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States Seeking Levies on Digital Downloads
evdubs writes "15 states and the District of Columbia currently tax online media, with others eager to begin their own taxes. The RIAA estimates that domestic sales totaled $503 million last year, but that figure doesn't include movies, e-books, online video games and other forms of digital media. Perhaps the most interesting point in this article is the way states, looking to start taxing online media, are trying to use the interpretation of previous law and apply it to digital media. In Washington, politicians are using their definition of software (already taxable), 'a set of coded instructions designed to cause a computer...to perform a task,' to justify taxation of online media because 'they cause some action by a piece of hardware to play them.'"
It makes me wonder how they could possible determine who owes what. If someone from the UK purchases digital goods from me in Michigan - how would they know the difference? It will require that businesses volunteer the info - not likely
require that businesses volunteer the info
JUST LIKE SALES TAX on in store sales..
do you think any seller of legal electronic media (movies, music, photographs) is not going to be a large enough company to plan on compliance with their local laws?
every day http://en.wikipedia.org/wiki/Special:Random
As the government/corporations keep going down this road, we will all just have to go back something like the old BBS days where everything is private and you have to know someone to get in the door. Which to be honest, sounds good to me.
.. so this cd of linux is worth an estimated 10000, so you owe us 100 bucks or we put you in jail )
This is also getting out of hand. Next they will assign an arbritary value to OSS software ( well, lets see. windows is xxx and office is xxx and and and
---- Booth was a patriot ----
I'm not entirely opposed to the idea here, but exactly what value are the taxing entities (states, districts, etc.) providing in exchange for the taxes collected? I could see the Feds providing structure and market enforcement via the FCC and FTC, which could possibly justify a federal levy, but where does an individual state get involved? That part I'm having trouble seeing.
Of course, there's the other perspective which has state governments looking for any means to plug massive budget holes, so to that extent they're probably just following the old John Dillinger line as to why he robbed banks - because that's where the money was.
Stop by my site where I write about ERP systems & more
thats why I've already started giving away some of my software for free with support. By signing a support agreement, my tools can be licensed for use for free by your company... I'm not selling them, you can't tax them.
meh
In Kentucky, I pay $1.07 for a song from iTunes. For some reason, my state feels the need to collect on content that didn't originate in the state, isn't served by an employee that works in the state, isn't stored on servers inside the state, and isn't necessarily even bought inside the state (a purchase made on a laptop while on vacation, for example).
For me and my state, adding that $.08 to cigarette tax would be much more productive. I wish they would do that instead.
In Washington, politicians are using their definition of software (already taxable), 'a set of coded instructions designed to cause a computer...to perform a task,' to justify taxation of online media because 'they cause some action by a piece of hardware to play them
...except that the media file itself cannot cause the hardware to play it. Software must be employed to decode the file. Double-clicking on the file's icon requires more software, the OS, to load the software required to decode the file.
This'll take about five minutes to be thrown out. *yawn*
The only surefire protection against Microsoft infections is abstinence. - The Onion
...a DVD, a CD, and other types of media that are just media are also "software." In a CD's case for example, the CD causes a CD player program to react and play a tune, so is the CD now software? These idiots don't even understand the distinction between "data" and software. Let me give you a hint morons: software is executable, data isn't, the two are not the same at all. Data, in and of itself, causes nothing to happen. You could double-click on an MP3 all day, if you have no player installed it doesn't work. We seriously need to start getting people into office that understand computers at least to this basic degree.
Judges and senates have been bought for gold; Esteem and love were never to be sold.
No taxes to pay on free stuff.
This hardly affects me as a consumer (open source, and my pay-for entertainment ALWAYS comes on a disc) but being in the software industry I'd like to know - didn't the federal government have a ban (at least temporary, for the next several years) on internet sales taxes?
How would it get around this?
This is expected, along with other twisted plot points in the struggle for the world to become completely flat with regard to regulation, business, and other things of huge impact to joe public.
