New Net taxes amid taxing times?
Because of quirks in many state laws, sales taxes may be levied on CDs sold in storefronts but not on iTunes and other digital downloads. It's a situation that recession-weary, tax-hungry politicians are hoping to change.
A growing number of states are considering laws to tax digital goods, such as iTunes songs, Amazon MP3s, or electronic books. Yet at a time when governments say they want to encourage broadband adoption and the development of a low-carbon economy, opponents say taxing digital goods sends exactly the wrong message.
Mississippi is one of the latest states to write into law a tax on digital products. The measure, which was adopted mid-March and goes into effect July 1, imposes a sale and use tax on specified digital products--including digital audio-visual works such as movies, digital audio works such as ringtones, and digital books.
Republican Gov. Haley Barbour endorsed the legislation via Twitter. "On HB 1461, I support this bill and here's why: This bill will treat Internet sales like catalog sales making it a level playing field," he said on March 11.
Including Mississippi, at least 18 states claim they have the authority to collect taxes on digital goods, and more are likely to join them.
On March 12, a bill was introduced in the North Carolina general assembly "to modernize the sales and use tax statutes by treating music, movies, books, and computer software that are delivered electronically the same as those that are purchased in a tangible medium."
A digital goods tax measure was also introduced in the Minnesota House of Representatives in late March. The bill could raise the state more than $8.2 million in 2010 through 2013, according to the Minnesota Department of Revenue (PDF).
States such as Washington and Vermont are also considering such measures, according to Stephen Kranz, an attorney at the Sutherland law firm who represents companies in the digital media industry.
The idea isn't popular everywhere. A proposal to tax digital goods in New York died this month when it was left it out of the state budget.
Rob Atkinson, the president of the Information Technology and Innovation Foundation, said that policy makers should distinguish between digital goods and digital services in their tax laws.
"A service would be someone designing your Web site for you," Atkinson said. "Whether they design it from a thousand miles away or in your office is irrelevant. On the other hand, if someone is buying (music online), it should be treated in the same way as a physical analog in the economy."
"I don't think most policy makers think about it that way," he added.
The Washington state bill would clearly tax digital services as well as what's typically considered digital goods, Kranz said. The Streamlined Sales Tax Project, a multistate effort to develop uniform standards for taxation, adopted in 2007 a specific definition of digital products, along with procedures for how they should be taxed.
Location, location, location
A uniform definition across states would make the taxes less burdensome to merchants, Atkinson said.
"There has to be some easy to use plug-in software...so each seller doesn't have to go through this accounting nightmare," of determining the taxes due in each state, he said.
However, some proposed laws such as Minnesota's would not apply to online merchants based outside the state, Kranz said. That's because under the legal concept of "nexus," a state generally may only tax a company that has a physical business presence within the state's borders--though a state may apply a "use tax" for goods coming into the state from elsewhere.
Those states that are not including a use tax in their proposals are "'discriminating against their own digital community," Kranz said. "If I'm a consumer and I have a choice between two Web sites and one charges tax and one doesn't, which one do you think I'm going to purchase from?"
In fact, North Dakota Gov. John Hoeven on March 19 signed into law a measure to explicitly exempt digital goods from taxes for that reason.
"I think it's important we send a message to the world of digital products that this is a state that's favorable to their interests," Dwight Cook, the state senator who introduced the tax exemption bill, told CNET News in January.
The tech industry has also been advocating for the government to promote the use of information and communications technology as a means of creating a more energy efficient economy--a goal that may be undermined by digital goods taxes, according to some.
"The digital economy is growing fast, and the tiny carbon footprint of downloads is something that benefits all of us," said Steve DelBianco, executive director of NetChoice. "Digital downloads are the most environmentally responsible way to get movies, music and software, and tax policy is one the ways we promote environmentally sound decisions."
Digital goods taxes may be particularly unappealing to consumers on April 15, DelBianco said.
"Writing a fat tax check is particularly painful when your home (value) and savings have declined so deeply, and the idea of facing new taxes on digital goods makes that pain last all year long," he said.
Stephanie Condon is a staff writer for CNET News focused on the intersection of technology and politics. She is based in Washington, D.C. E-mail Stephanie. 
You would also encourage more digital piracy I imagine.
However, you are right about the piracy piece: at least until they tax stolen items.
Of course, people who live in border towns (that is, a town in a tax state which borders a tax-free state) simply changes their credit card billing addy to a PO box on the other side of the state line.
