iTax

Jeff Taylor | April 13, 2006

Just in time for tax season, news that 15 states are already trying to tax downloads from iTunes and other digital media providers. Other states will surely follow suit, taking existing tax law and twisting it to cover the new delivery model.

Kentucky, for one, reasons that purchased music is personal property and, as such, is taxable. Toss in the added wrinkle that has many states treating Net service as a quasi-utility, with associated fees and taxes, and the tax bite from states could be difficult to escape.

Comments

Dan T.|4.13.06 @ 5:09PM|#

Well, if I go to the store and purchase music on a CD, I pay sales tax on that. It's not exactly clear why purchasing that same music over the internet should be exempt from tax.

|4.13.06 @ 5:22PM|#

If they can tax it, and they can call my digital music "personal property", then I had damn well better be able to copy it and share it with friends. (At least copy it for my own use, as I am on the fence wrt copyright laws, fair use, etc.)

Dan T - I'm not saying I disagree with you, but these money-grubbing assholes that we have in gov't are just doing it to keep leviathan going. That is not something I can stand behind.

|4.13.06 @ 5:23PM|#

Well, Dan, in theory you are getting something from the government in exchange for being able to go to the store (roads) and buy the thing that was trucked in and protected by the local constables, etc.

In short, it is a use tax on the building blocks of commerce. Sitting on your butt downloading, I guess you could say the government is keeping you being gang raped whilst downloading, but in reality this iTax is straight ability-to-pay deal. If you can afford to buy X, then government gets a cut.

|4.13.06 @ 5:24PM|#

Explain to me again why politicians don't want to try this approach with illegal drugs and prostitution.

And explain to me why we keep electing these numnuts.

And what are Texas, South Dakota and Utah doing on this list? I thought red states were supposed to be opposed to taxes.

'Merica jus' keeps gettin' weirder every day.

|4.13.06 @ 5:25PM|#

...keeping you FROM being gang raped...

(Obviously, or perhaps not so)

|4.13.06 @ 5:26PM|#

1100010101000100101011010010111110101010010101010110111101101010110101001001010010010010010101010101010010010

All this and more for just $0.99*

*taxes, shipping and handling (internet access), taxes on the shipping and handling, and express delivery (high speed internet access) are extra.

|4.13.06 @ 5:33PM|#

...

Does anyone really pay the Use Tax anyway?

|4.13.06 @ 5:42PM|#

Does anyone really pay the Use Tax anyway?

I did. Kentucky sent me a bill for the tax and I paid 'cause I don't need the hassle of fighting it. I packed up and left right after that. Fuck 'em. They can have their pregnant fourteen year olds and toothless twentysomethings.

|4.13.06 @ 5:45PM|#

And what are Texas, South Dakota and Utah doing on this list? I thought red states were supposed to be opposed to taxes.

My hunch is that iTunes users probably skew younger and more liberal than the general population in those states, so there's little to be lost by pissing them off if you're a Republican Governor.

|4.13.06 @ 5:48PM|#

p>If a state says that downloads are personal property, this might then support challenges to DRM restrictions imposed by the Studios/Labels.

Dan T., I buy a CD (or DVD, or Book, etc.) on Amazon with Supersaver Shipping (free), and pay no state sales tax. If the "property" came from outside the buyer's state of residence, then no tax is owed. (granted that several business unfriendly states have been trying for at least a decade to change that situation.)

|4.13.06 @ 6:24PM|#

Hasn't most mail order been the same as well?

I always knew the rule to be that if the seller has "no physical presence" in my home state, then my home state has no claim to sales tax on sold products.

I used to buy from PCMall/MacMall, until recently they said they opened a local warehouse in IL and thus had to start charging me sales tax. So I stopped buy from them as the tax made their product more expensive then other online competitors who dont have a presence in IL

|4.13.06 @ 6:26PM|#

careful, Eddy, remember, Microsoft patented ones and zeroes.

|4.13.06 @ 6:58PM|#

It's ok biologist, I recently upgraded to 1's & 0's v. 2.0 and it allows me to copyright not only that sequence but any representation of that sequence for only .77 times the gross revenue and allowing MS to use it for free. Well, anything except a dodecadecimal because of some sort of disagreement with the Dirty Dozen. The only problem is Massachusetts has recently started taxing any number greater than 0 so I'm going to move my business to China.

|4.13.06 @ 7:04PM|#

And explain to me why we keep electing these numnuts.

I never voted for any of 'em.

Tip: don't buy recordable CDs labelled "Music." The difference between "Music" CDs and others is that part of the procedes, as a tax, goes to the entertainment industry, which assumes you're going to steal music and put it on the CD. Long before recordable CDs were popular they did the same thing with blank casette tapes.

I'm curious as to how they'll tax Usenet alt.binary.* downloads.

|4.13.06 @ 7:23PM|#

Damn, Kentucky shat on twice in one day. Not to say we don't deserve it, though. But, to be fair Twba, all those hillbilly cliches get old, even in the few cases where they are true (like there aren't knocked up 14 years-olds and toothless 20 years olds everywhere in the world). What's more, the "hillbilly" is a phenomenon of the Appalachian Mountains. Most Kentuckians don't actually live there (most, in fact, live in Lexington and Louisville which are somewhat crappy cities but cities nonetheless). If people are going to slur us I wish they'd come up with more region-specific epithets.

|4.13.06 @ 7:45PM|#

And what are Texas, South Dakota and Utah doing on this list?

