mean.