SAN DIEGO (CBS NEWS) - A video streaming tax is already a reality in some cities across the country, but a "Netflix tax" could soon be a reality for some California cities.
According to CBS News, streaming video services are being referred to as an utility so it can be taxed like water and electricity.
For example, the City Council of Pasadena announced a 9.4 percent tax on streaming video, but Pasadena residents' backlash was quick and harsh.
Pasadena City Councilman Tyron Hampton told CBS News the surprise tax was designed to make up for lost tax revenue from people getting rid of cable TV and home phones.
"My constituents do not want this tax. Even if it is just a couple of dollars. It is being taxed twice," he told CBS News.
In 2008, Pasadena voters modernized a law to tax cell phones like landlines, never anticipating it could be applied to video streaming. Forty California cities now have similar laws, according to CBS News.
Internet Association Director Robert Callahan believes cities could be violating federal law, because the government doesn't allow tax on the internet.
"People are going to wake up and see tax line items on their Netflix and Hulu bill and they are not going to be happy," Robert Callahan said.
CBS News reported that Chicago is currently being sued for charging a 9 percent tax on video streaming. And Pennsylvania's charging a 6 percent sales tax on everything, from apps to downloads, to help close a $1.3 billion budget gap.
Cities in California still haven't started collecting the controversial and unpopular video streaming tax -- but when they do, it will very likely end up in court.
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