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Wisconsin Passes Digital Download Tax

Posted by Soulskill on from the harvesting-the-tubes dept.

McGruber writes with news that the State of Wisconsin has passed legislation to extend sales tax to digital downloads. The new law will go into effect on October 1st. Estimates suggest that the 5% tax on "downloads of music, games, books, ring tones and other video entertainment" will bring in $6.7 million annually. "[Wisconsin Governor Jim Doyle] has been fighting for the change for years. He and other state officials say it is a matter of fairness: Internet vendors shouldn't have a tax-exempt advantage over Wisconsin's brick-and-mortar retail stores." Similar legislation has been proposed in North Carolina, and we've previously discussed New York's foray into taxing sales made online in addition to downloaded purchases.

25 of 327 comments (clear)

  1. I live in WI, and I say this sucks by neo-mkrey · · Score: 5, Informative

    In addition to this, the current legislature wants to increase the state sales tax another 0.5%, add a tax to car insurance sales and put toll booths on the Interstate. This after they voted themselves a 5.5% wage increase.

    1. Re:I live in WI, and I say this sucks by mabhatter654 · · Score: 4, Interesting

      That's the problem with "business" taxes that aren't on property values. Michigan's reeling too, because the auto makers can basically pick and choose how much "profit" to have in a year. You and I are taxed on Income, with few deductions for "capital" investments (hint YOU can't deduct rent or car payments.. your company can). We can't choose to not make income. That's why PEOPLE have to pay the taxes. California has Hollywood and Silicon Valley.. they should generally be rolling in cash... both industries that are highly profitable.. .and very good at not actually showing that profit on the bottom line where the state gets a cut. That's why you don't ever let businesses off the property taxes.. it's the only thing that's hard to filch out of.

  2. How do they enforce this? by SigNuZX728 · · Score: 5, Insightful

    I'm a little confused how they're going to enforce this law against companies that have no physical presence in the state? I did not see that addressed in the article.

    1. Re:How do they enforce this? by doktor-hladnjak · · Score: 4, Insightful

      I don't think the physical presence aspect is affected by this legislation at all. Previously, digital downloads were just not applicable to sales tax in Wisconsin, much like food or medical supplies are not taxable in certain states. If Apple or Amazon don't have a business presence in the state, their stores will probably remain sales tax free.

      I'm not sure why these articles are such news. We've been paying sales tax on digital downloads in Washington for as long as I can remember. We have both an Apple (via Apple Stores) and Amazon (headquarters and all) presence too.

    2. Re:How do they enforce this? by tmosley · · Score: 3, Insightful

      If that's the case, then they are actually encouraging businesses to not come to their state, lest their internet operations be subjected to a costly tax. Large businesses like Apple or Amazon, which do such a large amount of online business, will probably end up stopping all operations in that state.

      If you tax something, you get less of it. This is kindergarden economics.

    3. Re:How do they enforce this? by dedmorris · · Score: 5, Insightful

      The hot dog vendor only collects tax, and more importantly has the expense of filing in only one location. The small internet vendor could potentially be held liable to collect, file, and understand the tax laws of thousands of taxing jurisdictions. It's more than just the states. Could Madison attempt to enforce a download tax? What about the Dane County High School Football Stadium levy? Historically, out-of-state businesses have been protected in the US by nexus requirements. There are tens of thousands of taxing jurisdictions in the US.

    4. Re:How do they enforce this? by KingFeanor · · Score: 4, Insightful

      The Wisconsin Income tax form has a spot on it for WI residents to report "use" tax for items they purchased which should be subject to sales tax. A WI resident is supposed to pay the "use" (really sales) tax on any items purchased online which would have been subject to sales tax in a WI store. So this bill just expands that to the digital downloads. For the most part this is just an "on your honor" tax. Most of us will never pay it given we don't like it and they really can't figure out that we owe it.

    5. Re:How do they enforce this? by Anonymous Coward · · Score: 5, Insightful

      You do realize that having your withholding adjusted so that you owe instead of get a refund is a good thing right?

    6. Re:How do they enforce this? by Atomic6 · · Score: 5, Informative

      Not sure why this was downranked, but I'll try to explain why Anon. Coward is correct in his thinking, to a certain point at least.

      If you get a refund, you'll get exactly what you would've have spent when you initially paid your taxes and had withholding's taken out. In other words, it's like the government was saving your money for you without paying interest like a bank would do.

