Arizona lawmakers are wading into some uncharted waters in deciding whether to tax digital streaming services and cloud technology and software.
Their actions could impact taxes on Microsoft office products, streaming services such as Netflix (Nasdaq; NFLX) and music services such as Spotify.
Cities and education groups worry about the lost revenue from changing economic dynamics while business and technology interests back exempting digital streams and cloud technology from taxes.
The Arizona Legislature is considering two companion bills — Senate Bill 1392 and House Bill 2479 — that would exempt digital and cloud services from state sales taxes and restrict cities from imposing local taxes in them.
The measures are backed by business and technology interests ranging from Microsoft Corp. (Nasdaq: MSFT), AT&T (NYSE: T) and American Airlines (Nasdaq: AAL) to the National Federation of Independent Business, East Valley Chambers of Commerce Alliance and Greater Phoenix Chamber of Commerce.
The Arizona Tax Research Association also backs the bills. ATRA Senior Analyst Sean McCarthy said the state needs to update its wider tax laws and definitions.