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States Seeking Levies on Digital Downloads 249

Posted by Zonk
from the more-money-for-them dept.
evdubs writes "15 states and the District of Columbia currently tax online media, with others eager to begin their own taxes. The RIAA estimates that domestic sales totaled $503 million last year, but that figure doesn't include movies, e-books, online video games and other forms of digital media. Perhaps the most interesting point in this article is the way states, looking to start taxing online media, are trying to use the interpretation of previous law and apply it to digital media. In Washington, politicians are using their definition of software (already taxable), 'a set of coded instructions designed to cause a computer...to perform a task,' to justify taxation of online media because 'they cause some action by a piece of hardware to play them.'"
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States Seeking Levies on Digital Downloads

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  • by IntelliAdmin (941633) * on Friday April 14, 2006 @10:26AM (#15129065) Homepage
    It makes me wonder how they could possible determine who owes what. If someone from the UK purchases digital goods from me in Michigan - how would they know the difference? It will require that businesses volunteer the info - not likely
    • by way2trivial (601132) on Friday April 14, 2006 @10:29AM (#15129084) Homepage Journal
      require that businesses volunteer the info

      JUST LIKE SALES TAX on in store sales..

      do you think any seller of legal electronic media (movies, music, photographs) is not going to be a large enough company to plan on compliance with their local laws?

      • Well, generally you don't pay taxes for purchases made from a business in another country or state, since that jurisdiction doesn't have "authority" to tax you. (not that I believe in taxation at all)
        • You're supposed to, though. Now exactly how many people actually went and tallied their online purchaes just so they could pay tax on them is beyond me, but I wasn't one of them.

          While taxation in general seems wrong to me, especially on sales since it's insanely regressive screwing over the poor, trying to tax online sales will damage the global economy. Maybe if they didn't spend so irresponsibly I wouldn't be as bothered, but they do. And if they just tax digital downloads, piracy is going to effing

      • Sure, but if I run an online business in New Hampshire (where there is no sales tax), and this is where my servers are and where the credit-card processing occurs, and sell digital downloads to people all over the country and world, there's no way that I'm going to be able to track where the recipients are and pay tax in their jurisdiction. Heck, I'm probably never even going to ask the recipients their addresses. Why do I need to know? If they have a credit card, that's pretty much all I care about.

        If Wash
        • http://www.nj.com/business/ledger/index.ssf?/base / business-3/1144385793100320.xml&coll=1 [nj.com]

          The names and purchase information of smokers who bought cigarettes online are being relinquished by the Web-based purveyors, after prodding by the state Di vision of Taxation.

          The Taxation Division cited a 1949 federal law, the Jenkins Act, to obtain lists of New Jersey buy ers. The law requires remote sellers of cigarettes to provide names of buyers to state tax authorities, said Tom Vincz, a spokesman for the stat
        • Why would you need to know their address if they are paying by credit card? Merchants should gather address information for AVS (Address Verification Service) so that a) It verifies that the person submitting the credit card information knows the billing address for the card. This along with the 3 or 4 digit code that is only printed on the back of the card reduces the amount of fraud that occurs (which is good for the industry). b) Providing the information to your credit card processor will ensure that
    • Nah, they wouldn't require them to volunteer the info. They'd just tax all of it and offer refunds on those the business could prove weren't taxable.

      Jeez, I'm cynical today.
    • It's the "if I don't get caught syndrome." Basically, you'll get caught and then they'll fine you big time. For example, many years ago I ordered a computer for a NYC business, but I had it delivered to a New Jersey address for safety reasons. The computer was never used in NJ, but NJ still came after me for (use tax) sales tax + a BIG FINE. Funny thing is, the business in NY already paid sales tax in both NY and NYC. I tried to explain this to NY division of taxation, but they just wanted their money.

      Fact
    • In New York they have a line on your tax return to report any online purchases you made over the past year but didn't pay tax on. They even suggest a value for you to pay if you aren't sure! (How nice of them). I think you're also supposed to report any (non-taxable!) purchases made on indian reservations, so they can tax you for that too. How the hell did we get to this point?
      • You don't march in the streets in the tens of thousands and tell the politicians if they don't immediately revoke the tax, you're driving them out of town.
      • How the hell did we get to this point?

        Because a lot of people voted for politicians who promised them a lot of "free" stuff, without thinking too hard about who was going to pay for it?