      If, however, you owe money, that means you got to keep it in the bank or put it into some kind of investment, where it could grow grow. When it comes time to pay owed taxes, whatever interest or growth that money accrued is yours.

      --
      "We have exactly as much freedom as we are willing to demand and as we can defend."
    7. Re:How do they enforce this? by dangitman · · Score: 3, Informative

      Large businesses like Apple or Amazon, which do such a large amount of online business, will probably end up stopping all operations in that state.

      Yeah right. Apple's going to close down all its retail stores in a state (which bring in plenty of revenue) because of a tax on digital downloads. Economics isn't your strong point, is it?

      --
      ... and then they built the supercollider.
  3. Not too hard to ditch... by Penguinisto · · Score: 4, Insightful

    Option 1: Start using PayPal with an out-of-state relative's address
    Option 2: Get a PO box over state lines, and open a bank account there while you're at it.

    ...or Option 3: Move to Oregon, where we don't have a sales tax.

    I am curious, though - they expect to make $6.7m per year... how much of that will disappear into enforcement and accounting? Doesn't really seem like there's enough return on it to balance the hordes of pissed-off constituents.

    /P

    --
    Quo usque tandem abutere, Nimbus, patientia nostra?
    1. Re:Not too hard to ditch... by cortesoft · · Score: 3, Insightful

      Yeah, this seems strange that you would go as far as to commit tax fraud, but you seem to be against downloading a free copy from file sharers. I am curious; is there a moral reason for this duality (maybe you think it is wrong to not pay an artist but not wrong to not pay the government?), or do you just enjoy thinking up ways to get out of having to do something someone is trying to make you do?

    2. Re:Not too hard to ditch... by thrillseeker · · Score: 3, Insightful

      It's less than a wash - any job created via legislation does not enjoy the cost reduction pressures of a competitive market

  4. economy by Anonymous Coward · · Score: 5, Funny

    Glad to see that WI is working to help stimulate the economy by pulling more money out of it!!

    1. Re:economy by thrillseeker · · Score: 3, Informative

      Tax is a zero sum game

      negative ghostrider - a tax involves a middleman, who involves an ever growing support structure, all of whom must be paid via tax, and who does not make decisions based on a profit perspective, but on a position of influencing a vote for him. That which is not profitable but is paid for regardless because of edict will not have competitive pressure for improvement. It will eventually cost more than an alternative that required continuous improvement to survive in a competitive environment. Anything that costs more than is necessary, espcially that which is legislated to exist and so has little incentive to be withdrawn because *voters* become dependent on it, draws away the ability to create and improve everything else, from stem cells to flying cars.

      Tax is not zero sum - it is a negative use of money. It should be kept to those minimal actions necessary for the survival of a society - like the Constitution envisioned.

    2. Re:economy by Heather+D · · Score: 4, Insightful

      Both parties have figured out that the best way to get control is to take advantage of the fact that everybody thinks everybody else is an idiot and cannot be trusted with their own money.

      Nobody in their right mind will vote Govt. into taking decision making power over themselves but it's usually acceptable to do it to 'those people'.

      The net result of this is that if you are in the under six-figure income bracket you'd probably better get used to the idea that there will soon be a bureaucracy in charge of everything in you life.

      If you were capable of making good decisions you'd be wealthier wouldn't you?

      Similarly, those of you who are in the over six-figure bracket will get your own bureaucracy to redistribute the wealth. No don't whine. You get your own welfare too.

      Everything has to be managed. And, of course, anything not controlled by bureaucrats is not managed.

    3. Re:economy by im_thatoneguy · · Score: 3, Insightful

      Yes because we all know that a privately run fire department would be a much better use of tax payer's dollars. Or a privatized police force is the best use of a community's resources.

      Also city streets should be an amalgam of competing enterprises trying to win your daily commuting nickles.

      Needless to say I disagree with your assertion that EVERY enterprise performs better when exposed to competitive pressure.

  5. Why now? by ShadowRangerRIT · · Score: 4, Insightful

    Has something changed recently that makes all these states think Quill Corp. v. North Dakota no longer applies? Are they just following New York's lead and hoping the opinion is reversed? This is 17 year old case law; I don't see what would have changed to warrant reversing the precedent.

    --
    $_ = "wftedskaebjgdpjgidbsmnjgcdwatb"; tr/a-z/oh, turtleneck Phrase Jar!/; print
  6. Dear Wisconsin... by The+Ultimate+Fartkno · · Score: 3, Funny

    Good luck with that.

