Complete Story
04/18/2018
Supreme Court Case Could Have OTT Implications
The US Supreme Court is set to hear arguments Tuesday in South Dakota vs Wayfair, which could result in overturning a 1992 decision that found states can’t impose a sales tax on out-of-state retailers that don’t have a physical presence in the state. While there’s plenty of talk about what this could mean for online retailers such as Wayfair or Overstock.com, some believe it could have implications for OTT services.
Under the 1992 decision (Quill vs North Dakota), states can’t collect sales tax from OTT customers, even if the state does impose tax on streaming or downloadable video programming services similar to OTT. Of course, cable operators with multiple touch points in a state are required to remit sales and use tax on all taxable services in a state which it has subs. Overturning Quill could help level the playing field between the two.
“We continue to see the laws change as states get more aggressive about collecting tax, and with the Wayfair hearing, we’re only going to see that pace increase. If South Dakota wins, we can expect other states across the country to adopt similar laws, impacting OTT providers as well as other businesses,” predicted Toby Bargar, an attorney and senior tax consultant at Avalara for the communications sector. Even if South Dakota doesn’t prevail at the Supreme Court, he doesn’t think the issue will go away. “States have been pushing for a legislative solution for a decade or more. And in the absence of national legislation many have passed their own laws attempting to collect taxes from remote sellers. It is likely that states will double down on all the things they have been doing before,” said Bargar, noting that almost every state is looking to stem the tide of falling transaction tax revenues.