A perfect example is here in Portland, Oregon. Oregon has no sales taxes, and Washington has no income taxes. The city of Vancouver, Washington has a whole lot of people who live there (and pay no income taxes), but do practically all of their shopping across the river in Portland. There are a few countermeasures to stop this (for example, buying a car in Oregon won't help you avoid the WA sales taxes when you go to register your car in WA), but by and large, there's nothing to stop someone from saving a metric ton of money each year by dodging the tax man.
You don't even have to live in a border town. Just drive to the nearest tax-free state (for most people this can be done as a day trip - otherwise get a relative living there to do it for you). Once there, set up a PO box, then go home and shift your credit card to a paperless (no envelopes) system and change your billing addy to that state. *poof*... what sales taxes on Internet goods?
Of course, this may hamper buying physical goods online, but most people have more than one credit card anyway.
But your still paying for a PO box if you do that so what benefit would it serve.
$10/mo (or so) is a lot cheaper than the 6% of everything you buy online, especially if you shop enough online so that you're worried about paying taxes for online goods, no?
Politicians are complete morons. They just can't seem to grasp the idea that people will find a way around them. Unfortunately they do seem to grasp the idea that the typical voter is enough of an idiot to re-elect them again and again.
Just how are we (merchants) to determine where the downloaded item shipped? IP address will get you close, most of the time, but not always. As the article implies, it would take a major change in the way sales tax is addressed for this to happen. Attempting to tax digital downloads is nothing new, it's just never been successful. IMHO, I don't think it will fly this time either.
Taxes are money that is taken out of the economy. That is money taken from someone who could have purchased a new car, gone on a vacation, purchased some extra clothes, etc. But now some people want the government to take that money. How does taxing help get out of a recession? It doesn't. Never has and never will.
The solution to this would be the FairTax. That would allow taxing on digital goods as well as everything else while at the same time letting people keep their full paycheck, not pay any federal taxes up to the poverty level, and no more income redistribution schemes. The tax code would be extremely simple to implement and comply with. No more wasting $300 BILLION a year just to pay the taxes that are owed. Now THAT is real stimulus.
"Taxes are money that is taken out of the economy. That is money taken from someone who could have purchased a new car, gone on a vacation, purchased some extra clothes, etc."
Tax money is never taken out of the economy. It goes right back to the politicians in the form of salaries, junkets, kickbacks, wasteful spending, etc.
These politicians then use it to buy their own new cars, take lavish "fact finding" trips to exotic vacation spots, and feather their nest in ways you haven't even thought of before. :)
" But now some people want the government to take that money. How does taxing help get out of a recession? It doesn't. Never has and never will."
correct. Taxing will never help get people out of a recession, and once again this will be another regressive tax forced upon those that need money the most. When people have enough money that sales tax is not a factor in their purchase decision, they simply buy from whatever local business suits them. Many people buy over the net because it helps them save their hard earned dollars for other living expenses.
"The solution to this would be the FairTax. That would allow taxing on digital goods as well as everything else while at the same time letting people keep their full paycheck, not pay any federal taxes up to the poverty level, and no more income redistribution schemes. The tax code would be extremely simple to implement and comply with. No more wasting $300 BILLION a year just to pay the taxes that are owed. Now THAT is real stimulus."
We've had 8 full years of total income distribution. The rich paid NO taxes under bush, and the middle class lived in a dream world thinking that buying on credit (because they couldn't afford the goods other wise) was the same thing as "getting ahead".. Talk about a rude awakening...
What we don't need is one more scheme to insure that the rich pay nothing and the middle/lower classes pay everything. Trickle down (voodoo) economics works for one class, and that's the wealthy; everyone else eventually get's screwed. Do the wealthiest use less resources? NO. Do they contribute to society any more than others? NO. Are they more valuable to society. In 99% of the cases, that answer is an unequivocal NO..
I've had the good fortune to earn more than most, but regressive taxes of any kind are not a solution to anything other than class warfare, and an internet tax is an opening salvo...
Creating jobs, such as unskilled labor to put new tires on a rich guys car or painting his new vacation house is not the way
"Tax money is never taken out of the economy. It goes right back to the politicians in the form of salaries, junkets, kickbacks, wasteful spending, etc. These politicians then use it to buy their own new cars, take lavish "fact finding" trips to exotic vacation spots, and feather their nest in ways you haven't even thought of before. :)"
Tax money always comes from the private sector. Government does not generate wealth; it takes it from those that create / earn it. Even if all politicians took the tax money to buy cars, that money still came from the private sector, so yes, that money was taken from the economy.
