Alabama Department of Revenue Cancels Streaming Tax Regulation

This week, the Alabama Department of Revenue notified Legislative Council Chairman Sen. Paul Sanford, R-Huntsville, that the proposed Amended Rule 810-6-5-.09, Leasing and Rental of Tangible Personal Property, which would apply the rental tax to streaming video or audio, would be withdrawn. 

Had it gone into effect, the rule would have created a new tax by extending the existing Alabama Leasing and Rental Tax in a manner that is contrary to the Code by classifying streaming audio and video, including on demand movies and television shows, as tangible personal property subject to the rental tax. 

During the comment period for the rule, the BCA filed comments stating that the amended rule would violate the separation of powers doctrine between the executive and legislative branches.

“In our opinion, the proposed regulation far exceeds the authority of the Department by imposing a new tax, thereby intruding into the exclusive province of the Legislature,” wrote BCA President and CEO William J. Canary. “There is no provision in the Alabama Code that imposes a tax on streaming content.”

Following the comment period, the ADOR proceeded to certify the rule which led to the BCA, among others, requesting that the House and Senate leadership to use the Legislature’s administrative review process to reject the rule.

In addition to the BCA’s comments, the Legislative Council, consisting of representatives from both the House and Senate, wrote the Department to state disapproval of the move to tax films and television shows streamed online.

The Legislative Council’s letter to the ADOR indicated that any attempt to push the proposal would be opposed, in effect killing it. Legislators who signed the letter expressed the belief that the proposed rule was actually a new tax that could only be considered by the Legislature, not an executive branch agency.

Senator Sanford had asked ADOR Commissioner Julie McGee to withdraw the rule and planned to convene the Joint Committee on Administrative Regulation Review, where a rejection of the rule would have been considered. 

-Dana Beyerle