        There was a time when I would have said those politicians were called Democrats, but sadly now it's pretty much everybody (except for some quasi-Libertarians).
      • by hackstraw (262471) * on Friday April 14, 2006 @12:40PM (#15130269)
        How the hell did we get to this point?

        There are no victims, only volunteers.

        "Back in the day", when Americans were not satisfied with the tax on goods, they threw the goods into the harbor. Reaction, more laws from the lawmakers. Next reaction, revolt.

        I was speaking with a guy in his 60s the other day, and he was quiet and just worked for a living. He bluntly said to me, "I don't understand why young people put up with the shit that the government is doing today."

        So, aside from PETA trying to keep poor frogs from being dissected* and the NRA wanting armor piercing bullets available for children, and the EFF, who stands up for their rights?

        I speak with lawmakers, individuals, post stuff like this on slashdot and have it moderated down.

        * I have a love/hate relationship with extremists. I guess they need to be extreme so that a decent middleground is reached, but frogs? I love frogs. I've had 1 tree frog as a pet, and 2 firebelly toads. Very interesting animals. But in the wild, frogs have about a 0.03% chance of becoming old enough to be dissected. Frogs/toads are pretty happy in captivity. A little water, a little girl frog for the boy frog to hug onto, some food, they sing at night. Cool stuff. But, we still need extremists, even though their rational is irrational, hopefully a decent middlegound can be reached.

    • how they could possible determine who owes what.

      How about who owns what? With DRM'd music, and Right-of-First-Sale compromised, downloading some music is not quite as clear cut an ownership as buying a toaster. (I can re-sell a toaster, or a CD, but how can I re-sell a DRM'd music download?)

      I suppose they could just call it a service and put a sales tax on all services. Maybe some states already do this (?).

  • by nurb432 (527695) on Friday April 14, 2006 @10:31AM (#15129106) Homepage Journal
    As the government/corporations keep going down this road, we will all just have to go back something like the old BBS days where everything is private and you have to know someone to get in the door. Which to be honest, sounds good to me.

    This is also getting out of hand. Next they will assign an arbritary value to OSS software ( well, lets see. windows is xxx and office is xxx and and and .. so this cd of linux is worth an estimated 10000, so you owe us 100 bucks or we put you in jail )
    • so this cd of linux is worth an estimated 10000, so you owe us 100 bucks or we put you in jail

      Shut up, you'll give them ideas!!

    • I assume you mean his brother Edwin? Dave
  • Bang for the buck? (Score:5, Insightful)

    by TopShelf (92521) on Friday April 14, 2006 @10:32AM (#15129120) Homepage Journal
    I'm not entirely opposed to the idea here, but exactly what value are the taxing entities (states, districts, etc.) providing in exchange for the taxes collected? I could see the Feds providing structure and market enforcement via the FCC and FTC, which could possibly justify a federal levy, but where does an individual state get involved? That part I'm having trouble seeing.

    Of course, there's the other perspective which has state governments looking for any means to plug massive budget holes, so to that extent they're probably just following the old John Dillinger line as to why he robbed banks - because that's where the money was.
  • Thats Why.. (Score:5, Interesting)

    by bigattichouse (527527) on Friday April 14, 2006 @10:32AM (#15129121) Homepage
    thats why I've already started giving away some of my software for free with support. By signing a support agreement, my tools can be licensed for use for free by your company... I'm not selling them, you can't tax them.
    • thats why I've already started giving away some of my software for free with support. By signing a support agreement, my tools can be licensed for use for free by your company... I'm not selling them, you can't tax them.

      Be very careful here. The worst case scenario is they look at what you did as services rather than product and hand you a 1099 that gets taxed as income. That is a substantially higher amount when the tax man comes for you.

      In my youth I helped out a former boss who jumped companies. He n
      • My beef is if I sell something that can be delivered over the net, I now need to figure out what/if/how I have to tax the customer. Hard for a one guy and his dog style operations.

        Pretty much every ecommerce package calculates tax. It is not difficult to find state sales tax rates [taxadmin.org].

        • Pretty much every ecommerce package calculates tax. It is not difficult to find state sales tax rates.

          That's unfortunately a very naive view of the situation. Sales taxes can apply at local levels in addition to state levels. Recall this story [slashdot.org] from a few months ago. This stuff is not trivial, and you have to pay ongoing big bucks just to stay current (much like the mandatory Quickbooks subscription fees). No, I'm afraid it's far more complex than you're suggesting.