... well, up till now. As they lose power and control, they will do many twisted things to try to retain it.
Some of the processes to watch are: Immigration, offshoring, outsourcing, foodstuffs regulation, computer and internet regulation and taxation.
The world is very busy at becoming flat in many regards. Something tells me the French will always be a sore thumb, but everyone else is interested in commerce and becoming either wealthy consumers or those that supply them. Once the regulatory grip slips loose a bit, watch how farmers start selling their products both without the protection of the government, and without the stranglehold on how they can sell their products. Food has been used as a political tool for too long, as technology has been. The old guard are losing control of all the things that kept them in power for
As for taxation, without funds from taxation, governments become rather helpless groups of mislead individuals. This is just one *SMALL* sign that its time to revamp the tax schemes here in the US. The old ways are falling behind so quickly that it will be difficult to keep up... we need someone to start a wiki or something... A place where government types can go to learn about the brave new world they are facing and how they can effect a stable government within it.
Support NYCountryLawyer RIAA vs People
So are they trying to tax items you download if the company has a physical presence in the state or no matter what? The old brick and mortar way of solving taxation, which is how catalog orders were handle since catalogs came about, is something states have been trying to squash for years. Seriously, if they are following the old model, I really have no problem with it. Many of us are already dodging sales tax on the purchases of items from Amazon and the like.
Now many states have tried to get around the old method of taxing by creating "Use Tax." I saw this nifty little item when I filed my taxes this year. They basically want to charge you sales tax on items you purchased online and, in some cases, other states. The latter one bothers me because it is absurd to be taxed twice simple because you either moved or purchased items while travelling on vacation. The initial one is almost as absurd, since it relies heavily on them getting the truth out of you. If you do not claim to purchase anything online then it is sort of hard for them to say you did, short of tracking all your CC purchases.
The states have complained for ages it seems about the loss of money from online purchases. I personally think that while states might lose money, it actually helps overall economy. If people have to pay a few dollars less and not pay tax on an item (especially higher priced ones), they are more likely to purchase the item. Now if this item requires disposable or extra items (i.e. batteries, DVDs, etc.) you are more likely to get people purchasing those locally as well. In the end, the states still get money, they may just miss out on a small portion of it every now and then. Instead of sales taxing us all to death, raise liquor, tobacco, or hotel taxes to cover expenses. I enjoy the hotel taxes because I do not have to pay my local governments, the tourists do.
"Some days you just can't get rid of a bomb."
Digital media does NOT cause any action to occur.
None of the currently used media file types have any *code* in them that causes actions to occur.
The computers that have media players on them, have settings defined that tell the computer what to do when that media type is selected.
Someone should explain the difference between media and the device.
I can strip the entries out of the registry, and drop media files and even double click them all day long and *NOTHING* will happen, except that I'll either get a sore finger, or break my mouse.
Who is general failure, and why is he reading my hard drive?
Much better than taxing the gas guzzling SUVs that exploit loopholes in the law or taxing cigarettes. Yup, very logical.
This guy is way out there
So now what... music patents?
How are they going to tax allofmp3? I bet those clever russians have a loophole for just such an occassion.
That seems to be what the State Governments are saying. A lot of people sell stuff at garage sales and dont report the sales as taxes.
Reminds me when I was 11, my friend was mowing a few lawns that summer for money. He didnt make much maybe $60 bucks. But the IRS guy that came by their house was telling him and his parents he needed to file taxes the next year. I'm sure the IRS guy was being technically legal, but it seemed more anal to me.
From what I understand about online music, we cannot copy it because we are merely "licensing" the right to play it, not own it. This though is in contrast with the statement from Tennessee which says ""Music is included because music downloads fit the definition of personal property,"
Does this mean then that we now own music we download, and can freely do with it what we wish!?
If so, tax away.
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Piracy on the rise in 15 states and the District of Columbia
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If the levy breaks, will there be a torrent?
Unknown host pong.
