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Streaming Technology provided by Netflix, Spotify and others, in the Context of Tax law and Digital


One of the most discussed topics in the world, as humanity enters the Digital Age [1], is the difficulty in taxing triggering events occurring on the Internet, given its essentially immaterial and intangible quality. Therefore, this difficulty is the background for this article, where the goal is to discuss the framework of streaming technology (or media flow) in the scope of Brazilian tax law.

The lack of any pretension to decidedly exhaust the conversation on the subject is highlighted here.

1. The Digital Age 1.1. New paradigms, new demands

The introduction of new information and communication technologies in social, economic, and political life has been deeply affecting the ways of organization of economic, juridical, and social relations.

The transversal and global quality of the ongoing transformation is taking us to a new social-economic paradigm that also demands a new legal model.

That is because the Digital Age has challenged principles and rules that have long been consolidated, conceived for a society backed on physical or corporeal goods.

And it is not that only. The Internet features and, consequently, every digital business made from it, contradict the territorial and temporal reach of the law as well as the authority of the State, thus creating obstacles to its application in a space without borders, of hard inspection and control. Also, this new social paradigm brought us a jurisdiction problem: it is more and more frequent, for example, the remote consumption of content stored in “clouds,” a computing method that makes available resources like storage, data banks, and the applications accessible through the Internet. [2] The new business models, therefore, can cross national borders increasing the questions of which the applicable legislation is and which competent court for solving disputes are.

Because of that, the creation of a new branch of Law, the Digital Law [3], has been discussed to rethink the organization of juridical relations and existing legislation, under the light of a new social demand caused by the Digital Age.

2. The Taxation Of Triggering Events Occurred On The Internet

2.1. The necessary standardization of activities in the digital environment. [4]

As taxation is a fully connected activity (which practice does not benefit from the freedom to enjoy the convenience or the opportunity to act), the tax authority is left entirely linked to legal command [5].

When talking about taxation, the Federal Revenue [6] does not have discretion. That is why the editing of the normative rule must prescriptively fulfill inevitable imprecision and apply to all of those who find themselves in the hypothetically foreseen scenario.

Consequently, the activities that occur on the Internet also demand legal description, trimmed by the legislator among numerous facts on the phenomenal digital world, which, once materialized in the triggering event, gives rise to the tax obligation. Once the activity occurring in the worldwide network of computers takes place (like an online purchase, for example), it would only be subjected to taxing if there is a previous description in law (tax incidence hypothesis).

The events occurring through the Internet, therefore, are real facts that, although possessing complex characteristics, the Law cannot avoid regulating.

3. The Streaming Technology

3.1. The meaning of the word and its concept

Streaming (Media flow, online broadcast software [7]) is a type of data distribution, generally multimedia, in a network via bundles. It is frequently used to distribute multimedia content through the Internet [8].

The word streaming has a similar connotation to another use of the term, a creek. Streaming denotes a “flow,” that, in the scope of technology, means the flow of data or multimedia content.

From that, we can understand the following concept: streaming is a broadcasting technology that enables access to content through the Internet, without the need for a transfer of ownership or property.

3.2. Its origin

The streaming technology was developed in the United States in the 1990s. However, it did not popularize due to the slow speed of the Internet connection, which could not cope with instant loading. Trying to watch a video or listen to music via streaming continued to be an exercise of patience through the 2000s (since the data spent more time loading and being stored than viewed). Videos “crashed” often, and the image quality was inferior.

Only with the increase in Internet speed through broadband technology, streaming popularized and, along, came the advent of an incalculable number of possibilities.

3.3. How does streaming technology work?

In streaming technology, information is not stored on the user’s device, who receives a stream, a data transmission (with temporary storage in the system’s cache [9]), in a way that media (video, music, and others) is played as it arrives at the user, depending on the broadband’s width [10] (which must be enough to play the content; otherwise, there will be gaps in the transmission).

This technology enables users to play content protected by copyright, through the Internet, without violating rights (similar to radio or broadcast TV, and different from what would happen in the case of a content download [11], when the user stores the media in the HD, and constitute an illegal copy).

As examples of the application of video streaming technology, we can mention YouTube (a pioneer in the streaming service on the Internet), Netflix, Hulu, Globo Play, HBO Now, Amazon Prime, and as musical streaming, we have Spotify, Deezer and Apple Music.

3.4. Its main characteristics and species.

One of the most significant advantages of online transmission software is the possibility of distribution of content protected by copyright without violating these rights.

