More Digital Download Taxes On The Way

from the but-of-course... dept

With the economy in so much trouble, state tax revenues are being hit hard -- so, rather than figuring out ways to spend more wisely (what a concept), they're looking for ways to boost tax revenues, and are hitting up two popular online tax targets: taxes on physical goods purchased online and taxes on digital downloads. Of course, the whole (official) purpose of a sales tax was that it was supposed to be used to pay for the infrastructure that made it possible for you to drive to the store and purchase the product (e.g., the roads...). That's not always the case for online ordering (though, some will point out that local infrastructure plays a part on the delivery side). However, it's difficult to see any justification at all (other than a blatant money grab) for a digital download sales tax. But, state officials don't even seem to be looking for any real justification. They're just saying that they need more tax revenue.

Another point raised, in the article on taxing digital downloads, is that politicians don't seem to be distinguishing between digital goods and online services. The person quoted in the article suggests that's a problem, but I'd argue that the real mistake is in thinking that there actually is a "digital good." These days, pretty much all sales of "digital goods" are nothing more than a service. So if we believe that services shouldn't be taxed, then digital goods shouldn't be taxed either. They're the same thing.
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Filed Under: digital downloads, taxes


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  1. identicon
    MrScott, 16 Apr 2009 @ 5:01pm

    Let's see here... If I buy something online (say NewEgg.com) and I don't pay sales tax, at what rate of sales tax do they collect? The state I live in has a lower sales tax rate than California. Would they want to collect the higher rate? Probably.

    What about a state where there is no sales tax? Nevada, I believe (but correct me if I'm wrong there) wouldn't they be outraged? That would kill online commerce right there for them.

    At what level would the tax be? Would it be a set level across the board, where the tax is the same no matter what state you live in? I sure wouldn't want to pay more tax online for an item than I would in a brick and mortar store.

    I agree with the DRM issue, where it de-values the product. I can't re-sell it, I can't give it away, I can't loan it to anyone, I can't do jack with it but keep it for myself. Let's hope the "online store" I bought it from never goes offline. Oh no, that'll never happen. (rolling my eyes there)

    And finally, what state would get that tax? Would it be the state where purchased, or the state I live in? Seems like my state is getting more revenue now than it did several years ago. My state has raised the sales tax twice in the past 6 years or so. From 5% to 7%. Yes, there are states with a higher tax rate, but where I live, the cost of living is far below the national average.

    One more thing, isn't there sales tax on the shipping of these items we purchase and sent to our home? Isn't the government collecting that tax? And now they want more tax? Oh, I get it. It's not enough tax so they want more. Got it!

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