Now more than ever, technology is influencing the way we do business, communicate, move through and around the world, access and manage our homes, receive and administer healthcare, make purchases, secure information, and protect our most valuable property. Morrison Foerster keeps pace with this rapidly evolving landscape across our internationally recognized corporate, finance, intellectual property, and litigation practices. MoFo Tech brings together our insights relating to fields such as blockchain and distributed ledger, cloud and as-a-service technologies, driverless cars, drones, fintech, computer hardware and software, the Internet of Things, semiconductors, and telecommunications. The MoFo Tech blog offers real-time, in-depth analyses of the trends and complex issues shaping the global technology industry.<h2>ABOUT MORRISON FOERSTER</h2>Morrison Foerster is a leading global law firm that transforms complexity into advantage for its clients. Our clients include some of the largest financial institutions, banks, consulting and accounting firms, and Fortune 100, technology, and life sciences companies. Highlighting the firm’s commitment to client service, leadership in market-changing deals and impact litigation, and values-based culture, Morrison Foerster has been repeatedly recognized as one of the top 10 firms on The American Lawyer’s A-List. Year after year, the firm receives significant recognition from Chambers and The Legal 500 across their various guides, including Global, USA, Asia‑Pacific, Europe, UK, Latin America, and FinTech Legal. Our lawyers passionately care about delivering legal excellence while living our values. Morrison Foerster has a long-standing commitment to creating a culture that respects and celebrates differences, while providing an inclusive environment. The firm has achieved Mansfield Certification Plus since 2018 as a result of successfully reaching at least 30 percent women, communities of color, and LGBTQ+ lawyer representation in a notable number of current leadership roles and committees. The firm also has a long history of commitment to the community and society through providing pro bono legal services, including litigating for civil rights and civil liberties, improving public education and fostering the wellbeing of children, advocating for veterans, promoting international human rights, enforcing the right to asylum, and safeguarding the environment.

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Scott Llewellyn’s practice focuses on complex litigation in federal and state courts around the country, with an emphasis on patent and trade secret disputes. Over the past decade, he has worked on some of the most significant, high–profile IP cases involving technology for televisions, smartphones, and self–driving cars, relying on 40 years of experience with computer hardware and software. Scott also has significant experience with business divorce cases before courts and arbitrators, involving a mix of trade secret, patent, tort, and contract claims relating to technology development and implementation.Scott also has successfully tried general commercial arbitration and agency matters, briefed and argued various appeals in federal appellate court, and tried more than 20 cases for the Denver City Attorney’s office, most of them jury trials.Scott also has an active pro bono practice, having worked on a variety of criminal and immigration appeals, and having represented Colorado criminal defense and mental health organizations in high–profile suits against the state of Colorado for violations of the constitutional rights of defendants.At MoFo, Scott serves on the board of the Morrison & Foerster Foundation. In the broader legal community, he serves on the boards of the Colorado Lawyers Committee and Drop in the Bucket (a charity that builds wells and sanitation systems in sub–Saharan Africa).After law school, Scott clerked for the Honorable Clarence A. Brimmer, District of Wyoming, and the Honorable Diarmuid F. O’Scannlain, Ninth Circuit. He was also previously an adjunct professor at the Georgetown University Law Center.

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Scott Llewellyn’s practice involves complex litigation before state and federal courts around the country, with an emphasis on patent and trade secret disputes for high-tech companies, to which he brings more than 35 years of experience with computer hardware and software, in particular relating to the processing and transmission of audio, video, voice, and other types of data. Mr. Llewellyn has also tried commercial arbitration and agency matters; briefed and argued various appeals in federal appellate court; and tried more than 20 cases for the Denver city attorney’s office, most of them jury trials.

