North Pole resident questions online Netflix tax
Originally published Wednesday, June 18, 2008 at 12:02 a.m.
Updated Wednesday, June 18, 2008 at 3:42 p.m.
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FAIRBANKS — Debra Burkhardt said she loves her Netflix account.
But she was surprised when her monthly bill for April showed a charge under the “tax” column for the first time in three years of her being a customer.
She figured maybe the company had mistakenly applied the North Pole city’s sales tax — despite the fact that she lives outside the city limits — but noticed the tax rate would have been wrong. So she called and was told the charge applied to a municipal tax on hotel stays, which left her more confused — enough that, after a few more tries, she suspended her service.
“It’s like they’re making it up,” she said of the 65-cent charge.
Burkhardt called North Pole officials, who said she wasn’t the only one with questions and drafted a letter asking the company about the charges.
Netflix corporate communications vice president Steve Swasey said the online DVD rental giant is “judicious” in its efforts to make sure it applies the correct tax rates when billing customers — all 8.2 million of them. He said it was looking into the North Pole-area complaints Tuesday to rule out any confusion.
Swasey said the company follows a default strategy — it researches local tax laws and, if a tax seems to apply, errs on the side of caution by charging customers. Of course, if the tax later turns out to be wrong, they’ll fix things, he said.
“We don’t want to run afoul with (tax) regulators,” Swasey said by phone Tuesday. “We follow what we think is the law until we are convinced it is not the law.”
Burkhardt is running into a quirk that could be hitting many residents and companies doing business in and around North Pole, particularly with the rise in popularity of Internet sales through huge companies like Amazon and Cabela's.
The 1,700-person city of North Pole charges a sales tax, unlike the larger Fairbanks North Star Borough — a municipality the geographical size of Connecticut, but with around 100,000 residents — and its biggest city, the city of Fairbanks. The state of Alaska does not charge a sales tax.
Burkhardt said her discussion with the city also revealed North Pole’s lawbooks exempt Internet sales from its local sales tax. So she kept calling Netflix and, after four or five tries and conversations with multiple representatives, put her subscription on hold until things were ironed out.
North Pole officials drafted a letter to Netflix last week asking the company to identify the tax on area customers’ bills. Mayor Doug Isaacson stopped short of speculation but noted city officials have seen several companies attempt to collect sales tax despite what he said are state and local laws forbidding sales tax on Internet sales.
“I wish I had the staff to go after it all the time,” he said, “but I don’t.”
Burkhardt and Netflix could simply be working out kinks in the web of rules growing alongside the rise of Internet shopping and e-commerce. Martin Kenney, a community development professor at the University of California, Davis, said the difference between tax scenarios that apply to Internet-reliant companies depend on a number of factors — such as whether, for example, the company has a distribution center in that specific state. Kenney suggested the situation in North Pole could be a case that “slipped through the cracks” of usually reliable mapping software used by major companies to figure out which customers live where, and how they need to be taxed.
“Which, for a company like Netflix, is probably almost impossible for them to solve,” he said.
Amazon.com spokeswoman Patty Smith said her company is legally required to collect only statewide sales taxes, which it does in a handful of states, including Washington and North Dakota. She said the company does not, however, zero in on local sales taxes that would apply in places like North Pole.
Compounding Burkhardt’s questions is her mailing address — while she lives outside the North Pole legal city limits, the Postal Service lists her address as “North Pole.”
Burkhardt said she’s been a Netflix customer for years and loves their service. And Swasey noted the company regularly ranks near or at the top of customer ratings of online companies.
“We’re real proud of that and we hold to that because we take all of this stuff so seriously,” Swasey said.
But Burkhardt also said she’s given up until she figures out what the few cents tax on her bill means.
“Granted, it’s a small amount,” she said. “But it’s not right.”
Community Discussion
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No doubt many, many residents within the Borough would like to not have the '99705' zip code when they do NOT live within the North Pole city limits.
What can the Postal Service do to end the endless confusion they cause by having a zip code for North Pole that is not contiguous with the city limits of North Pole? Anyone with the Postal Service care to comment?
