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The Great iTunes Tax Grab

CNET’s Stephanie Condon writes today:


“Semantic disputes and other complications aside, the lure of easy
revenues–especially if they can be sold to voters as a technical
change in definitions rather than a tax increase–continues to lure

Unfortunately, in this day and age, this means a tax grab by politicians on digital goods such as music downloads off of iTunes or Amazon.


And, despite the popularity of download tax legislation in state legislatures across the country, it has its big problems.  Says Condon…


“Not all online vendors, though, would be compelled by state laws to
collect digital download taxes from their customers. 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. Translated, that
means a company such as Seattle-based Amazon would not be required to
collect taxes for the items it sells to San Francisco residents, even
if California imposed a digital download tax…

“…Digital download taxes have also been criticized for running businesses out of state.
Michelle Steel, a member of California’s Board of Equalization, wrote in an editorial
in April that if the state were to tax downloads, “Golden State
retailers would be at a competitive disadvantage to out-of-state

“…For those companies that do have a physical presence in many
states–like Apple–it can be a logistical headache to comply with
digital download tax laws in multiple states. That’s because many
states have varied definitions of what constitutes a digital download
and how they may be taxed.”

Not only that, but given the price of oil, our foreign dependency issues and environmental concerns, shouldn’t we be promoting commerce that uses vastly less energy than driving an SUV across town to pick up the latest Celine Dion album?  NetChoice executive director Steve DelBianco says in the CNET piece:


“With global warming and a world that’s running out of oil, the last
thing governments should do is add taxes on something that uses no oil
and produces no carbon.  A digital download is the greenest way to buy music,
movies, and software, since it requires no driving to the store, no
delivery vans, and no plastics or packaging.”

Indeed, the American Consumer Institute recently reported that:


More than 6.5 billion fewer miles were driven to and from record stores in 2007 as consumers continue to switch en masse from buying CDs to downloading songs via high-speed connections.  Over the past 10 years, the emissions savings from avoided drive time alone add up to 17.6 million tons of GHG.  Demand for plastic CD cases has also fallen as more and more people switch to downloading.  ACI estimates that “6 million tons of emissions have been saved in the last 10 years by reducing the demand for plastic cases,” which are generally made from petroleum.  All told, the switch to downloads from CDs that’s been underway since 1997 translates into a total savings of 23.6 million tons of GHG – a remarkable decrease in emissions”  (PDF of study)