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If Your Company Offers Streaming Services, You Should Be Aware that States and Localities Are Taking Different Approaches to Taxing Such Services

If Your Company Offers Streaming Services, You Should Be Aware that States and Localities Are Taking Different Approaches to Taxing Such Services | MoFo Tech

Rebecca M. Balinskas

Many states and localities are concerned that the proliferation of streaming services is shrinking tax revenues previously received from sales of traditional forms of entertainment.  Those concerns are not unfounded.  The rapid development of streaming services has drastically changed how people watch “television.”  It is now estimated that over 56 million U.S. adults either have cancelled or never subscribed to traditional cable or satellite television service, while the number of Americans who subscribe to Netflix now equals the number of Americans who have a traditional television service subscription.  Meanwhile, streaming music services now generate the majority of the industry’s revenue.Thus, it is not surprising that many jurisdictions have taken a variety of approaches to subject sales of streaming services to sales taxes and excise taxes.  And now that the U.S. Supreme Court has ruled that there is no physical presence requirement for a state to impose a sales tax collection obligation on sellers, all companies offering streaming services should pay even closer attention to the state and local tax landscape—even if the streaming service is only a small part of a larger business.  Notably, in a state or locality that imposes sales taxes or excise taxes on streaming services, a company’s otherwise non-taxable services may become taxable if the company decides to include a streaming service as part of a bundled offering for a single price, even if the streaming service is not used or desired by a particular purchaser.Some jurisdictions, including Pennsylvania, have passed legislation amending their sales tax laws to specifically tax streaming services.  However, similar legislative efforts have proven less successful in other jurisdictions.  For example, a proposal in Virginia to expand the state’s communications sales tax to streaming entertainment services was overwhelmingly rejected by a Virginia House of Delegates committee earlier this year.  Meanwhile, the general unpopularity of taxes on streaming television services has inspired legislative proposals to explicitly exclude such services from tax.Taxing authorities in other jurisdictions have attempted to apply existing sales tax and excise tax laws to reach streaming services by issuing guidance such as letter rulings and publications.  For example, in a 2018 Private Letter Ruling, the Texas Comptroller found that a streaming video service was subject to sales tax as a “cable television service.”  The Florida Department of Revenue has issued guidance stating that, while sales and rentals of streaming videos are not subject to sales tax, rentals of streaming videos are subject to the State’s communications services tax as a “video service.”  Even more confusing, the Florida guidance states that sales (as opposed to rentals) of streaming videos are not subject to Florida’s communications services tax because the sales would qualify as a nontaxable “information service.”  Localities are also attempting to tax streaming services, even when the state is not.  For example, although Illinois does not currently impose tax on streaming services, the City of Chicago’s Comptroller released guidance stating that the City’s excise tax on admission fees or other charges paid for the privilege to enter, witness, view, or participate in “amusements” applies to certain streaming services. Any company that offers streaming services should be aware of the taxing authority’s position in each jurisdiction where the company has customers, even if the company has no other “presence” in that jurisdiction.  Importantly, however, companies should also be aware that a taxing authority’s position is subject to challenge.  Judicial challenges of taxes on streaming services are ongoing in Chicago and Pennsylvania.  Notably, at least one state’s attempt to impose existing taxes on streaming services was rejected.  In Kentucky, a state circuit court overturned the Department of Revenue’s audit assessment that subjected a streaming service company’s revenues from Kentucky customers to the same excise taxes applicable to traditional pay television providers. If your company offers a streaming service, now is the time to closely examine your tax compliance efforts.  In the wake of the U.S. Supreme Court’s recent decision in South Dakota v. Wayfair, Inc., which overruled over 50 years of precedent and found that the U.S. Constitution does not require a physical presence in a taxing state in order for the state to impose a sales and use tax collection obligation on an out-of-state seller, jurisdictions will likely be more aggressive in seeking sales tax from companies offering purportedly taxable services over the Internet.  And don’t forget that continued vigilance will be necessary, as jurisdictions continue to investigate whether or how to subject streaming services to sales taxes and excise taxes.

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