  • I don't get it (Score:5, Interesting)

    by dsgitl (922908) on Friday April 14, 2006 @10:33AM (#15129128)
    In Kentucky, I pay $1.07 for a song from iTunes. For some reason, my state feels the need to collect on content that didn't originate in the state, isn't served by an employee that works in the state, isn't stored on servers inside the state, and isn't necessarily even bought inside the state (a purchase made on a laptop while on vacation, for example).

    For me and my state, adding that $.08 to cigarette tax would be much more productive. I wish they would do that instead.
    • Every state has a "Fair Use Tax" that says anything purchased must be sales-tax collected. For example, here in NJ, if I purchase a newspaper on the ride home from NYC, I am supposed to declare it and perhaps pay sales tax on it to NJ. Ridiculous - and obviously not enforced in most cases. However in some common cases it IS enforced (try purchasing a new car out of state and see what a pain the state will be on sales tax). Why shouldnt items purchased via web be taxed? Its no different than calling a reta
      • Interesting Factiod- ITMS asks Ohioans for their county of residence. In Ohio we have 88 counties and 88 sales tax rates. (FUN STUFF!)
        I live in Ohio and this is only "enforced" in one direction. I live in X County where the tax is 5% . The next county over is Y County, where the tax is 7% . When someone from Y buys something in X, they are supposed to report and pay the 2% difference in taxes. Of course, if someone from X buys something at the higher rate in Y, they can't get the 2% difference back.
        (For
      • Re:I don't get it (Score:3, Insightful)

        by voidptr (609)
        Why shouldnt items purchased via web be taxed? Its no different than calling a retailer in a different state to make a purchase. Sales tax is due in that transaction - so why not via http?

        Because the theory behind sales taxes is you're paying the government's costs for making that transaction posible. Courts, roads, infrastructure, etc.

        When I buy something out of state and have it shipped or downloaded, my state government HASN'T DONE ANYTHING to support that sale. Why should they get a cut? At most they ge
    • For me and my state, adding that $.08 to cigarette tax would be much more productive. I wish they would do that instead.

      Why? I'd quite like to hear your reasoning on that...

      • For me and my state, adding that $.08 to cigarette tax would be much more productive. I wish they would do that instead.

        Why? I'd quite like to hear your reasoning on that...


        Yeah. What is up with that? If the government really cared, they would pay people to smoke. Smokers don't live as long in old age when they are collecting government money and odds are they aren't working and paying income tax either. Wait until 2050 when the largest age group will be 80+. We will have a Geritol party!

        I pay to digit
    • What you don't get is that the article author is an idiot. Despite the headline, the tax man isn't coming after iTunes. (Strangely enough, the Slashdot story somehow managed to avoid mentioning the completely inaccurate iTunes connection in that headline. For all the condemnation for inaccurate stories they get, I think the editors and/or submitter deserve a lot of praise here). The doesn't affect iTunes at all; Apple's already been collecting sales tax on its internet sales.

      Who it does affect is any co

    • You're kind of hinting toward what I've been thinking about this whole thing. Bascially, what we need to do is contact our (in this case state) representatives and say, "Hey, if you want to add this tax, you'd better be doing it to give us some tangible benefit. We'll gladly pay the government for some specific purpose, but if you just increase our taxes for existing services, that's a problem."

      That's the responsible civic thing to do, because when it comes to government, there is no way to "vote with your

    • "(a purchase made on a laptop while on vacation, for example)"

      What next, do you want your property taxes prorated for the time you're on vacation as well?

      If you don't want to pay state taxes while you're not in the state, stop using state services. Make sure to call the police and fire departments before you go on vacation and tell them they won't need to come around to your place if anything happens while you're gone.

      And be sure to surrender your driver's license at the state line (and start walking). We
    • Re:I don't get it (Score:3, Insightful)

      by necrognome (236545)
      Governments think they are entitled to money. This attitude needs to change.
  • Genius! (Score:4, Interesting)

    by proverbialcow (177020) on Friday April 14, 2006 @10:33AM (#15129131) Journal
    In Washington, politicians are using their definition of software (already taxable), 'a set of coded instructions designed to cause a computer...to perform a task,' to justify taxation of online media because 'they cause some action by a piece of hardware to play them

    ...except that the media file itself cannot cause the hardware to play it. Software must be employed to decode the file. Double-clicking on the file's icon requires more software, the OS, to load the software required to decode the file.

