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Can Colorado municipalities collect sales tax from online retailers?


 Can Colorado municipalities impose local taxes on streaming services?

Netflix and the city of Loveland, Colorado, are at odds over taxes.

In 2016, having determined that the streaming services provided by Netflix are sales/rentals of taxable tangible personal property, the city’s Revenue Division issued the company a $116,508.22 tax assessment for the period Sept. 1, 2012, through Aug. 31, 2015.

In response, Netflix filed a complaint accusing the city’s tax assessment of violating state and federal law. An administrative hearing on the case was held in January 2017, but by Oct. 3, 2017, the city had neither issued a decision nor informed Netflix that it would not issue a decision. Netflix filed another complaint and notice of appeal, and the city dismissed the case on Oct. 26, 2017.

Yet the overarching issue prevails. Loveland City Attorney Clay Douglas says, “According to the city council’s legislative policy agency, Loveland maintains that web-based internet sellers should be required to remit … sales taxes in a similar manner as brick-and-mortar businesses in order to create commerce equity. Without this … local retail businesses have a 5 to 10 percent cost disadvantage” (Reporter Herald).

Other members of the city council (and public) disagree. Councilmember Don Overcash believes a tax on streaming services, if legal, would put the city at odds with the pro-business reputation it espouses. And Councilor Leah Johnson notes that not taxing Netflix and similar service providers doesn’t hurt local small businesses.

California cities also interested in taxing streaming services

Still, Loveland isn’t the only city interested in taxing streaming services. In the fall of 2016, Pasadena, California, announced a plan to apply the city utility users tax (UUT) to the streaming services offered by Hulu, Netflix, and others. It later decided “a full and complete review of the matter” was needed before such action could be taken.

Several other California cities have also expressed interest in taxing streaming services under the UUT. Under existing state law, cities, counties, and other local agencies are authorized “to impose various taxes and fees connected to activities or property within their respective jurisdictions.” Counties are specifically authorized to levy a UUT on the consumption of cable television (see bill analysis, 4.21.2017).

Yet in California, as in Colorado, taxing these services at the municipal level is controversial — the idea has as many detractors as supporters. In January, California assemblymember Sebastian Ridley-Thomas introduced a bill (AB 252) that would “prohibit the imposition by a city, city and county, or county … of a tax on video streaming services.” The city of Pasadena opposes the bill, while the Computing Technology Industry Association supports it. The bill has been in committee since April.

Learn more about local attempts to tax streaming services.

photo credit: Day 81 via photopin (license)


Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.