California Can't Resist: Wants To Tax iTunes Downloads Again

from the keep-on-trying dept

There are some states that already include a sales tax on internet downloads for things like iTunes purchases (even if the rationale for the tax doesn’t seem to exist beyond “the state needs money”). Every so often various other state politicians start itching to add an iTunes download tax. The latest is California. Some state politicians made a bunch of news back in April for proposing just such a plan, but the resulting publicity and anger from California residents made sure that proposal was quickly shot down. So what did the main sponsor of that proposal do? He waited less than two months and proposed a nearly identical tax on digital downloads. Of course, all this will really do is push more people to look at alternatives, legal or not, because of the greater expense associated with digital downloads (a product that should get cheaper over time, rather than more expensive).

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Comments on “California Can't Resist: Wants To Tax iTunes Downloads Again”

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Justin (user link) says:

I shouldn't say this on Techdirt

If you answer yes to either of these questions, I have one more question for you.

If you buy CD from a store do you pay sales tax?

If you buy software from a store do you pay sales tax?

Again if you answered yes to those questions:

Why shouldn’t downloads get a sales tax?

Also as you can see by my subject line, I know this isn’t going to be popular.

Kevin (profile) says:

Re: Re: I shouldn't say this on Techdirt


Typically sales tax is collected on the sale of an item if the vendor has a physical presence in the state you live in.

We see this all the time with online sales already.

In the case of iTunes, it sortof makes sense but only if you are a California resident.

My state of Florida is not entitled to collect sales tax on an online transaction with a company in, say Ohio, which has no presence here in Florida.

This is also why many states have laws in place which are essentially “use taxes” whereby if you buy something out of state you are supposed to turn around and pay the state for the “lost” tax revenue. It doesn’t really work except for vehicles, where they nail you at the time of registration in Florida if the vehicle is less than 6 mos old.

To others: Remember states believe they have the right to tax anything at any time. : )

wasnt me (user link) says:

Re: I shouldn't say this on Techdirt

thats a very good point, but I am not sure thats a good example.

isn’t sales tax related to a physical store? I think buying online is more like buying from out of state, or maybe different country.

does California law require you to pay sales tax on products you bought from Delaware?

something similar came up i believe when i think new York wanted to tax amazon.

Tony (user link) says:

Re: Re: I shouldn't say this on Techdirt

“does California law require you to pay sales tax on products you bought from Delaware?”

Actually, yes. Of course, it’s not a sales tax, but a SALES AND USE tax

Nobody does, of course, but the law is that if you purchase taxable goods from out of state, then you are supposed to pay the California SALES AND USE tax on those goods. You aren’t being taxed on the purchase, you are being taxed on the use of the goods.

I seem to remember there’s even a place on your state income tax return to note those taxable sales

oldgoat1948 says:

Re: Re: I shouldn't say this on Techdirt

CA expects/requires its residents to pay a tax on anything purchased and brought into the borders whether physically or electronically. Its not called a sales tax thus getting around the 2/3ds majority rule to increase tax and we’re required to declare ANY internet purchases if out of state.
I have a local Sales tax rate of 8.75% and they want to raise that (again) to fund the social engineers(read Liberals) visons of Nirvana for anyone getting into california

anony mouse says:

Re: I shouldn't say this on Techdirt

Sales tax is intended to pay for infrastructure associated with a company having a physical presence in a state or locality. Such as fire, police, water and sewer services. If a company has no physical presence in a state, why should the consumers be burdened with a sales tax?

dgo says:

Re: Re: I shouldn't say this on Techdirt

It did happen on 6/1/08 – Amazon is charging sales tax in NYS. 🙁

Items Shipped to New York State
Effective June 1, 2008, LLC will begin collecting sales tax on items shipped to destinations within the State of New York as New York has enacted a new law requiring out-of-state sellers to collect and remit sales tax based on advertising. Amazon has filed a lawsuit challenging the constitutionality of this provision. However, as required by the law, we must still begin collecting New York sales tax beginning on that date.

Anonymous Coward says:

Re: I shouldn't say this on Techdirt

Legit questions. Releveant too. Here’s a cookie.

Moving on to the meat of your post, I’m now curious. I know whey I buy physical goods online I sometimes have to pay sales tax, and sometimes I don’t.

For the ones where I don’t, I don’t know if they are just doing it wrong or are providing an unadvertised incentive for me to go to them rather than someone else.

For the ones where I do, I don’t know if they’re just milking me for more money, or actually just know what they are doing.