    This'll take about five minutes to be thrown out. *yawn*
    • Re:Genius! (Score:3, Insightful)

      by Zerth (26112)
      If you go that route, then most software wouldn't qualify, as programs frequently needs an OS to run.
      • True, but excepting Java and the like, software consists of instructions specifically designed to cause the processor to do something.

        My point was that by trying to reinterpret the law in a way it was not intended (so as to circumvent the legislative process), these states (and District) are leaving open a simple argument to defeat them.
    • ..except that the media file itself cannot cause the hardware to play it. Software must be employed to decode the file.

      Do any of the DRM formats carry embedded code in the media?

    • I would disagree. I think the argument that jpg files are a "series of instructions" is pretty strong - the same is true with MPEG - which is based on JPG. These highly compressed formats are instructions which cause a virtual machine (decompressor) to perform deterministic functions (a signal output). Say what you want about taxes (while driving on the best roads in the world - in a safe - and rational society) - but the argument that digital media are not deterministic instructions for a computing device
  • By that rationale... (Score:5, Interesting)

    by danpsmith (922127) on Friday April 14, 2006 @10:34AM (#15129135)
    ...a DVD, a CD, and other types of media that are just media are also "software." In a CD's case for example, the CD causes a CD player program to react and play a tune, so is the CD now software? These idiots don't even understand the distinction between "data" and software. Let me give you a hint morons: software is executable, data isn't, the two are not the same at all. Data, in and of itself, causes nothing to happen. You could double-click on an MP3 all day, if you have no player installed it doesn't work. We seriously need to start getting people into office that understand computers at least to this basic degree.
    • The 'morons' don't know what executable means, or why there's a distinction between software and data. They view it has hardware vs. software with hardware being something that you insert (physically or digitally) software into - nothing more.
    • By their definition every time you pass a digit it is "software" and therefore taxable since they consider data an executable.
    • The American Heritage Dictionary defines software as:

      The programs, routines, and symbolic languages that control the functioning of the hardware and direct its operation.

      Princton Universities Word Net defines it as:

      written programs or procedures or rules and associated documentation pertaining to the operation of a computer system and that are stored in read/write memory

      And the The Free On-line Dictionary of Computing Defines it as:

      The instructions executed by a computer, as opposed to the physica

    • ...a set of coded instructions designed to cause a computer...to perform a task,'...

      Great! They're going to tax viruses! Every time your computer catches a virus or a keylogger that compromises your credit card information, steals your PayPal password, etc., you will now have to pay state tax on any money that is stolen.

      What? You don't think so? If they can write an arbitrary definition of 'software', they can write an arbitrary definition of 'purchase'.

  • With that dubious justification, at least The Man finally figured out a way to take nail the virus writers and spammers. Get the Treasury Department to bust them for tax evasion. Capone 'em!
  • by rolfwind (528248) on Friday April 14, 2006 @10:37AM (#15129166)
    No taxes to pay on free stuff.

    This hardly affects me as a consumer (open source, and my pay-for entertainment ALWAYS comes on a disc) but being in the software industry I'd like to know - didn't the federal government have a ban (at least temporary, for the next several years) on internet sales taxes?

    How would it get around this?
  • This is expected... (Score:5, Interesting)

    by zappepcs (820751) on Friday April 14, 2006 @10:37AM (#15129168) Journal
    This is expected, along with other twisted plot points in the struggle for the world to become completely flat with regard to regulation, business, and other things of huge impact to joe public.

    Some of the processes to watch are: Immigration, offshoring, outsourcing, foodstuffs regulation, computer and internet regulation and taxation.

    The world is very busy at becoming flat in many regards. Something tells me the French will always be a sore thumb, but everyone else is interested in commerce and becoming either wealthy consumers or those that supply them. Once the regulatory grip slips loose a bit, watch how farmers start selling their products both without the protection of the government, and without the stranglehold on how they can sell their products. Food has been used as a political tool for too long, as technology has been. The old guard are losing control of all the things that kept them in power for ... well, up till now. As they lose power and control, they will do many twisted things to try to retain it.

