March 10, 2005 12:21 PM PST

'iPod tax' planned for music downloads?

Legislators in Wisconsin are mobilizing against a proposal they call the "iPod tax," in a battle over online music and movies that could soon spread across the United States.

At issue is whether consumers need to pay tax on digital downloads such as movies or songs purchased from Apple Computer's iTunes store. In a few states, those who don't voluntarily pay a few extra cents of tax on their 99-cent downloads are already technically breaking the law.

Wisconsin Gov. Jim Doyle now wants his state to start collecting taxes on digital music, videos and software. Key Republicans in the GOP-dominated legislature say they will block the proposal, but administration officials say they're just trying to make things fair.

News.context

What's new:
Wisconsin and other states are grappling with how, or if, to tax digital downloads such as music and movies purchased online.

Bottom line:
Some economists say taxes on digital goods could hamper the growth of a vibrant new marketplace; others say that having taxes only on offline versions of the same goods distorts the operation of free markets.

More stories on this topic

"It's an issue of tax equity," said Jessica Iverson, a spokeswoman for the Wisconsin Department of Revenue. "If you go into a Main Street business and purchase a CD, you are paying tax."

That issue of "leveling the playing field" between Internet and offline businesses has dogged e-commerce from its inception, creating a complicated maze of rules that is now extending to the world of digital downloads.

Economists are split, even across right-left divides, as to whether adding these kinds of taxes is a good idea. Some say that taxes on digital goods will hamper the growth of a potentially vibrant new marketplace, while others say that having taxes only on offline versions of the same goods distorts the operation of free markets.

Many states already impose what is often called a "use tax," which is essentially a sales tax applied to goods purchased from out of state businesses such as through a catalog, a 1-800 number, or online.

For the most part, states can't force the vendors to collect that tax unless they have a physical presence in the state, however. That means that consumers themselves are often technically required to tally up how much they've spent during the year and pay the tax voluntarily.

Predictably, the compliance rate for this is extremely low, although some states have pursued high-profile efforts to collect the tax by contacting online vendors--most notably when Michigan subpoenaed online cigarette sellers for the names of state residents earlier this year. Wisconsin officials estimate that just about 1 percent of people actually pay this kind of "voluntary" tax at the end of the year in that state.

In the case of digital downloads, the issue has been almost wholly invisible.

In at least a few states, however, consumers who don't pay taxes

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17 comments

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Don't these people ever stop?
It's never ending! Government will also try and raise taxes, no matter what!
Posted by bobby_brady (765 comments )
Reply Link Flag
Guess What
They will get their way too. I would be willing to bet that within a year they will get their taxes.

I am not opposed to paying taxes, but I wan't to know exactly when and where my taxes go. I want an Itemized list of everything my money goes for. I also think that any pay incresses that state and federal officials get should be voted on by the people not by other reps. To clear it up when you run and win an office you should be able to go to the bathroom without approval from the people.

Yeah I know that's stupid. I really don't want to know when and why they are going to the bathroom.
Posted by System Tyrant (1453 comments )
Link Flag
Taxes, Taxes EVERYWHERE
From your phone to the tires on your car, the public is being
taxed to death.

The Beatles
Taxman

"Let me tell you how it will be
There's one for you, nineteen for me
'Cause I'm the taxman, yeah, I'm the taxman

Should five per cent appear too small
Be thankful I don't take it all
'Cause I'm the taxman, yeah I'm the taxman

If you drive a car, I'll tax the street,
If you try to sit, I'll tax your seat.
If you get too cold I'll tax the heat,
If you take a walk, I'll tax your feet.

Don't ask me what I want it for
If you don't want to pay some more
'Cause I'm the taxman, yeah, I'm the taxman

Now my advice for those who die
Declare the pennies on your eyes
'Cause I'm the taxman, yeah, I'm the taxman
And you're working for no one but me."
Posted by (2 comments )
Reply Link Flag
Avoid Taxes
Simply download from an Australian site....
Posted by bradfriedrich (6 comments )
Reply Link Flag
Yes..
...there are no borders online. Good luck with collecting tax for music from me. The 37% of my pay isn't enough.
Posted by lewissalem (167 comments )
Link Flag
Unfair and Based Entirely on Greed
Taxes are collected, not for the SAKE of collecting taxes, but are
collected because they impact an infrastructure that has a cost
to maintain.

Now before you think you can build an argument about on-line
sales affecting infrastructure, we are talking about labor and
materials. Any other argument would be based on intangibles
and would be complete and utter ********.

