The NetChoice Coalition

Promoting Convenience, Choice, and Commerce on The Net

Steve DelBianco, Executive Director

1401 K St NW, Suite 502

Washington, DC 20005

202-420-7482

www.netchoice.org

 

 

March 16, 2009

 

The Honorable Michael Obuchowski

Chairman, Ways and Means Committee

Vermont State Legislature

via email: obie@leg.state.vt.us

 

RE:  proposal to tax digital downloads

Part of Miscellaneous Tax Bill, scheduled for March 17, 2009

 

Dear Chairman Obuchowski:

We write to respectfully oppose Vermont’s proposal to add a new sales tax on digital goods. The Miscellaneous Tax bill creates a new tax on “specified digital products,” which includes digital audio-visual works”, “digital audio works” and “digital books.”

Now is a critical point in the evolution of e-commerce and internet content distribution. Online companies are experimenting with new ways to deliver products, services, and content, and businesses of all kinds are going online to reach consumers and advertise to receptive audiences. At the same time, state governments are looking online for additional revenue, including taxing digital products. However, just last week New York concluded that the negatives outweighed any benefits of such a tax, and rejected efforts to tax digital goods.  

Likewise, we believe that Vermont should conclude that this tax proposal will negatively impact the state. It will penalize the environmental benefits of digitally delivered goods and discourage economic development and job creation among Internet companies.

This tax will also burden the environment by causing consumers to slow their growing shift from physical goods to digital alternatives. Vermont’s residents will log more miles in their cars to buy physical products whose raw inputs and carbon outputs contribute to global warming.

A digital download is the greenest way to buy music, movies, books, and software. Downloading requires no driving to the store, no delivery vans, and no plastics or packaging. When a consumer downloads a CD’s worth of music, her carbon footprint is only 1.3lbs. But if she were to drive to a store and buy a physical CD, she’d use up almost three times the amount of natural resources.

One study commissioned by the European Union compared the amount of resources (minerals, fossil fuels, etc) required for 56 minutes of music:

Physical retail: 3.4 lb

Online purchase with physical delivery: 2.9 lb

Digital distribution: 1.3 lb

According to the Recording Industry Association of America, in 2007 nearly 100 million full albums’ worth of music was digitally downloaded by Americans. In 2007 alone, more than 200 million pounds of natural resources were saved by US consumers buying music digitally instead of driving to the store for a CD. This works out to more than 380 pounds of natural resources every minute.

Vermont’s leaders should instead be identifying ways to encourage the environmental benefits realized when consumers use digital delivery instead of driving to a store for a tangible item that had to be produced and packaged.

While a digital goods tax is bad for the environment, it would also extend the long arm of government to the long tail of online commerce. As an example, independent music artists are increasing eschewing traditional forms of music distribution and are instead using Internet websites to sell their own creative works. A tax on digital downloads turns artists into tax collectors, and impairs their ability to survive in today’s tough economy.

Furthermore, under current law, out-of-state businesses would not be required to collect sales tax on digital downloads sold to Vermont consumers, which places in-state sellers at a disadvantage. A tax on digital downloads would place new burdens on Vermont’s small businesses, who would be forced to implement costly new systems to calculate, collect and remit sales taxes.

Vermont should instead take the lead and exempt digital goods from taxation. North Dakota recently passed legislation such an exemption. If a state with the commitment toward environmentalism were to introduce similar legislation, it would send a strong positive message about the benefits of eco-commerce.

We urge you to reconsider the proposal to tax digital goods, and thank you for your consideration.

 

Sincerely,

 

Steve DelBianco

Executive Director

 

cc: Members of the House Committee on Ways and Means

NetChoice is a coalition of trade associations and e-Commerce businesses who share the goal of promoting convenience, choice and commerce on the Net. NetChoice members include AOL, eBay, the Electronic Retailing Association, IAC, News Corporation, Overstock.com, VeriSign, Yahoo! and others.  More information about NetChoice can be found at www.netchoice.org .