    As for taxation, without funds from taxation, governments become rather helpless groups of mislead individuals. This is just one *SMALL* sign that its time to revamp the tax schemes here in the US. The old ways are falling behind so quickly that it will be difficult to keep up... we need someone to start a wiki or something... A place where government types can go to learn about the brave new world they are facing and how they can effect a stable government within it.

    • I think it was about five months ago that Press editor Alex Zaitchik whispered to me in the office hallway that Thomas Friedman had a new book coming out. All he knew about it was the title, but that was enough; he approached me with the chilled demeanor of a British spy who has just discovered that Hitler was secretly buying up the world's manganese supply. Who knew what it meant--but one had to assume the worst

      "It's going to be called 'The Flattening,'" he whispered. Then he stood there, eyebrows rais

  • Question (Score:4, Insightful)

    by thebdj (768618) on Friday April 14, 2006 @10:39AM (#15129186) Journal
    So are they trying to tax items you download if the company has a physical presence in the state or no matter what? The old brick and mortar way of solving taxation, which is how catalog orders were handle since catalogs came about, is something states have been trying to squash for years. Seriously, if they are following the old model, I really have no problem with it. Many of us are already dodging sales tax on the purchases of items from Amazon and the like.

    Now many states have tried to get around the old method of taxing by creating "Use Tax." I saw this nifty little item when I filed my taxes this year. They basically want to charge you sales tax on items you purchased online and, in some cases, other states. The latter one bothers me because it is absurd to be taxed twice simple because you either moved or purchased items while travelling on vacation. The initial one is almost as absurd, since it relies heavily on them getting the truth out of you. If you do not claim to purchase anything online then it is sort of hard for them to say you did, short of tracking all your CC purchases.

    The states have complained for ages it seems about the loss of money from online purchases. I personally think that while states might lose money, it actually helps overall economy. If people have to pay a few dollars less and not pay tax on an item (especially higher priced ones), they are more likely to purchase the item. Now if this item requires disposable or extra items (i.e. batteries, DVDs, etc.) you are more likely to get people purchasing those locally as well. In the end, the states still get money, they may just miss out on a small portion of it every now and then. Instead of sales taxing us all to death, raise liquor, tobacco, or hotel taxes to cover expenses. I enjoy the hotel taxes because I do not have to pay my local governments, the tourists do.
    • Use tax [wikipedia.org] has been around for a very long time, but until recently it was basically ignored by most taxpayers and collecting agencies because enforcement was difficult if not impossible for the average citizen buying something via catalog from another state.
  • I cannot believe they pulled this! Until the federal government changes the rules, though, the political tussle over taxing digital downloads will continue in state capitols. Last year, Democratic Wisconsin Gov. Jim Doyle proposed a tax on iTunes purchases, with his administration calling it an "issue of tax equity." Republicans pledged to defeat it, and they ultimately prevailed.

    Oh wait... They're on our side. All of you DailyKos readers just look away. And just forget about the 800lb [slashdot.org]
  • by GuyverDH (232921) on Friday April 14, 2006 @10:40AM (#15129193)
    Digital media does NOT cause any action to occur.

    None of the currently used media file types have any *code* in them that causes actions to occur.

    The computers that have media players on them, have settings defined that tell the computer what to do when that media type is selected.

    Someone should explain the difference between media and the device.

    I can strip the entries out of the registry, and drop media files and even double click them all day long and *NOTHING* will happen, except that I'll either get a sore finger, or break my mouse.
  • by LittleLebowskiUrbanA (619114) on Friday April 14, 2006 @10:42AM (#15129214) Homepage Journal
    Much better than taxing the gas guzzling SUVs that exploit loopholes in the law or taxing cigarettes. Yup, very logical.
    • by drinkypoo (153816) <martin.espinoza@gmail.com> on Friday April 14, 2006 @10:58AM (#15129360) Homepage Journal
      A large percentage of the price of a pack of smokes is taxes already. It would be lovely to see the weight/class restrictions on SUVs and large trucks (like those F450 Duallys I keep seeing people driving around as their daily driver, they only want one car and they pull a fifth wheel) so that people had to have a commercial license to drive them. Hummer, Escalade, Excursion, etc would have this requirement, at least in most states. You wouldn't even be allowed to drive them on some residential streets, such as in San Francisco. One side benefit of this would be that people with commercial licenses get hit harder when they get a ticket...
      • A large percentage of the price of a pack of smokes is taxes already. It would be lovely to see the weight/class restrictions on SUVs and large trucks (like those F450 Duallys I keep seeing people driving around as their daily driver, they only want one car and they pull a fifth wheel) so that people had to have a commercial license to drive them. Hummer, Escalade, Excursion, etc would have this requirement, at least in most states. You wouldn't even be allowed to drive them on some residential streets, suc
    • by Shivetya (243324)
      don't worry, those driving SUVs are paying for them. The burn more gas and hence pay more in taxes to travel the same distance as others. They are usually more expensive to repair as well.