"We've had 8 full years of total income distribution. The rich paid NO taxes under bush, and the middle class lived in a dream world thinking that buying on credit (because they couldn't afford the goods other wise) was the same thing as "getting ahead".. Talk about a rude awakening..."
What planet are you getting your facts from? The top 1% income earners paid 37% of all federal income taxes in 2004, right in the middle of Bush's Presidency. The top 10% earners paid 71% of all income taxes. In 2003, the top 52% paid 100 percent of all income taxes. Think about that. A little over half of all workers are paying ALL of the taxes. So when you say the "rich" didn't pay anything, then how did over one-third of the federal government's revenue get there?
I can't quite tell if you like the FairTax or not. It's not a regressive tax, so you should like it. But then you rail against the rich paying taxes. If the FairTax was implemented today the rich would pay MORE than they do now. That new BMW they bought? They just paid a 23% sales tax on it. Today, they pay no tax on it (federal taxes, not state and local). They buy a new house on the beach and pay a 23% sales tax. Today, no federal taxes.
The poor have NO TAX LIABILITY under the FairTax. None. Zero. Zip. Zilch. They might not pay an income tax today, but they do pay the embedded taxes that are in all goods and services (which is 22%). Those drug dealers that are out there buying their bling-bling and Escalades will be paying federal taxes for it, which they do not do that now.
When we make money, we pay taxes to the useless Federal Government, AND in most states to their usually more useless politicians. AND in some cases, even to the completely incompetent City Government in a lot of cases.
When we SPEND that SAME money, we get hit again by the same greedy B6st6r6s as above.
If we want to buy a home, they nail us yet again, and they nail you again at the local level EVERY 6 MONTHS to a YEAR for owning the same home... And if we rent, in some states, you get hit again.
When you get gas so you can go to work.. WHAMMO you get hit again.
In a lot of states you get zapped again for any automobiles you own on a yearly basis. And you have some pretty hefty payouts just to buy that car.'
There are more examples but you get the idea.
And what do you see happening with your tax money. Lets do some more listing.
You see a federal government which is so corrupt, inefficient, and bloated that it is operating in a deficit mode while giving BILLIONS of dollars to insurance industry that just had it's largest company pay out millions to their head executives. They are also spending billions in a two fronted war which is about as popular now as Vietnam, and for pretty much the same reasons. AND when it is over, they are and plan to spend BILLIONS MORE in those same countries which made the wars necessary to begin with. THEY should be PAYING US! but thats another topic...
What else..? Oh yeah...
And when you DIE, they tax your estate!!! *** is going on in this country, that the people let this kind of government rip off go on???
I mean, if someone outside the government said that you had to give them 20% of your pay all the time or they would lock you away somewhere and/or steal everything you own, it would be called EXTORTION!
And the longer we put up with it, the more NEW taxes and TAX INCREASES they will throw at us. Heck, MOST of these taxes are illegal under the constitution anyways..
If this gets much worse, I am moving to Canada...
2. Every product you buy and every service you use is first and foremost provided by the government. The public sector is nothing more than a cute little faerie tale told by mommies and daddies so their little Republicans can sleep at night.
When you buy a loaf of bread from Walmart, you drive on public streets to buy a product that has been shipped on public streets and on rail that was created by the United States government. In the past, the factory that baked the bread was inspected by government workers (Due to tax cuts this no longer happens). Inventory of that bread is tracked by internet using wires that the phone company runs on public land or radio frequencies managed by the government. All the ingredients of this bread were shipped on public roads (other than water. Last I checked, that is provided by the government as well.). The money you spend for that bread gets it's value from the government.
When you walk into Walmart or your own home you are not that likely to be shot by some random person who wants your money. This is because of these people called the Police. They work for the government. When your house or your business catches fire, who puts it out? The government. Do your kids go to school? Do they go to the doctor?
Look at a list of countries that have lower taxes than we do. I would not want to live in any of them. If you want to pay lower taxes, your best bet is to move to Mogadishu.
PS. This is above not below.
^
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Understanding directions is important.
Now, can you support your arguments?
Are you a republican or just stupid? Oh, sorry, that was redundant..
Seriously, do people point at you and laugh when you open your mouth in public? You're a drooling moron pal...