What a load of crap. I see two issues here which don't appear to be addressed by the authorities levying the taxes.
1) No justification for the taxation is provided. There should be some underlying benefit to "We the people" for any taxation. i.e. I pay a hefty tax every month on my communication bill for various services provided to society, two of which are funding for communication access for the disabled and funding for communication access to rural areas. Levying a tax on downloaded media just because they can is not justification and depending on what they are considering a download it could be construed as double taxation since I already pay several taxes on the communication itself.
2) One of the concepts which jump started the United States of America was the concept of "No taxation without representation". Now I realize we have representatives in government who were voted into their positions by the people, however, if these representatives are not representing the interests of the people who voted them in and instead are representing the interests of the government or corporations then they are no longer representatives of the people. Before the American Revolutionary War the British argued that Americans did have "virtual" representation in parliament and therefore there was no need for American representatives to participate in the British government. We all know how that one turned out and virtual representation is no excuse today either.
I actually don't mind paying taxes, I think I enjoy many benefits from taxation here in the States, but I'd like to have some justification for new taxes beyond creative interpretation of existing laws.
burnin
don't worry, those driving SUVs are paying for them. The burn more gas and hence pay more in taxes to travel the same distance as others. They are usually more expensive to repair as well.
I look at it this way, if someone wants to buy the big SUV, pay the premium for doing so, and then to top it off pay for all that extra gas I say LET THEM!.
Besides there are quite a few people who can justify owning one for hauling the family. Singling out SUVs has gotten so low-brow it makes me wonder why people want to follow such a stupid path.
As for cigarettes, states are looking elsewhere because all their taxes are having the effect they claimed they wanted : reduced smoking. Problem was when the smokers quit it meant someone left the voluntary tax roles. Lottery tickets certainly don't make up all that money so its got to come from elsewhere.
I look at the bright side, my state has a near 1 billion dollar surplus because it doesn't specialize in income redistribution which what most states running a deficit are doing. They have promised so much money and service to people they have no choice but to scramble for every last penny.
Instead of asking why they aren't taxing some people more you should really be asking why are they taxing it in the first place. Too many spend more time wanting to inflict financial burdens on others than the more logical idea of reducing them on all.
* Winners compare their achievements to their goals, losers compare theirs to that of others.
Isn't it the boost in government spending (read "waste") that is creating the budget shortfalls? Just like raising gas taxes, property taxes, sales taxes, cigarette taxes, liquor taxes -- it all happens because once lawmakers get their hands on those billions, they can't help but spend it recklessly, to the point of drilling an enourmous hole in the budget that John and Joan Taxpayer have to fill. This is just local government trying to find a way to cover its own ass by papering over the hole, when we all know any revenue generated by these taxes is going to simply be frittered away.
Maybe these state governments should try balancing their budgets first before bludgeoning their citizens over the head with more taxes.
GetOuttaMySpace - The Anti-Social Network
Let's face it, it isn't college students and minimum wagers that are paying for the downloading of music. A person that buys their music from iTunes has the money to do so. Most of the outrage that comes towards taxing it comes from those who aren't paying for their music collection. These taxes will all be added because the majority of people have no idea what bills are being passed.
Slightly OT: I don't understand why more Americans don't go to the local library. Most of the music on my iPod was taken directly from the CD. I control the quality. The libraries have a very good selection of music, including huge box sets that cost over a hundred dollars from stores. If the library in your neighborhood doesn't have a cd you are looking for, they will check the county branches, and then even at the state level, and then send an email when the item arrives. I don't mind waiting 1 to 2 weeks to hold a cd in my hand and generate my own copy. Sitting at the computer searching mp3 sites, or bit torrent for an obscure song is a waste of time when the libraries databases are avaiable in the same browser.
15 states and the District of Columbia currently tax online media...
I'm curious to know which they are. I was recently forced out of my house due to a sinkhole. I'd consider relocating based on digital download taxes.
No, not really. But I'd like to know.