      I look at it this way, if someone wants to buy the big SUV, pay the premium for doing so, and then to top it off pay for all that extra gas I say LET THEM!.

      Besides there are quite a few people who can justify owning one for hauling the family. Singling out SUVs has gotten so low-brow it makes me wonder why people want t
      • It's hard not pick on SUVs when peopel die in them because of the rollover problems inherent in the design and you see people by themselves using them as a daily driver. A gas guzzler tax would be appropriate. If I see one more housewife driving a Hummer talking on a cell phone....
    • You do realize that gas is taxed and gas guzzelers will pay more simply because they refill more often, right? In the case of SUVs and trucks they will pay even more because they typically have larger tanks. Adding a tax on top of this is simply the knee jerk reaction of a stupid jackass thaty clearly can't think for themselves and parrots the argument that SUVs are destroying the environment without even researching he argument themselves. There are plenty of non-SUVs that guzzle gas yet you don't see t
      • By continuation... The more gas you buy the more oil comes from Saudi Arabia, the more money goes to the terrorist (yes they are still funding them), the more money goes to buy weapons, the more money goes to Boeing, Haliburton and all, this way the money returns to the American leaders and power base.

        Remember thirty years ago no oil was imported from the middle east. If a certain president had not reduced CAFE ratings and cut off alternative energy incentives that would have improved our efficencies and bu
  • Maybe this is a good thing. Taxation for digital sales can be easily automated. It allows my chronically underfunded state government to pick up revenue it would otherwise miss without a high enforcement expense. Right now, we have to depend on Washington D.C. to fund large portions of our roads, schools, and other infrastructure. Maybe this would help us pull our own weight.
    • Taxation for digital sales can be easily automated.

      Uh huh. How?

      I'm interested in hearing how you plan on knowing when anyone in your state connects to a webserver in some other part of the country or world, via an encrypted connection, and causes some money to be transferred from a bank in some other state to a bank in some other completely unrelated state, and then downloads some data.

      Also, you have to be able to force this system onto parties who are both going to be basically hostile to it, since people
  • by stevemm81 (203868) on Friday April 14, 2006 @10:46AM (#15129241) Homepage
    So now what... music patents?
  • by punkr0x (945364) on Friday April 14, 2006 @10:46AM (#15129243)
    How are they going to tax allofmp3? I bet those clever russians have a loophole for just such an occassion.
  • That seems to be what the State Governments are saying. A lot of people sell stuff at garage sales and dont report the sales as taxes.

    Reminds me when I was 11, my friend was mowing a few lawns that summer for money. He didnt make much maybe $60 bucks. But the IRS guy that came by their house was telling him and his parents he needed to file taxes the next year. I'm sure the IRS guy was being technically legal, but it seemed more anal to me.
  • Personal Property (Score:3, Insightful)

    by AyeFly (242460) on Friday April 14, 2006 @10:49AM (#15129263)
    From what I understand about online music, we cannot copy it because we are merely "licensing" the right to play it, not own it. This though is in contrast with the statement from Tennessee which says ""Music is included because music downloads fit the definition of personal property,"

    Does this mean then that we now own music we download, and can freely do with it what we wish!?
    If so, tax away.

    • Re:Personal Property (Score:4, Interesting)

      by ScriptedReplay (908196) on Friday April 14, 2006 @11:05AM (#15129428)
      Not to worry, they'll be taxing you the license you bought - just as it is for a software purchase. Buy a retail version of Win XP in a brick-and-mortar store, pay tax. And it's not just because the CD constitutes a tangible asset, since the intrinsic value of a CD is minuscule. So it's not even an issue of 'software programs' - they'll be taxing license purchases, be it for software, music, movies, podcasts or whatever novelty will pop up next year. Just as soon as someone hits them with the right clue-stick.

