Spoiler Alert: no upcharge. A Missouri Circuit Court judge recently granted motions for summary judgment submitted by Netflix, Hulu, DirecTV and Dish Network, agreeing that the companies’ streaming services are excluded from state franchise fees.
“ ... this bill is not changing any ... policy that’s currently in place. It’s merely a clarification of the policy. So therefore, there is no fiscal impact.”
clarifying v. changing
In August, Missouri’s definition of “video services” was effectively amended to exclude streaming services. In light of this ruling, over 420 Missouri municipalities who have been attempting to impose franchise fees on the streaming companies no longer have any footing.
In July, Missouri Governor Mike Parson signed into law HB 2057 and SB 872. These bills amended the definition of “video services” under Missouri tax law to exclude streaming services “accessed via a service that enables users to access content … offered over the internet.” The amended definition of “video services” clearly excludes streaming service providers like Netflix, Hulu, DirecTV, and Dish Network from the imposition of franchise fees.
However, this dispute is not about whether the streaming services are subject to the fees, but rather if the streaming services have ever been subject to the fees. In its brief, DirecTV and Dish Network argued that “[l]egislative history confirms that [the streaming] services were always excluded and that the new legislation simply clarifies what the General Assembly intended all along” (original emphasis included). The companies cite comments made by a sponsor of HB 2057, who stated that the bill merely clarified the existing definition and did not change the existing law.
key arguments
Historically, the law has been applied only to companies that own or operate infrastructure on public land in Missouri in order to provide cable or telephone services. To do so, cable and telephone companies must receive permission from the state, and in turn pay the franchise fees imposed. Thus, DirecTV and Dish Network argued that the General Assembly acted “consistently with the original intent and understanding” that the law has always only applied to facilities-based providers like cable and telephone companies, and not streaming service companies with no physical presence in the state.
The streaming service companies also reference other states’ laws, including Illinois, Louisiana and Georgia, which have nearly identical amendments to similar provisions of a law regarding video services. For example, in a lawsuit against Netflix in Louisiana, the court found that the amendment simply “sharpen[ed] the language of the original definition.” Further, in Georgia, the Georgia Court of Appeals held that the amendment “specifically excludes streaming services like Netflix and Hulu from paying franchise fees.” Consistent with the Missouri case, the amendments in the various states did not expressly apply retroactively, but the courts held the laws never applied to streaming services nonetheless.
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