Sales taxes are collected on goods sold in a state because the
transportation system is afffected and the state must maintain
the cost of roads. Merchants pay taxes because they have a
similar affect on their surroundings. This is all reasonable. I use
your streets, police, etc. The governing body has to have a
means to pay for it.

Taxing music sales, simply because it is a successful enterprise,
is pure, un-mitigated greed. The states are not affected. They
just want the money. These proposal earn the utter loathing of
the population they profess to serve.
Posted by Thomas, David (1947 comments )
Reply Link Flag
It's not just greed. Politicians want to use your money to buy votes
It's not just greed. Politicians want to use your money to buy votes.
Posted by lingsun (482 comments )
Link Flag
Taxes wouldn't be so bad...
..if politicians spent is properly and intelligently.

In nearly every situation, tax money is wasted.

Perhaps the government needs to slim down and spend wisely before asking us for more money.
Posted by Bill Dautrive (1179 comments )
Link Flag
The lack of sales taxes helps offset the cost of shipping (if applicable)
Politicians always talk about how online purchases that are tax free have some type of unfair advantage over brick and mortar stores. But the lack of sales tax helps offset the cost of shipping of tangible items (not digital downloads, obviously).
Posted by lingsun (482 comments )
Reply Link Flag
What do you expect....
What do you expect from an administration with the IQ of a zit, that spends, spends and spends some more and then tells lies to go to war to spend even more.

Clinton may have liked getting blow jobs in the oval office but at least he didn't run their country in to the toilet. Bush and all of his hired idiots are doing a good job with the toilet handle and plunger. Yes, idiot American's voted the moron back in to office.

Robert
Posted by (336 comments )
Reply Link Flag
I expect......
I expect your response to be about a proposed tax on iPod, not your political opinion of our presidents. If you insist on criticizing a political party, please note that the proposal is being made by Democratic Governor Jim Doyle of Wisconsin. Also notice that legislators in Wisconsin are mobilizing AGAINST the proposal, not for it. Those against it are key Republicans in the GOP-dominated legislature, who say they will block the proposal.

BTW, idiot American's voted the prior moron back in to office too, so what else is new?
Posted by br77575 (46 comments )
Link Flag
Too many C(r)ooks Spoiling the Broth
Australian consumption tax is applied and collected by the Federal Government and the receipts divided between the staes and territories as per GST legislation.
Apart from making the level of tax identical from state to state it also allows for the advertised or "sticker" price to be what is paid at the checkout. None of this "$5.98 plus tax, that will be $25.30 Thanks"
The Australian system may not be perfect but it's seems far simpler than each state having to chance their funds all over the country.
Posted by j3st3r (70 comments )
Reply Link Flag
What Happened to "Smaller" Government?
Every other article that gets posted to Cnet these days is about bigger and bigger and bigger government. The Republicans promised smaller government, but they're doing their level best to tax and spend in their own way. I do not trust any of these politicians one iota.

This is all getting way out of control. Crackdown on blogs, tax digital downloads, outlaw P2P, put black boxes in cars, regulate technology innovation, regulate paid cable and satellite programs the same as boradcast stations, control content on DVD's, and this was all in the past week!

Where does it stop?
Posted by (274 comments )
Reply Link Flag
Poletic
ALL polititians are for the most part idiots. They can be book smart and well versed, but like anybody who doesn't have to work for a living they haven't a clue. I suspect at the end of the day most of them go to bed feeling like they have done some good. Maybe they have. In my opinion there is nothing wrong with taxes. If you take them away America will go to crap real fast. My problem is thess people telling me they can do what they want with my money and they don't have to anwser to me. Well guess what, yes they do.

People complain about Bush being back in office. Well, this year we got screwed either way. Kerry doesn't know what it's like to have to work for a living. He would have been just as bad as Bush just in a different way. A good question is how long does America have before it folds in on itself because Capitilism and Polititians cause the economy to become so unstable that it crashes like Russia. We are the majority. If you don't like the way YOUR government is run then change it. Make your voice loud. Take them to court, take it to the steps, and take it to the poles.

Our fore fathers had to fight for America and we Americans are going to have to fight to keep America. I don't advicate violence I advicate having a voice and using it.
Posted by System Tyrant (1453 comments )
Link Flag
Isn't there already a tax?
As I recall, Apple charges tax for everything I purchace from them, including songs from the music store. Granted, I have not researched into whether this includes tax for my state, and of course you have to trust that they will send the tax collected to the state. I also don't see it amounting to much given that each song is only $0.99 anyway.
Posted by u2mr2os2 (42 comments )
Reply Link Flag
 

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