Quebec to Tax Netflix, Amazon, Other U.S. Streaming Services

Reed Hastings - H - 2016

The Canadian province plans to impose a 9.75 percent sales tax on subscribers of U.S. video and audio streamers operating locally.

The Quebec provincial government on Tuesday made good on its threat to impose a local sales taxes on foreign suppliers of paid digital services like Netflix and Amazon Prime, starting in 2019.

Quebec in November first hinted a plans to impose a provincial 9.75 percent sales tax on U.S. video and audio streamers operating locally. With the provincial budget unveiled Tuesday, the French-speaking province has made clear how that will be done, beginning next January.

Foreign platforms that provide digital services to Quebeckers will be compelled to collect the provincial sales tax if they have over $30,000 a year in annual revenue. The foreign services will also have to identify a subscriber's "usual place of residence," using data like a billing address, a IP address, banking information or phone numbers.

Quebec subscribers that falsify their residence to not pay the sale tax will be liable for a penalty. The Quebec government is expecting foreign digital services to "take reasonable measures to meet their new obligations."

The move to make the collection of the Quebec sales tax "mandatory for suppliers outside Quebec" is expected to bring the provincial coffers $27.5 million in new tax revenue in 2019 and $35 million in 2020.

The province is looking to operate within the limits of what it can do to tax the U.S. digital platforms, given the federal government has so far insisted it won't force American online players here to collect the HST goods and services tax from local subscribers.

That's after Netflix, led by CEO Reed Hastings, agreed to invest CAN $500 million ($400 million) in local TV series. The province had hoped Justin Trudeau's government in Ottawa would have imposed a sales tax on the U.S. digital platforms operating in the country, but no measures to do so were in the federal budget unveiled last month.

The HST is a consumption tax already included in cable TV and local streaming subscription bills. But Netflix and other American digital platforms active in the Canadian market have so far argued they don't have a sufficient physical presence in Quebec, or Canada, beyond exporting content to local subscribers.