This thread is about taxes and I'm NOT someone that wants to pay any more taxes than I have to, but what republicans never understand is that the country we live in costs money to maintain. They want to use the roads, they just don't want to pay for them. They want to tell everyone else what they can do, but they themselves never want to listen to anyone. George Bush is a low IQ idio that should have been institutionalized, but he was their leader (he IS more intelligent than most republicans, inducing you SCDECADE, which is why they kept putting him in office).
Republicans today are like rabid animals. You can't reason with them, you can't live with them, and I for one can't tolerate them because all they ever do is criticize others without offering any, NOT ONE, constructive suggestions on how to fix the mess they created. Yeah, let's put the blame where it belongs, and that's on the republicans.
Their solution? Double down on the tax cuts for the wealthy. That was all the Rabid R's can come up with..Criticize Obama and cut the taxes of the wealthy.. Jeez, what's the matter with you freaking animals. I keep wondering why it is that we let these people live. Isn't it time to use our military here at home to get the real domestic terrorists (republicans) out of here? Can we just mow them down and leave them in a ditch somewhere?
1. The US has the 2nd highest corporate tax rate in the world behind Japan. (http://en.wikipedia.org/wiki/Tax_rates_around_the_world) Saying that we are one of the lowest is just plain ignorance. We are in the middle when it comes to personal tax rates.
2. Your assertion that "Every product you buy and every service you use is first and foremost provided by the government" is just false. Your own examples prove you wrong. The bread that was created was not "provided" by the government, it was regulated by the government but created by the private sector. BTW, the railroads were not created by the government, they were a private sector invention and are still privately owned (other than Amtrak).
Tax cuts had nothing to do with the inspections either. The Bush tax cuts actually INCREASED revenue to the federal government. It's how they choose to spend it that caused that bread to not be inspected.
Why do you have such hatred of your fellow Americans? Your liberalism is showing.
3. The not likely to be shot in your home or Walmart has nothing to do with the Police. The police are a reactionary force; not a preventive force. It's the laws and subsequent punishment for violating them as well as morals that prevents the majority of people from robbing and killing other humans.
Not all firefighters work for the government. Volunteer fire departments are many times just a local organization the community puts together. The majority of doctors are not in the employment of government, so I fail to see your point. Kids are forced to attend the government indoctrination centers unless the parents are able to provide a better education through homeschooling or private schools.
4. If you want lower taxes, you ought to live in Ireland. Oh wait, using your logic Ireland is a third world country. </roll eyes> Ignorance is the biggest threat to America.
The funny thing is were going to allow them to do it.
What's there justification for doing this?
This country is softer than butter in july.
And the right wonders why they are becoming more irrelevant by the day.
PS. Please don't drink any water or eat any food from inspected sources.
True, there is a certain level of "public commons" that need to be paid for in a tax system. The idea of limited government does not mean no government. The idea is also that government is subordinate to the will of the people. We the people have decided that these certain functions are best done by a government. And different levels of government were formed to provide different services. The FED does not clean or repair the city streets for example. The State Highway Patrols (in the states I've lived in) do not have jurisdiction inside the city limits.
The city does not, sorry San Francisco, decide immigration policy.
The real angst comes when activists attempt to use the powers of government to compel people to do things that they cannot convince them to do with arguments. Your line of reasoning has absolutely no bearing on the matter as it's not a question of funding government enough to do the required jobs adequately...the food inspectors ought to be able to do their job properly, and their ought to be enough of them...same goes for the Border Patrol and INS. Tax regulations and government money should not be used to compel me to change my 'carbon footprint' or punish me if I don't. The day Al Gore gives up his mansion and Jet and lives in a 1400sqft house, I'll be convinced he means what he says he means and at least give him a listen...but that's a digression.
And also, if the small business baker cannot afford to make bread because the Gov't mandated regulations that were recommended by the big business baker because it helps the big business baker (Happens that way with Democrat Gov'ts and Republican Gov'ts so I'm kicking both), and the local and state taxes are so high that he cannot sell his products at the price needed to be worth his efforts, then he'll have to close up shop and you'll lose the jobs he created and you won't have any tax money from the government.
What telecommunication services are owned by the government? Private schools do not get tax money, so why'd you include those?
"The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration."
By definition, all constitutional amendments are constitutional.
