Could a "Digital Tax" Be on the Way for Virginia?

Jun 16, 2020

Lawmakers will return to Richmond later this summer for a special session, and they’ll be looking for ways to fund criminal justice reform during an economic crisis.

Virginia is one of 12 states that does not apply a sales tax to streaming platforms, missing out on about $10 million a year.

Chris Wodicka at the Commonwealth Institute says lawmakers could help fund new priorities and balance the books during an economic crisis by modernizing the tax code.

Credit AP Photo

“If you went to your local video rental place, probably those don’t really exist anymore but you would pay sales tax on that," he says. "But if you were to watch the exact same thing from your home, getting it on demand, you wouldn’t pay tax on that at this point. So this is really just updating the tax code for changes in technology.”

During the pandemic, streaming services have boomed while people have been staying at home. That could be a lucrative source of tax revenue.

But Stephen Haner at the Thomas Jefferson Institute says that might also make taxing it a problem. 

"Oddly enough, it’s one that’s pretty popular. So I’m not sure the legislature would jump at that one because a lot of people right now spend a lot of time on Amazon, on Netflix on Hulu," explains Haner. "And to suddenly pay another five or ten bucks a year to have that service might not be popular.”

Virginia’s sales and use tax was last modified back in 2007, before services like Spotify or Apple Music even existed.

This report, provided by Virginia Public Radio, was made possible with support from the Virginia Education Association.