With tax being a percentage, I have no issue with having to pay sales tax on digital goods as well as physical goods. It’ll (supposedly & hopefully) help pay for more services, better roads and schools and so on.

I live in Washington State. We have a sales tax around 8 cents on the dollar I think. It’s been a while since I had to worry about it since I got a better job that’s given me a nice buffer financially.

A song on iTunes is like what? A 1.30? I don’t mind paying 1.39 instead due to sales tax. There’s a lot of infrastructure that needs to be built and improved let alone maintained.

The question is, with this tax are they trying to double tax? If Cali already has sales tax, just make it apply to digital goods. Amend that tax that exists. This story (did not RTFA) sounds like they are adding a special tax just for it, possibly at different rates.

And it opens up to attempts to double tax…

Legos says:

Re: I shouldn't say this on Techdirt


Your a moron. Do you have iTunes? You already pay sales tax if Apple has a store in your state/county, which accounts for most users, I imagine.

This is a Digital Download tax, ADDITIONAL to sales tax. I have to wonder if someone from Redmond bought off a politician to introduce this bill. They are pretty ruthless, and Robbie Bach, no. I do not want your product.

JTO says:

Re: I shouldn't say this on Techdirt

Article 1 of the Constitution prohibits the taxation of any item exported from any State. It’s a pretty clear-cut definition of law and so important to our Founding Fathers that they put it in the first ten sections…. Those State Taxes you pay on items purchased in-State are supposed to go toward the commonwealth of the State. They are to pay for the State’s liability for a physical presence in the State. If any of the iTunes servers happen to be in California, then there should be no reason California cannot levy a tax, as iTunes now has a physical presence in the State.

Andrew Boyd says:

Re: I shouldn't say this on Techdirt

To your point, let me ask this…if you purchase an I-Tunes gift card at the store, do you pay sales tax on it? The answer is “no,” so why should you have to pay sales tax when you use the card? If you agree that downloaded I-Tunes songs are in fact taxable, you are in fact saying that all other gift cards should be taxable as well (Visa Gift Cards, Olive Garden gift cards, Home Depot gift cards, etc). Is this correct?

TravisO (profile) says:

Re: Well...

The government is double dipping; either tax what we buy or tax our income, but when they do both, it’s outright robbery.

Therefore since income tax isn’t going away anytime soon, I’m dead against this tax. This is obviously a case of “The state wants more money, so what new taxes can we add? Oh yea, people like that iPod thingy!”

Daniel says:

California taxes all out-of-state purchases

California, my state of residence, taxes all out of state purchases. Every year, when I do my income taxes, TurboTax asks me if I’ve made any purchases online. If so, I have to pay a “use tax” equivalent to sales tax. I don’t know anyone who actually says “yes,” but if you buy online (like Amazon) and are from California, you should already be paying use tax on the stuff.

Daniel says:

Re: California taxes all out-of-state purchases

California Use Tax Origin:

The California use tax law became effective on July 1, 1935. Section 6201 of the Revenue and Taxation Code established the use tax to eliminate the price disadvantage of California businesses when California consumers purchase taxable merchandise from out-of-state retailers.


Anonymous Coward says:

Taxes for Internet downloads? R U joking!!!

The only good side to this story is that its only happening on a state level and not on a federal level.

Big business is trying to orchestrate a corporate take over of the internet. The government is getting in on a piece of the action by proposing this unconstitutional tax. If you look at the goals of the RIAA you will find that they are very similiar to the goals of some members of the government. You cant really tax music if it is being downloaded from public servers not owned by big business or the government.

1. The internet is not a government entity (No matter how much they want it to be). The governement proposing a tax for downloading makes as much sense as taxing someone for walking on the sidewalk in front of your home.
2. Big Business does not own, control, or mandate internet practices. The internet is a piece of technology they choose to use. If big business is unhappy with this technology they have the right not to use it. THey do not have the right to lobby congress and force their agenda’s on the public when it comes to the internet.
3. Special Interest groups or memebers of the public have the right to not use the internet if they are unhappy with it. If you feel the internet should be nothing but a corporate/ U.S. government entity DO NOT USE THIS TECHNOLOGY!

This is ridiculous. Do these lawmakers just sit around trying to think of new ways they can tax the public? I would like to propose this tax- Government officials should have to pay a stupid tax. Yup, everytime they have a stupid idea they should have to pay the state and federal governemtn $10,000. This way the country would get out of debt in just a couple day.

