“Netflix/D.C. government pocketing extra 3.25% in sales tax?”

tax
Photo by PoPville flickr user brunofish

“Dear PoPville,

Ever since I’ve had Netflix I’ve been charged a 10 percent sales tax. Every month for maybe 3-4 years I’ve been charged $7.99 (+$0.80 tax). I had thought that the only 10 percent tax in the city was for restaurants and I didn’t think that should include Netflix, so I reached out to D.C. government to see what the correct tax should be. They confirmed it should be 5.75 percent.

As per the D.C., code 475.1 ( information services), gross receipts from the sale or charges for information services shall be subject to the sales and use tax at the rate of 5.75%.

I have reached out to Netflix for a refund of the small amount of money they’ve been overcharging me, but so far I haven’t heard back from them (and I was just charged my next month’s bill with the same incorrect tax). What interests me, though, is if most D.C. residents are getting charged the incorrect tax. If that’s so, who pockets the extra cash? It’s a lot of money if it’s everyone with a D.C. address that subscribes to Netflix. Just wonder if I’m the only one and if I’m not who is making off with the extra money.”

39 Comment

  • I also pay $8.79 a month. Interested to see where this goes!

  • Sounds like a class action suit in the making

  • I can all but see a troupe of lawyers just drooling at the prospect of a class action suit.

    • I can’t wait to get my $4 check in the mail! You know, after the lawyer fees water down the settlement.

  • Interesting. I have the streaming and DVD plan, and I get charged $24.64: $22.98 (+$1.66 tax). I suspect they are charging me the correct 5.75% rate on the the $14.99 DVD plan, and the 10% rate on the streaming portion.

    • I have the highest tier streaming-only plan (11.99 before tax) and I pay $1.20 in tax (10% on everything, just like OP). Seems like all the streaming options are at 10%.
      .
      Good catch by OP. I’ve been paying them an extra $6/year for many years, it looks like.

  • gotryit

    There are holes in your story, like “I reached out to D.C. government to see what the correct tax should be. They confirmed it should be 5.75 percent.”

    The DC government doesn’t get back to you… that’s just silly.

  • Talking to them now. They state tax is set by state and they do not calculate taxes and says the percent comes directly from government. Sounds weird.

  • Ashy Oldlady

    I wouldn’t be surprised if the other 4.25% is for something else. Some jurisdictions have placed a tax on streaming services specifically.

  • You always use this photo of mine for dystopian tax subjects ;^)

  • Hey all! I sent in the original “Dear Popville…” I have chat transcripts with Netflix about this issue. They said they would contact me about it and fix the issue but I was charged this week again at the incorrect rate. Kind of a little fumed about this, shouldn’t we be charged the correct tax rate? Also, who is making off with this money? If it’s everyone in D.C., that’s big chunk of change. I’ve only had D.C. addresses with my current Netflix subscription, so I have no idea why it would be anything above the D.C. rate.

    • I think you should do some more research. Not because I think you’re wrong, but because I wouldn’t get up in arms based on a chat with someone at Netflix and one person in D.C. government (who exactly was it and do they know what they’re talking about?) It would not surprise me to find out that Netflix falls under some other category of taxation rather than general “sales tax”. I think you moved too quickly past the investigation phase here.

      • I submitted to Popville precisely because I wanted to investigate further. I’ve hardly called any tax attorneys about this. Quite possibly this is the right rate, but according to my email correspondence from the city, they indicated it should be 5.75 percent. I wanted to know if I was the only one this was happening to, hence Popville.

      • He moved to quickly to . . . asking other people about it? He should have made sure to keep this under wraps?

        • Haha, thank you dcd. I don’t always agree with you but I agree with you on this one.

        • …assuming he was being charged the wrong tax rate. Did you miss where he said “I was charged this week again at the incorrect rate”?

    • ah

      My guess is that it’s all going to DC – presumably the legal and accounting departments determined they need to collect and remit 10% tax, and have been doing so. I doubt that Netflix is charging you and others 10% but remitting only 5.75% and pocketing the difference because different departments reached different legal/accounting conclusions.

  • Sales tax rate is 5.75% – not applied to streaming video. Instead, it is the District’s 10% gross receipts tax that you are being charged.

  • I’m guessing DC is taxing Netflix 10% based on Title 47 Chapter 25 “Television, video, or radio service to subscribers or paying customers.,” so that’s what Netflix is recovering from you.

  • Or you could forge a VA mailing/billing address and get a 0% tax added. Same goes for any non-regulated service, like car or computer repair, delivery etc

    • You’ll wanna use your DC address for Amazon, because VA (as well as MD) pays sales tax on that and we don’t.

    • Or, you shouldn’t, you know, commit fraud to dodge some minor taxes. I mean, generally you shouldn’t. But also in DC lots of people have jobs with background checks and public integrity components.

  • Yep, I also pay $8.79.

  • I subscribe through iTunes and pay $7.99 + .46 for a total of $8.45. So, I’m getting charged the 5.75%

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