And what is New York doing NOT on this list?! Eliiot Spitzer better get on that when he becomes governor.

|4.13.06 @ 8:58PM|#

eric mattingly,

Sorry, you'll get no sympathy from me. When visiting Cincinnati, I went out of my way to eat at a Kentucky Fried Chicken in Kentucky (Covington). The mashed potatoes were lumpy, the corn was tasteless, and the chicken reeked of detergent. If Kentuckians can't even get their own Fried Chicken right, I think you'll understand why I'm anti-KY for life.

|4.13.06 @ 9:01PM|#

Oh, please. There is no reason not to tax products purchased from the internet just like any other purchase. Of course, I'm a freak who'd like to see sales taxes on real estate. (I prefer sales taxes to income taxes. Increase sales taxes and decrease income taxes proportionately.)

|4.13.06 @ 9:32PM|#

Oh, please. There is no reason not to tax products purchased from the internet just like any other purchase.

TRB

No one understands sales tax! This problem has nothing to do with the Internet. Most Internet retailers will sell you the same product if you call their 800 number. It will not be taxed either, or it will, depending on the names of the states in which the product is bought and sold, on the physical or legal presence of the seller in the same state where the buyer is, how the product was delivered or picked up, and the history of the seller's sales tax collection method.

(I prefer sales taxes to income taxes. Increase sales taxes and decrease income taxes proportionately.)

If you own your own business some day, you will reconsider that preference.

|4.14.06 @ 2:32AM|#

KenFucky !!!

|4.14.06 @ 2:39AM|#

If a state says that downloads are personal property, this might then support challenges to DRM restrictions imposed by the Studios/Labels.

You beat me to it. DRM does indeed assert that the property is not the purchaser's and its ditribution or even performance not under his or her control. This of course could extend to copy protection measures on downloadable software or hell, even store-bought software. The bits are only licensed and not sold.

If the the information on the media is not the purchaser's property then taxation should be limited to the portion of the total cost corresponding to the physical media or whatever part the purchaser legally owns.

|4.14.06 @ 3:17AM|#

JK,

Perhaps Real Bill might not reconsider his position if he were a business owner who looked at the bigger picture. Since sales tax is higher and income tax lower, there'd be more saving & therefore more available money for investment, so it would be cheaper to start the business and make capital improvements. While sales would be lower, in the end, could it not balance out?

|4.14.06 @ 3:17AM|#

JK,

Perhaps Real Bill might not reconsider his position if he were a business owner who looked at the bigger picture. Since sales tax is higher and income tax lower, there'd be more saving & therefore more available money for investment, so it would be cheaper to start the business and make capital improvements. While sales would be lower, in the end, could it not balance out?

Rich Ard|4.14.06 @ 3:54AM|#

Of course, I'm a freak who'd like to see sales taxes on real estate.

Do you mean something different than existing transfer taxes? And would you like to see it replace or augment some existing tax?

|4.14.06 @ 3:58AM|#

Well, a sales tax on real estate instead of property tax might be preferrable. You can't own something you continuously have to make payments on so when theygovernment takes "your" land don't complain since it's not really yours to begin with.

Ed|4.14.06 @ 8:38AM|#

It's just another shakedown. If you have internet access you are already paying various telecommunications taxes through your phone or cable company. You probably paid a sales tax when you bought your computer. Apple pays corporate taxes. If you own Apple stock you pay taxes on capital gains. You pay taxes on the electricity that runs your computer. Etc. Etc. Etc.

R C Dean|4.14.06 @ 8:44AM|#

There is no reason not to tax products purchased from the internet just like any other purchase.

A state cannot impose a tax on someone it has no jurisdiction over. A state has no jurisdiction over you unless you have a physical presence in that state.

Any arguments so far? Anyone want to argue that Texas can start sending income tax bills to people living in New York who have never been in Texas? No? Then you are on board so far.

That means a state cannot tax a seller who has no presence in that state, whether the tax is an income, property, or sales tax.

Some states try to get around this with a "use" tax imposed on their residents for stuff they didn't pay sales tax on, but this is risibly unenforceable.

|4.14.06 @ 11:02AM|#

Eric Mattingly,

I lived in Kentucky. If that doesn't give me an excuse to complain, what does?

Shawn Levasseur|4.14.06 @ 12:21PM|#

Trying to tax iTunes?

Funny, I'm in Maine and whenever I buy on the iTunes Media Store, I see Sales Tax applied. And have for quite a while.

|4.14.06 @ 12:44PM|#

Apple does have a physical presence in Maine.

|4.14.06 @ 9:01PM|#

Perhaps Real Bill might not reconsider his position if he were a business owner who looked at the bigger picture. Since sales tax is higher and income tax lower, there'd be more saving & therefore more available money for investment, so it would be cheaper to start the business and make capital improvements. While sales would be lower, in the end, could it not balance out?

No "Huh?". The higher sales tax would just discourage customers from buying his products, leaving him with lower sales revenue and less capital for improvements.

You're gonna get taxed no matter what. And the taxes are going to take away from you ability to start and run a business regardless of how the taxes are collected.

My point was that TRB might reconsider when he sees how fucking complicated collecting sales tax is.