ACS for many years was illegally charging a North Pole City tax to customers who did not reside within North Pole city limits simply because they had that dreaded '99705' zip code.
If Netflix is legally collecting statewide sales taxes, are the designated states actually receiving the monies?
Seems like North Pole would know if they are getting a check from Netflix. Since Alaska doesnt have a statewide sales tax, it seems like a no brainer to not be collecting it!
I am not a Netflix subscriber but think I will ask around and see if others are sending this tax it!
God forbid the state of Alaska should miss out on a contribution to state coffers!
So Netflix collects the tax. Then keeps it rather than forwarding it on to North Pole. There's a word for that. Fraud.
I noticed the extra charge pop up on my Netflix account a few months ago too, but I assumed it was in response to the postage increase. I didn't even call them and ask. I'm interested to see what comes of this.
This should help clear up your confusion "Eat_or_Heat" on the zip code issue, I found this link.
http://alaska.hometownlocator.com/zip-co...
I live in an area between Moose Creek and North Pole. According to a census map I found I live within Salcha but the post office says I have a North Pole address, so who is correct?
I believe the proper spelling is "Cabela's" not "Cabella's", apparently Mr Eshleman doesn't sport the hard bound Limited Edition as a classic Alaskan coffee table book like many of us, "rookie mistake". LOL
Netflix informs me that the $.68 charge is a statewide "rental tax" that does apply to the internet and that they should have been collecting it all along. Apparently, both Alaska and Delaware have informed them to begin collecting it at once.
Ahh the old smoke and mirrors trick. Yes, it sounds like the alaska dept of revenue should have a word with netflix about where the money is. I've had transactions on EBAY where they tried to pull this stunt of charging me a tax. I just politely remind them there is no tax for us and to collect a tax in the name of a state when none exists is fraud and likely on the federal level due to the borders. They always dropped the issue.
Alaskanlady wrote: "I believe the proper spelling is "Cabela's" not "Cabella's", apparently Mr Eshleman doesn't sport the hard bound Limited Edition as a classic Alaskan coffee table book like many of us, "rookie mistake". LOL"
Alaskanlady, I find it amusing that in your rush to redicule the reporter's spelling, you yourself misspelled (misquoted) what HE wrote.
Alaskanlady wrote: "I believe the proper spelling is "Cabela's" not "Cabella's", apparently Mr Eshleman doesn't sport the hard bound Limited Edition as a classic Alaskan coffee table book like many of us, "rookie mistake". LOL"
Alaskanlady, I find it amusing that in your rush to ridicule the reporter's spelling, you yourself misspelled (misquoted) what HE wrote.
I believe everyone's wrong, it's spelled "Kaballah", ... ask Madonna.
LOL.
I had the same problem with Dell. I filed a claim with the Alaska Attorney General and Dell gave me my money back.
http://www.law.state.ak.us/department/ci...
99705 is a nice zip code...
I talked to Netflix about this tax, and then emailed dor.tax.excise@alaska.gov, the State's department of revenue. The state has yet to respond to me. Perhaps more folks need to contact the department of revenue to get an answer about this 4% state rental tax.
Netflix said this tax came from the State of Alaska, not North Pole.
Same thing in Palmer/Wasilla area, all of us in between the two locations are either listed as Palmer or Wasilla mailing addresses, we too see the tax charge even though we are listed outside city limits. I see a 3% sales tax charge on my bill.
I called Netflix and this was her answer They said quote "We have a very sophisticated Tax Program and that the State of Alaska has allowed Netflix to envoke a media mail tax in the city of Palmer of 3%" When I told her I don't live in the City she said I must live in the City because that is where my mail is sent to. Nice lady though.
Alaskanlady — Yours is the correct spelling for Cabela's. We've fixed it online.
Also: A few folks have suggested the tax — which seems to be showing up on some people's Netflix bills but not on others — could be some sort of a statewide tax. I just got off the phone with Jerry Burnett, who directs administrative services for the Alaska Department of Revenue. He ruled that option out, saying "the state does not have any taxes that would be applied to Netflix rentals."
More to come.
We were recently charged North Pole tax on telephones that we ordered online through Tracphone....perhaps there is a new trend happening here with the taxes?
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