The 'Netflix tax' is starting

Watch out: The "Netflix tax" is coming.

At least in Pennsylvania. The state legislature there recently extended its 6 percent sales tax to digital downloads and subscription services like Netflix and Hulu.

Though it's called the Netflix tax, colloquially at least, the fee will also apply to streaming and downloads for music, e-books and apps. Digital versions of newspapers, magazines and the Bible, will be exempt.

Pennsylvania joins a select group of locations that have begun to put local taxes on digital services. Chicago already has a similar 9-percent tax, often called its "cloud tax." Digital goods are also taxable in Minnesota. Similar taxes have come up in Canada. Netflix even battled in Kentucky over telecommunications taxes there, a way some states have tried to tax digital services without imposing a sales tax.

The sales taxes, like the one in Pennsylvania, are applied when a customer uses a billing address in a city or state with an applicable sales tax.

So if you want to avoid the Netflix tax, borrow a billing address outside the state. At least until the Netflix tax comes for us all, that is.

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When and how to tax consumers buying services and goods from internet companies has long been a difficult question to answer. Amazon avoided charging sales tax for years before starting to charge it in some locations. Amazon now collects sales tax in 28 states.

One bill to charge online sales take, the MarketPlace Fairness Act, has been debated for years and remains up for debate.