Since there is no downloading of files, streaming is similar to television transmissions. They also have the advantage of the freedom to access the content at any time.

Considering that the technology allows the user to both follow a live event (like the Oscar ceremony, or a show broadcasted directly via the Internet) or make use of it on demand, we can classify the media flow in two different species: on-demand and live streaming.

On on-demand streaming, the user accesses the content like movies or TV series, documentaries, music, and others, via the transmission and instantaneous reproduction of files stored in a catalog. Here, the user is in control of what they will watch, when and where (which device), being able to control the display, pausing, skipping forward or rewinding the chosen video or music.

On live streaming, although being based on the same technology, it focuses on events that are happening at the time of transmission, even enabling interaction of the user with the event they are watching. In this category (live streaming, which is the current tendency), are the live broadcasting of parties, likes marriages, or corporate events.

4. The Taxing of streaming in the United States of America

In the USA, the birthplace of streaming technology, the legislation and jurisprudence on the theme [12] are well advanced, although not yet pacified. For a better understanding of our study, let’s see how some locations in the United States have dealt with the theme.

The Chicago Department of Finance, on 09/01/2015, emitted the fiscal instruction Tax Ruling #5 [13] and altered the Chicago Amusement Tax to tax entertainment enjoyed through electronic means. Such exaction applies to the taxpayer that watches or takes part in any entertainment using Internet access. The tax rate is 9% of the charges paid in the subscription or equivalent payment, besides the traditional events taxed by the Chicago Amusement Tax (expositions, entertainment shows, recreational activities, or similar events). Also, entertainment through digital access (television shows, movies, videos, music, and online games) has been integrated into the hypothesis of tax incidence. Moreover, it is considered a passive subject of the alluded tax every client whose primary residential or commercial address is in Chicago (which can be proven by credit card billings, the negotiation income address, and others.) Finally, according to the Chicago Department of Finance, such taxation focuses “only on object content of temporary access broadcasted online” (and not to the acquisition of shows, movies, videos, tunes, or games permanently downloaded to the user’s device).

The Alabama Department of Revenue altered the Administrative Rule 810-6-5-.09 [14], to extend Alabama’s rental tax (some form of taxation over rental) to video and audio streaming, valid as of 10/01/2015.

According to this change, “digital broadcasts, movies on demand, television programs, video streaming, audio streaming, and other similar programs available to the clients, independently of the broadcasting method (be it through a subscription for a determined or undetermined period, be it on demand), are considered tangible goods and subjected to taxation on rental (which is similar to location of movable property in the Brazilian legislation). However, after the State government and tax lawyers put pressure, the alluded administrative norm was revoked on July 7, 2015. Following the suppression of taxation, its imposition has not been considered anymore.

On the other hand, in the State of Florida, a tax consultation to the local Department of Revenue resulted in the Florida Technical Assistance Advisement # 14A19-005, of 12/18/2014 [15], whereby the sales and use tax does not concern the selling and subscription of digital video streaming (television shows, movies, sports events, and news events) because there is no transfer of material (tangible) ownership.

inally, in Idaho, the statute on digital goods (Idaho, H.B. 209) [16] was altered in 4/1/2015, to establish that streaming services are not subject to any taxation. The difference between taxable treatment or not is in the temporary (streaming) or permanent (download) character of the right to use. The tax on sale and use will concern digital goods when the buyer acquires the permanent right to use digital products. In opposition, the tax on sales and use will not be relevant when the use is temporary or if it’s conditioned to continued payment.

Thus, after this brief analysis of the legislations pointed above, we can conclude that American states and counties have been using different triggering events to handle taxation on streaming of videos, TV programs, games, and digital music.

Consequently, if on the one hand, the online entertainment, the communications service, or even, the sale of and use of material goods can be triggering events in the taxation of streaming in the USA; on the other hand, there are American states and counties which legislation does not even frame media flow as hypothesis in tax incidence.

5. Closing remarks

Questions related to the application of existing tax structures will undoubtedly need to be revised in order to adapt the old legal framework between taxpayers and triggering events to handle taxation on streaming of videos, TV programs, games, and digital music.

At first, this can result in uncertainty regarding the applicable tax legislation, especially when considering that new technologies bring decentralization as a new form of data transmission and storage.

However, these uncertainties do not eliminate the need for a political agenda to adapt the tax legislative framework to the new fatal situations emerging from technological innovation.

At this rate, it is necessary for legislators to discard punctual and disconnected approaches with the current economic, social and cultural digitalization, and to position themselves in a global context, seeking a tax structure together with other countries, accepting support and endorsement from specialists in new technologies in that process.