Walton says:

Re: Taxes for Internet downloads? R U joking!!!

This is ridiculous. Do these lawmakers just sit around trying to think of new ways they can tax the public? I would like to propose this tax- Government officials should have to pay a stupid tax. Yup, everytime they have a stupid idea they should have to pay the state and federal governemtn $10,000. This way the country would get out of debt in just a couple day.

Yep, this reminds me of a Lewis Black rant
“We’re a Two party system of Democrats and Republicans.

The Democrats, have no ideas, and Republicans have real bad ideas. The worst thing that happens is when these pricks decide to *work together*. Because what happens is that the Republicans say HEY I GOT A REAL BAD IDEA! and then the Democrats say I CAN MAKE IT EVEN SHITTIER!

Anonymous Coward says:

Well, If I live in Washington, and download an itunes song which of the following taxes will I have to pay? or all of them?
California Sales tax, Washington Sales Tax, Sales tax from every state which the download runs through on its journey here, The state where the server is actually located which contains the file?

Freedom says:

Back Taxes...

Just imagine the fun this will create. What if you download a 1000 songs from XYZ torrents or whatever. Even though you didn’t pay for them via iTunes, will you still be required to pay the tax? Similar to if you have a job that isn’t legal, you are still required to pay income tax on your income.

I can see it now as part of an RIAA settlement suit. If you settle with us RIGHT NOW, we won’t turn our records over to the “IRS”.

This tax is going to promote overseas distribution of “digital downloads” that will be out of the reach of various US based tax collection. At which point, some stupid law will get passed that requires ISPs to monitor and access you a fee if you connect to certain sites. Finally followed by a massive game of cat and mouse with encryption and proxy servers.

Oh did I mention the best part of this. The “IRS” will now audit your computer and if you can’t prove that you paid taxes on every song, you be accessed a standard fee per song.


Squee says:

warning! you are now entering a Tinfoil hat area!

Supposedly (though I havent researched this myself, i dont have time) but taxes are unconstitutional in the USA as it is a direct apportioned tax. All taxes have to apportioned to be legal in the US. I cant remember where I read that but there is no law that says you have to pay tax. The required number of states (36 I believe) to ratify the (16th) amendment to the constitution was never met. A few IRS employees have quit when they discovered that there was no law to take taxes, and what they were doing was unconstitutional.

Anonymous Coward says:

Re: warning! you are now entering a Tinfoil hat area!

About Joseph Banister:
His research led him to question its very legality and constitutionality. Deeply disturbed by his discoveries, he summarized these in a report which, in February, he sent to his supervisors (At the IRS), and asked them to respond to three allegations:

1. That the filing of federal income tax returns is voluntary and the filing of federal income tax returns is not required;

2. That the 16th Amendment to the U.S. Constitution was never ratified;

3. That income taxes are not used to pay for daily government operations, but to pay the interest on the national debt.

Banister was called into his supervisor’s office, and assured his report had been reviewed “by the highest levels of the IRS.” Then he was handed a memo dated that day, presenting the typical non-response:

“The Internal Revenue Service will not be responding to your request and will provide you with the necessary paperwork to tender your resignation,” his supervisor wrote. “You will be placed on administrative leave effective upon receipt of this memorandum for a period of seven calendar days to consider what actions you wish to take.”

Squee says:

yeah I’m wrong because Wikipedia is known for its accuracy. I’m not citing anything as truth. I dont know that much about all of this not coming from the US, but if you think I am wrong and quote wikipedia (who takes its references from the government anyway).

Dont pay your taxes, and when you get threatened, ask them to show you the law that says you have to pay them. Then when they find it, prove that its unconstitutional.

I think I got this info from Zeitgeist the movie. Very tinfoil hat’sy but their sources looked credible.

TomL says:

Re: When is enough enough

Yes, it’s sad. The government has run amok with taxation.

I hate how they trot out the “we’ll have to cut fire and police, and little kids will go homeless, and old grannies will starve…” rhetoric when it comes to “we have to raise your taxes because” arguments.

It’s a ploy. They know that people are mostly just pushovers, and that they’ll say, “oh, I didn’t know that. I don’t want kids to go homeless or grannies to starve. I guess I’ll pay up.” What government doesn’t tell you is that there are probably many ancillary government jobs that could easily be farmed out to the private sector for less. Maybe a mosquito-tracking guy, or the roadcrew cone-picker-upper gal, or the setup-the-tables-at-the-gymnasium guy, or you name it.

