Close this menu

North Carolina Targets Digital Goods

Whack a mole  In the Whack-a-Mole game that digital  goods taxation  has become, North Carolina is the latest state in which  proposed legislation has popped up.  Right now, North    Carolina’s House and  Senate are considering billsHB  558 and S 487, bills which would create a new  sales tax  on digitally downloaded goods such as books, consumer  information services, and music, such as iTunes  downloads. as well as expand tax burdens on retailers who seek to advertise on North Carolina properties, via an “affiliate nexus” bill.

 NetChoice has been heavily engaged in these debates, both in North Carolina and aroundthe country. Taxation of digital goods is 1) bad for the environment – digital  downloads don’t require a drive to the store, delivery vans, plastics, paper, or packaging; 2) bad for consumers already struggling to make ends meet in a deteriorating  economy, especially one in which online information and services can be used to help them stretch their already-thin dollars; and 3) encourages the scourge of digital piracy —  people should be encouraged to download content legally. Taxing it and making it more expensive only serves to drive more people to readily available, illegal copies of music and movies.

And bills which seek to require any out-of-state retailer that uses a network of affiliates to drive traffic via advertisements on North Carolina-based websites to collect North Carolina sales taxes, would have the unintended consequence of reducing ad revenues for North Carolina companies, including media outlets, without increasing sales tax collections.

Maryland, Virginia, and New York have all flirted with the idea of imposing onerous taxes on innovative, green, and growing component of the economy. Ultimately, they all decided that the negatives outweighed the benefits, and changed or abandoned their plans. NetChoice will do its best to make sure North Carolina joins them.

Photo credit to terren in Virginia via Flickr