And here we conclude this article hoping that this work will contribute to a more macro view of the whole panorama of taxation in the digital age, in addition to encouraging public authorities to formulate and apply the relevant tax legislation in a coherent manner.



[1] WIKIPEDIA. Era da informação. In Wikipédia, a enciclopédia livre. Available at:<>. Accessed on: 02/20/2017.

[2] WELSH, Anne; KINSKY, Curt; RONAN, Nick; KLITGAARD, Mark. Can Clouds Change Shapes? Transfer Pricing Considerations for Cloud Computing, In Tax Notes International magazine, Tax Notes International, v.64, #2, 10/102011, p.147-154, ISSN: 1048-3306, p. 147. Available at <>. Accessed on 02/18/2017.

[3] "Digital Law consists of the evolution of Law itself. It encompasses every fundamental principles and the current institutes that are applied to this day, as well as introducing new institutes and elements to legal thought, in each of its areas (Civil Law, Copyright Law, Commercial Law, Contract Law, Economic Law, Financial Law, Tax Law, Criminal Law, International Law, and others).” (PINHEIRO, Patricia Peck. Direito Digital. Ed. Saraiva, 2007.)

[4] WIKIPÉDIA. Internet. Available at <>. Accessed on 02/20/2017.

[5] MACHADO, Hugo de Brito. Curso de direito tributário. 27th ed. São Paulo: Saraiva, 2006, p. 82

[6] The State as administrator of Public Treasure in respect to financial, economic, patrimonial and, especially, tributary questions. (XAVIER, A. Fisco, in Enciclopédia Verbo Luso-Brasileira da Cultura, XXI Century Edition, Volume XII, Editorial Verbo, Braga, November 1999).

[7] Computer program, composed of a sequence of instructions, which is interpreted and ran by a processor or a virtual machine. In a correct and functional application, this sequence follows specific patterns that result in the desired behavior. The term “software” was created in the 1940s, and it’s a pun on the term hardware. “Hardware” is a physical tool. Software, in turn, would be everything that makes a computer run, except for its physical part. A program can be run by any device capable of interpreting and running the instructions that are made of. [UFPA. Programas – Função e Tipos. Website of Universidade Federal do Pará. Available at: <>. Accessed on 02/21/2017

[8] WIKIPÉDIA. Streaming. In Wikipédia, a enciclopédia livre. Available at <>. Accessed on 02/18/2017.

[9] “In the world of computing, a cache is the device of rapid access, internal to a system, that serves as the intermediary between the operator of a process and the storing device in which this operator accedes” (Wikipédia. Cache. Available at:<>. Accessed on 02/15/2017).[10] Name given to any Internet connection above the standard speed of analog modems (56 kbps.). (Wikipédia. Banda larga. Available at: <>. Accessed on 02/15/2017).

[11] In technology, the terms download and upload are used to reference the data transmission of one device to another through a communication channel previously established. The most common use of the term download is related to the acquisition of content from the Internet, where a remote server hosts data that are accessed by clients through specific applications that communicate with the server through pre-established protocols, as in the case of the web navigators that access the data of a web server, usually utilizing the HTTP protocol. Similarly, the term upload references the opposite operation to the download, that is, the sending of content to the Internet. TECHTUDO. O que é download. Available at <>. Accessed on 02/15/2017.

[12] JENSEN, Jennifer. US – The disparate state and local tax treatment of digital streaming services. In: PwC, e-business and e-commerce, In the Year 2015 and beyond. USA, 9/9/2015. Available at: <>. Accessed on 02/18/2017.

[13] the UNITED STATES. Chicago. Department of Finance. Amusement Tax Ruling – Tax Rule nº 5. Available at: <>. Accessed on 02/21/2017.

[14] the UNITED STATES. Alabama. Alabama Administrative Code: Administrative Rule nº 810-6-5-.09. Available at: <>. Accessed on 02/21/2017.

[15] the UNITED STATES. Florida. Florida Department of Revenue – Florida Technical Assistance Advisement No. 14A19-005. Available at: <>. Accessed on 02/21/2017.

[16] the UNITED STATES. Idaho. The legislature of State of Idaho. Sixty-third Legislature – First Regular Session – 2015 – HOUSE BILL NO. 209. By Revenue and Taxation Committee. Available at: <>. Accessed on 02/21/2017.


About the Author

Tatiana Revoredo – CSO at Liaison at European Law Observatory on New Technologies. Court legal Advisor at São Paulo Court of Justice.

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