Music Streaming in New Orleans, Louisiana Deemed Not Taxable Under Internet Tax Freedom Act

The Louisiana Board of Tax Appeals (Board) ruled that music streaming services provided by Apple (Apple Music) are not subject to tax in New Orleans (City) under the Internet Tax Freedom Act (ITFA).

Apple had asked the Board to overturn the City’s notice of assessment that assessed tax, penalties and interest of $676,130 with respect to sales of Apple Music streaming subscriptions. In its argument, Apple listed three material facts:

• Apple Music is a service that uses the internet to stream audio content, such as music, to devices connected to the internet.
• Satellite radio is a service that allows the streaming of audio content, such as music, using satellites to devices capable of receiving satellite signals.
• The audio content streamed using the internet to Apple Music subscribers is similar to the audio content streamed by satellite radio providers to subscribers using satellite signals.

Apple provided information showing that Apple Music offers subscribers access to music categories similar to music channels offered by SiriusXM, which provides its music streaming services via satellite. The Board found no evidence that Apple Music offers any services that are substantially different than the services provided by SiriusXM. The only evidence before the Board was that Apple Music and SiriusXM are essentially the same service. The only difference between Apple Music and SiriusXM that was shown to the Board is the medium by which the services are provided.

The ITFA prohibits a state or political subdivision from imposing discriminatory taxes on electronic commerce. The Federal Telecommunications Act (FTA) prohibits providers of direct-to-home satellite service from collecting or remitting any tax or fee imposed by any local taxing jurisdiction on direct-to-home satellite service. Apple provided evidence that SiriusXM’s music streaming service is not subject to the City’s sales tax because it is provided by satellite. Based on that evidence, the Board concluded that “under the unique circumstances of this case,” satellite music streaming services are not generally subject to the City’s sales tax. The Board found that the city was attempting to impose its sales tax on the same service because Apple provides it via the internet. As such, the Board found that the City had applied its sales tax in a discriminatory manner prohibited by the ITFA.

Based on the absence of any contrary evidence provided by the City, the Board granted summary judgment to Apple. Apple provided sufficient evidence that it was entitled to relief. As such, the Board vacated the City’s assessment issued to Apple. (Apple Inc. v. Romy S. Samuel, Docket No. L01283, Board of Tax Appeals, State of Louisiana)