      Well, as one thing leads to another, you'll have taxes on subscription music services, then or general pay-for 'net subscriptions ... next thing you know, you'll have to pay tax on that /. subscription. Now that would be a news item.
  • by Ryz0r (849412) on Friday April 14, 2006 @10:49AM (#15129265)
    Piracy on the rise in 15 states and the District of Columbia
  • These idiots are intentionally merging the definitions of "data" and "program".

    Last I checked, you can't run an mp3 file anymore than you can run an avi file.

    You need software to interpret the data. The data is what people are buying.

    Let's face it: these greedy little bastards want a cut of the action EVERY TIME money changes hands. They want a cut when you buy something from a store, from an individual (eBay, Rummage Sales, Classified Ads, etc), whatever. Everytime we find a way around the law, they

  • yeah but... (Score:5, Funny)

    by k4_pacific (736911) <k4_pacific@y a h oo.com> on Friday April 14, 2006 @11:01AM (#15129385) Homepage Journal
    If the levy breaks, will there be a torrent?
  • by burnin1965 (535071) on Friday April 14, 2006 @11:02AM (#15129391) Homepage
    What a load of crap. I see two issues here which don't appear to be addressed by the authorities levying the taxes.

    1) No justification for the taxation is provided. There should be some underlying benefit to "We the people" for any taxation. i.e. I pay a hefty tax every month on my communication bill for various services provided to society, two of which are funding for communication access for the disabled and funding for communication access to rural areas. Levying a tax on downloaded media just because they can is not justification and depending on what they are considering a download it could be construed as double taxation since I already pay several taxes on the communication itself.

    2) One of the concepts which jump started the United States of America was the concept of "No taxation without representation". Now I realize we have representatives in government who were voted into their positions by the people, however, if these representatives are not representing the interests of the people who voted them in and instead are representing the interests of the government or corporations then they are no longer representatives of the people. Before the American Revolutionary War the British argued that Americans did have "virtual" representation in parliament and therefore there was no need for American representatives to participate in the British government. We all know how that one turned out and virtual representation is no excuse today either.

    I actually don't mind paying taxes, I think I enjoy many benefits from taxation here in the States, but I'd like to have some justification for new taxes beyond creative interpretation of existing laws.

    burnin
    • The first because the Senate no longer represents the will of the State's legislature and second because the Federal Government encroaches on the power of the states too much.

      How would this help out with concern to the current story?

      Simple, many states are stuck with underfunded or unfunded Federal mandates. So the states look in ever nook an cranny for money. Yeah we would still have states taxing everything but the air we breathe but it would be far easier to avoid those states instead of being stuck wh
  • by Billosaur (927319) * <wgrother@NOsPAm.optonline.net> on Friday April 14, 2006 @11:17AM (#15129533) Journal
    State legislatures and tax officials, eager to find new ways to boost government spending and curb budget shortfalls, are eyeing the burgeoning market for digital downloads as a potentially lucrative source of revenue.

    Isn't it the boost in government spending (read "waste") that is creating the budget shortfalls? Just like raising gas taxes, property taxes, sales taxes, cigarette taxes, liquor taxes -- it all happens because once lawmakers get their hands on those billions, they can't help but spend it recklessly, to the point of drilling an enourmous hole in the budget that John and Joan Taxpayer have to fill. This is just local government trying to find a way to cover its own ass by papering over the hole, when we all know any revenue generated by these taxes is going to simply be frittered away.

    Maybe these state governments should try balancing their budgets first before bludgeoning their citizens over the head with more taxes.

    • "Isn't it the boost in government spending (read "waste") that is creating the budget shortfalls?"

      You mean other than the un-/underfunded mandates given to them by people who, unlike the state legislatures, get to borrow and endebt us to their heart's content?

      So long as people continue to ask state governments to do more with less, the choice is always going to be between debt and taxes, and since many states are now constitutionally prohibited from endebting themselves...

      "Just like raising gas taxes, prope
  • Let's face it, it isn't college students and minimum wagers that are paying for the downloading of music. A person that buys their music from iTunes has the money to do so. Most of the outrage that comes towards taxing it comes from those who aren't paying for their music collection. These taxes will all be added because the majority of people have no idea what bills are being passed.

    Slightly OT: I don't understand why more Americans don't go to the local library. Most of the music on my iPod was taken
  • 15 states and the District of Columbia currently tax online media...