The only thing necessary for the triumph of evil is for good men to do nothing.
"music downloads fit the definition of personal property", according to a Kentucky government spokesperson.
Does that mean that when you pay for a download and it disappears after a month or you can't move it to a different device, that the Kentucky government will prosecute the company responsible for violating your property rights?
Conversely, if the software makers can argue "this-software-is-licensed-not-sold", how could there be a sales tax?
The first because the Senate no longer represents the will of the State's legislature and second because the Federal Government encroaches on the power of the states too much.
How would this help out with concern to the current story?
Simple, many states are stuck with underfunded or unfunded Federal mandates. So the states look in ever nook an cranny for money. Yeah we would still have states taxing everything but the air we breathe but it would be far easier to avoid those states instead of being stuck where all of them are surragate collectors of taxes to fund Federal mandates that the Federal government had no real basis for doing.
* Winners compare their achievements to their goals, losers compare theirs to that of others.
There are a number of threads here with points worth responding to. I'm too lazy to put them all in the respective threads, so I put them here in one place. Here is the skinny on Sales and Use tax issues, at least in PA. It applies to taxability of digital downloads specifically but touches on other issues as well.
/rev-227.pdf), but I haveto pay the additional 1% to PA on a use tax return.
1. Sales tax:
To be required to collect sales tax from customers, businesses must have a nexus with the state. Physical presence is sufficient, as Lynn Swann found out from selling his footballs. Sales tax is collected by businesses, not consumers. Physical things (tangible personal property) must be sold to the end consumer in order for the sales tax to be due in PA. Services (some) also incur sales tax. For property sales, however, you needed tangible personal property, not intangible ones.
2. Use tax:
This is required to be paid by customers (purchasers of tangible personal property). If I buy a sofa in MD (5% sales tax) and bring it to PA (6% sales tax on a taxable item of personal property), I am required to pay sales tax. I can get credit for sales tax paid to MD (see: http://www.revenue.state.pa.us/revenue/lib/revenue
From a practical standpoint, use tax is paid in two scenarios, primarily. First is by businesses with multijurisdictional operations that transfer property between states. Second is by consumers who buy cars elsewhere and register them in PA.
3. Sales and use tax issues - tangible personal property:
One of my partners does SALT work (State and Local Taxation) and he specializes in going to businesses to do reverse audits to reduce taxes paid going forward by changing business practices and in appling for refunds for improperly paid sales and use tax.
One big issue with sales and use tax is whether something qualifies as tangible personal property. Software has been a big issue in Pennsylvania. The Graham Packaging case decided that issue:
http://www.revenue.state.pa.us/revenue/cwp/view.as p?a=318&q=252626
http://www.courts.state.pa.us/OpPosting/CWealth/ou t/652FR02_9-15-05.pdf
The relevant stipulated facts of the case are as follows:
In connection with the appeal to this court, the parties entered into a
stipulation of facts which states, among other things, that: (1) users of software programs do not own the software program; rather, users purchase the right to use the program in accordance with the licensing agreement and copyright law; (2) computer disks are often provided free of charge to multiple user license holders; (3) computer disks do not give users rights of ownership to the software; (4) computer disks remain the property of the licensor of the software program; (5) the physical delivery of the computer software program can be accomplished without the transfer of the computer disk and the computer disk is not necessary for the use of the program; (6) the physical quality of the computer disk does not affect the price of the computer software program; (7) Graham paid Dell for two-year license renewals of software licenses previously purchased by Graham; (8) the delivery of the computer software sold to Graham was originally accomplished by disk; (9) the license renewals at issue did not involve computer disks; and (10) the original computer disks were obsolete at the time of the license renewals. See Stipulation of
Facts (filed March 2, 2005).
Before Graham Packaging, there was a big difference whether software was downloaded or delivered via CD. To wit: say I want an AV program. If I want the most sales tax advantaged way of buying one, I purchase and download AVG Antivirus instead of buying a copy of the Syman
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