BCA Requests Legislative Rejection of ADOR Rental Tax

Business Council of Alabama President and CEO William J. Canary has asked the House and Senate leadership to use the Legislature’s administrative review process to reject a streaming video and audio tax imposed by the Alabama Department of Revenue.

Canary wrote asking that a meeting of the Joint Committee on Administrative Regulation Review be convened to formally reject ADOR Rule No. 810-6-5-.09 Leasing and Rental of Tangible Personal Property, which would apply the rental tax to streaming video or audio.

Unless rejected, which the committee can do, the tax will take effect in mid-July, 35 days following its June 11 filing with the Legislative Reference Service.

When the ADOR proposed the rule in the spring, the BCA and legislators wrote the Department asking it to cancel plans to tax streaming video and audio services.

“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,” Canary wrote Department Secretary Michael Gamble. “As you are aware, there is no provision in the Alabama Code that imposes a tax on streaming content.”

Following the BCA’s comments, the Legislature’s governing 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 ADOR proposed imposing the tax by saying that an existing tax provision can be extended to digital streaming.

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.

There is no current provision in the Alabama Code that imposes a tax on streaming content. Yet the Department’s proposed regulation attempts to do just that by extending the existing Alabama Leasing and Rental Tax in a manner that is both illogical and 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. 

“What the Department’s regulation seeks to do, therefore, is impose new state and local taxes on streaming content,” Canary wrote.