July Brings a Flurry of New State Internet Taxes

Politicians want a piece of everything

Not waiting for Congress to act on Internet sales taxes, some states are imposing a sales tax on online transactions starting July 1 by slapping levies on items like telephone ringtones, digital audio book downloads and music.

July 1 is the beginning of the fiscal year in most states, and the preferred start date for new or updated taxes. This year, legislatures changed tax rates on significant parts of the economy, including gasoline or fuel levies, sales taxes and property taxes.

Perhaps the most innovative new taxes are in cyberspace. Minnesota is leading the way in moving the taxman into Internet sales, by imposing taxes on digital audio works like songs, readings of books, speeches, ring tones or other sound recordings. The 6.875 percent sales tax does not apply to "ring back" tones or music that is played while a caller is on hold.