    I'm curious to know which they are. I was recently forced out of my house due to a sinkhole. I'd consider relocating based on digital download taxes.

    No, not really. But I'd like to know.
  • by Beryllium Sphere(tm) (193358) on Friday April 14, 2006 @11:34AM (#15129698) Homepage Journal
    "music downloads fit the definition of personal property", according to a Kentucky government spokesperson.

    Does that mean that when you pay for a download and it disappears after a month or you can't move it to a different device, that the Kentucky government will prosecute the company responsible for violating your property rights?

    Conversely, if the software makers can argue "this-software-is-licensed-not-sold", how could there be a sales tax?
  • They need to leave this stuff alone, and be glad people use the internet to buy hard items which they do get some revenue off of.

    if you make it too costly to do business, then the 'retail internet' goes away. Espcially in this economy, which will just get worse due to greedy stunts like this.
    • good thing the internet and business are not directly related. The internet was around before business took over, and it'll be around if the businesses decide free advertising isn't worth it.

      Of course, when the government decides to tax anything that's downloaded, it'll be the end of everything.
  • If the government spent the money we already give them a little more wisely.
  • by guacamolefoo (577448) on Friday April 14, 2006 @04:40PM (#15132510) Homepage Journal
    There are a number of threads here with points worth responding to. I'm too lazy to put them all in the respective threads, so I put them here in one place. Here is the skinny on Sales and Use tax issues, at least in PA. It applies to taxability of digital downloads specifically but touches on other issues as well.

    1. Sales tax:
    To be required to collect sales tax from customers, businesses must have a nexus with the state. Physical presence is sufficient, as Lynn Swann found out from selling his footballs. Sales tax is collected by businesses, not consumers. Physical things (tangible personal property) must be sold to the end consumer in order for the sales tax to be due in PA. Services (some) also incur sales tax. For property sales, however, you needed tangible personal property, not intangible ones.

    2. Use tax:
    This is required to be paid by customers (purchasers of tangible personal property). If I buy a sofa in MD (5% sales tax) and bring it to PA (6% sales tax on a taxable item of personal property), I am required to pay sales tax. I can get credit for sales tax paid to MD (see: http://www.revenue.state.pa.us/revenue/lib/revenue /rev-227.pdf [state.pa.us]), but I haveto pay the additional 1% to PA on a use tax return.

    From a practical standpoint, use tax is paid in two scenarios, primarily. First is by businesses with multijurisdictional operations that transfer property between states. Second is by consumers who buy cars elsewhere and register them in PA.

    3. Sales and use tax issues - tangible personal property:
    One of my partners does SALT work (State and Local Taxation) and he specializes in going to businesses to do reverse audits to reduce taxes paid going forward by changing business practices and in appling for refunds for improperly paid sales and use tax.

    One big issue with sales and use tax is whether something qualifies as tangible personal property. Software has been a big issue in Pennsylvania. The Graham Packaging case decided that issue:

    http://www.revenue.state.pa.us/revenue/cwp/view.as p?a=318&q=252626 [state.pa.us]

    http://www.courts.state.pa.us/OpPosting/CWealth/ou t/652FR02_9-15-05.pdf [state.pa.us]

    The relevant stipulated facts of the case are as follows:

    In connection with the appeal to this court, the parties entered into a
    stipulation of facts which states, among other things, that: (1) users of software programs do not own the software program; rather, users purchase the right to use the program in accordance with the licensing agreement and copyright law; (2) computer disks are often provided free of charge to multiple user license holders; (3) computer disks do not give users rights of ownership to the software; (4) computer disks remain the property of the licensor of the software program; (5) the physical delivery of the computer software program can be accomplished without the transfer of the computer disk and the computer disk is not necessary for the use of the program; (6) the physical quality of the computer disk does not affect the price of the computer software program; (7) Graham paid Dell for two-year license renewals of software licenses previously purchased by Graham; (8) the delivery of the computer software sold to Graham was originally accomplished by disk; (9) the license renewals at issue did not involve computer disks; and (10) the original computer disks were obsolete at the time of the license renewals. See Stipulation of
    Facts (filed March 2, 2005).


    Before Graham Packaging, there was a big difference whether software was downloaded or delivered via CD. To wit: say I want an AV program. If I want the most sales tax advantaged way of buying one, I purchase and download AVG Antivirus instead of buying a copy of the Syman

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