Taxation has become a pay-for-my-government-job scam, and people eat it with a big spoon, because local and state governments and their workers’ unions have gamed the system and have become expert at controlling the information you get.

Carl says:

Isn't CA already taxing Apple?

Since Apple is based in Cupertino, I assume they are already paying taxes to the state for the profits generated via iTunes and all their other products. I never understand how people seem to forget that all these different ways of taxing you are only taxing the same dollars over and over again, and the taxes ultimately are paid by the citizens (corporations pass all these taxes along to the customer).

Anonymous Coward says:

Re: Isn't CA already taxing Apple?

But think of the infrastructure that CA needs to pay for. All those roads and sewers, those things don’t grow on trees. And it’s not like you’d just give it to them if they asked nicely. So they have to trick you into giving them money. And if they can trick you once, why not twice? And if twice, why not three times?

John (profile) says:

Just like mail-order stores

From what I learned about the Internet (and I could be completely wrong), web sites are basically the same as mail-order companies. When you call a 1-800 to get a Ginsu knife or stackable vacuum-sealed bags, do you pay sales tax? Sometimes: it depends whether the company charges it or not.

Maybe this has to do with the store having their offices in the state or some such, but how is an online, digital goods store different from a mail-order company?

Al says:

Justin and all

The sales tax issue had long been settled in CA. The difference in downloaded content, ( software, DVD, music etc) is it was classified and came as “non tangible” property and could not be taxed, VS. store bought content that was tangible property and as such taxable.

The State and 45 others then enacted “Use Tax” laws and businesses are audited for compliance on that as they have to report tax collections and out of state purchases for business “use” in the state.

More important is whether the State of NY is going to be able to force sales tax collection on out of state companies that have affiliates in their states and claiming that company has a Nexus in the state, circumventing intestate commerce laws that have been able to shield most companies from directly collecting sales taxes.

TomL says:

It's about the revenue

I know that when I say “it’s about the revenue” you all said “duh”, but my point is that taxation has become a blatant money grab.

When the California legislature wanted to tax my DirecTV bill I complained. I wrote my California congressmen, and told them I’m getting my TV FROM SPACE! I don’t use your telephone poles. I don’t use any of your infrastructure. I pay for my own electricity. How can you tax my bits from space?!

I got two replies. One was from a Republican who sent a form letter saying thanks and he was against it. The other was from a Democrat which was not a form letter. He described without hesitation that the state needed revenue and that it had to come from somewhere; sorry.

Wow. It never occurs to some of these guys to actually run the government like a business. Trim it; make it more efficient. No. We need money; you’ve got it; we’ve got the power to take it from you; cough up.

I’m tired of government at all levels. I know we need it for lots of services, but I always vote for the low-tax guys now. I figure they don’t have a chance in hell of actually lowering taxes, but at least they’re a brake on this runaway fund-my-government-job bureaucracy.

TomL says:

Companies Have to Have a

I haven’t seen it mentioned previously, so just to inform the discussion a little: My understanding is that a company has to have a “nexus” in a state in order for it to be able to collect taxes from the customers in that state for goods purchased over the internet.

My understanding is that a “nexus” is a legal term that determines if a company has a significant physical presence in a state. It can be one single store, or a company headquarters, or a warehouse, or something else that lawyers argue about. That’s why you get taxed on things from some states and not from others.

My gripe is that the system worked when there were brick-and-mortar stores, and everyone understood that sales taxes went to supporting infrastructure for these stores (i.e., sewer systems, roads, fire, police, etc.). When the politicians saw the internet sales figures climb they said “oh crap, we need some of that”, and the notion of taxing for services went out the window. Now it’s just taxing for revenue; like the English did to the colonies back in the day.

My understanding is that there is currently a moratorium on country-wide, all-states taxation for sales on the internet. It was championed by Congress and signed by Bill Clinton. It’s probably up for renewal, but I haven’t heard.

Interestingly enough, is a champion of collecting tax for everything from everybody. They’re trying to gain favor with the politicians by picking our pockets.

Dave says:

Too much

That’s alright. When I get done what I’m doing in the United States, I’m moving out and never coming back again. Can’t tax me while I live and work overseas in Europe. It is a sad day when I would rather live overseas than in my home country. But, the politicians in the U.S. have made it neigh impossible to live here. Everything is so expensive and now the eggheads in the state capitols want to tax everything in sight. Where does it end and when are people going to stand up and say enough is enough?

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