A peasant farmer living on only what he grows himself without any contact with the outside world needs no infrastructure other than what he makes himself. A person living in NYC needs tremendous infrastructure just to use the bathroom. Add food, transportation and medical, a very large part of his production goes to support the infrastructure keeping him alive.
California also has the costs related to lack of fresh water and immigration pressures. California will always be an expensive state to run.
Increased taxation is not the answer to economic woes. Decreased Taxation is. Let the people keep thier money.
While we are discussing use/sales taxes it should also be noted that whether these same legislators support digital sales/use taxes. It logically follows they would support a national sales/use tax that would eliminate the totally inefficient and inept state and national income tax system we now have. There would be no more equitable tax system than one that taxes those who most use this nations resources and products. The system for such a system is already essentially in place - its' just a matter of how much and where the collected taxes end up - and who gets to divide the spoils. Of course, being a tax lawyer and or a CPA might not be quite as lucrative - and for that reason our pols will never do the logical or the right thing regarding getting rid of our wasteful income tax system.
"The Congress shall have power . . . To regulate commerce with foreign nations, and among the several states, and with the Indian tribes;"
The powers enumerated to the Federal government are few, to the states, more, and the individual, many (everything that is left). The Constitution can't enumerate a power to one when in reality it is taken up by another, or rather the State can't start writing laws about a power relegated to the Congress. That's the first problem with taxing interstate commerce, which was upheld in the landmark case LeLoup v Mobile:
The supreme court upheld that:
telecommunications "carried on between different states, they are interstate commerce, and within the power of regulation conferred upon Congress, free from the control of state regulations except such as are strictly of a police character, and any state regulations by way of tax on the occupation or business, or requiring a license to transact such business, are unconstitutional and void."
Furthermore, the states try, but they can't actually enforce a USE tax without either writing a bill of attainder or without submitting EVERYTHING to a use tax. If the States tax just "out-of-state" products and services, they've effectively created an interstate commerce tax, but if they tax people who didn't pay a sales tax, they either have to admit that they are taxing interstate commerce (unconstitutional) or have created a tax so narrow as to tax a specific class (bill of attainder - unconstitutional).
So, some over-zealous "Constitution be damned" states and legislators will give the tax a go, and some business with enough at stake will sue up to the Supreme Court (if they even have to, they can probably prevail in the District Court with the Supreme Court precedences already set down), and the states will go back to a dwindling economy that they started stalling out by initiating the unconstitutional tax in the first place.
There's been much debate about "flat taxes", "national sales tax", but in its current form, the Constitution doesn't allow for either of these. The federal government can't regulate commerce in the state and the states can't regulate commerce between the states. The country was formed as a confederated republic and we'll never be able or want to depart from those origins without becoming soviet schlumps addicted to the opiate of socialist handouts and victimhood, which in spite of the current administration and congress's attempts, will meet extreme resistance with the American people and their entrepreneurial spirit.
So the states should first see if they can't amend the constitution (won't happen) before trying to write these foolhardy and self-destructive laws.
"The Commerce Clause emerged as the Framers' response to the central problem giving rise to the Constitution itself: the absence of any federal commerce power under the Articles of Confederation. For the first century of our history, the primary use of the Clause was to preclude the kind of discriminatory state legislation that had once been permissible. Then, in response to rapid industrial development and an increasingly interdependent national economy, Congress ?ushered in a new era of federal regulation under the commerce power,? beginning with the enactment of the Interstate Commerce Act in 1887 and the Sherman Antitrust Act in 1890."
As long as the digital good or service's origin came from within the border of a state AND was sold / provided to someone within that state's borders then I could see the tax being Constitutional. But this would be so hard to determine and enforce that it would be cost prohibitive, thereby negating the very reason to do the tax in the first place.
- by markdoiron April 15, 2009 2:30 PM PDT
- PAY ATTENTION, HERE'S THE ANSWER: Everyone KNOWS that we don't own these digital downloads. Just read the EULAs. Some company (probably in some other state) owns these downloads. If Company XYZ owns a plant in your state, are they paying taxes on it? If they own a computer in your state, are they paying taxes on it? Why, when they own all of this software in the form of digital downloads, and in the form of media-deliveries (CD, DVD, etc), does their property in your state go untaxed? It's not the users (lessees) of the property that should be taxed--it's the owners. So go after Apple, Microsoft, and the other owners of these digital downloads, and leave us poor users alone. --mark d.
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- by Endbringer April 15, 2009 5:57 PM PDT
- That is a very good point. I like it.
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