State legislator wants to tax online streaming

An Eastside lawmaker wants to tax movies, games and other products and services you pay to use online but don't download onto your computer.

State Rep. Ross Hunter, D-Medina, who is sponsoring the legislation, said the issue is fairness.

Washington and more than 17 other states collect sales taxes for purchases that are downloaded, such as music, movies and books. But that tax doesn't extend to products that are streamed onto your computer without the making of a digital copy you can keep.

"The whole goal of tax policy is to have as even of a playing field as you can so tax policy doesn't determine consumer decisions," said Hunter, who chairs the House Finance Committee.

"If I rent a movie from Blockbuster, I pay a sales tax. But if I stream that movie from my computer, I don't pay sales tax," he said. "We need to get rid of this loophole."

House Bill 2075 would lump so-called digital goods into a new taxing category.

Braden Cox, spokesman for Net Choices, a Washington, D.C.-based advocacy group representing companies like America Online, Yahoo and eBay, said his group strongly opposes the measure.

"Now is the wrong time for a new tax on consumers," Cox said at a recent hearing on the proposal. The taxes, he said, "will chip away from already shrinking wallets."

He also drew a distinction between online and offline products.

"Just because you tax something in the offline world doesn't mean it's equitable in the online," Cox said. For example, he said taxing digital goods would give consumers one less reason to purchase those products rather than pirate them.

Also, government should encourage consumers to use online services because they require fewer resources to produce, Cox said.

The Association of Washington Businesses, Washington Technology Industry Association and Northwest Career College Federation, which represents private vocational schools, also have concerns with the bill. The private schools worry about taxing online educational services.

Hunter said the bill is a first draft and that he will be negotiating with those affected by the tax.

Hunter is confident the bill will pass out of committee and on to the House. Under state law, any tax increase requires a two-thirds vote in both chambers of the Legislature to pass, but that hurdle is removed if lawmakers decide to place it on the ballot.

Gov. Chris Gregoire has yet to take a position on the bill. However, she has been kept in the loop, said Marty Brown, her legislative liaison.

"It's on her radar," he said. "Absolutely, we're watching."

Chantal Anderson: 360-236-8266 or canderson@seattletimes.com