    Love,
    anyone who ever used the internet *ever*.

  7. Re:That's it -we're fucked. by larry+bagina · · Score: 3, Interesting

    interesting... let's say someone downloads something from the pirate bay. There's no sales tax involved, and that's not "fair".

    There are two solutions:

    • Tax you on all downloaded bytes (regardless of what it was)
    • Require you to list all downloaded media and pay a tax on it. Failing to do so is now a crime, and since it's tax court, things like "presumed innocence" or "exculpatory evidence" don't matter as much. And if you do list anything, the MPAA/RIAA lawyers will bend you over and cram a lawsuit up your ass.
    --
    Do you even lift?

    These aren't the 'roids you're looking for.

  8. "FAIR"??? What's fair about taxes? by mangu · · Score: 3, Insightful

    There's no sales tax involved, and that's not "fair".

    An interesting statement. So, you think it's only "fair" that everything should be taxed? One cold argue that a tax on brick and mortar stores pays all the services the state provides: a road to get to the store, police to watch the store, and... what else does the state provide? For the on-line stores? Would it be fair to make the internet sellers pay for the services only the brick and mortar stores need?

    Okay, so the state provides schooling for the poor. But then, why do rich people pay income tax? Isn't that meant to redistribute wealth, to let the poor have the same opportunities the rich had?

    Let's put is this way: taxes are never fair. They are an unavoidable evil. Robert Heinlein said it best, "The power to tax, once conceded, has no limits; it contains until it destroys." ("The Moon Is A Harsh Mistress", 1966)

    1. Re:"FAIR"??? What's fair about taxes? by Mr2001 · · Score: 4, Interesting

      Let's put is this way: taxes are never fair.

      Or, they're always fair, but "fair" doesn't mean "you get back exactly the amount of services that your taxes paid for".

      I mean, as you say, one could argue that a tax on brick and mortar stores pays for such things as roads to get to the stores, police to watch the store, etc. But it's not like a $1000 piece of jewelry (for which you pay $80 in sales tax) costs that much more to transport and guard than a $10 package of steaks (for which you pay 80 cents in sales tax). And it's not like the money is earmarked to be spent only on things that directly apply to retail stores.

      The fairness in taxes, or lack thereof, comes from how they're applied to people, not how the money is spent. Sales tax is arguably fair because everyone pays the same rate per purchased item. Income tax is arguably fair because the burden is highest for those who have the most disposable income. (Of course, these arguments are conflicting: if you like income tax because it's progressive, you ought to dislike sales tax because it's regressive.)

      Robert Heinlein said it best, "The power to tax, once conceded, has no limits; it contains until it destroys." ("The Moon Is A Harsh Mistress", 1966)

      Hmm... judging from the fact that countries with far higher tax rates than ours are still around, facilitating higher standards of living rather than becoming dystopian hellholes of oppression, it looks like Heinlein was wrong.

      --
      Visual IRC: Fast. Powerful. Free.
    2. Re:"FAIR"??? What's fair about taxes? by cayenne8 · · Score: 3, Insightful
      "Let's face it, states are broke and need cash. Either raise traditional taxes (property tax, income tax, etc.) or find other creative ways to grab money from those who actually have some."

      Or yet another option (which politicians also seem to forget), is to cut wasteful spending!!

      Cut the govt. back to basic services, shed the waste and I think they could drop the need for a lot of tax revenue.

      --
      Light travels faster than sound. This is why some people appear bright until you hear them speak.........
  9. WHAT "brick and mortar" stores? by nasor · · Score: 4, Insightful

    "Internet vendors shouldn't have a tax-exempt advantage over Wisconsin's brick-and-mortar retail stores."

    Umm, what? We're not talking about selling physical products, we're talking about selling data. Are there any brick and mortar stores in WI that let you come in and pay to download things to your USB drive using a connection at the cash register or something?

  10. Re:Complaining about taxation is valid by Wildclaw · · Score: 3, Insightful

    Now, explain how we can keep adding so many government jobs and not expect the burden to become too much?

    Cherrypicking statistics is easy. Let's put those numbers in perspective

    Total goverment employment growth 1997-2007: 12.3%
    Total population growth 1997-2007: 12.7% (Using 267,000,000 and 301,000,000)

    Sure, the goverment is employing more people now. Oh, dear I wonder why. Could it be because there are more people in the country than there used to be.

    We are creating more non wealth producing jobs than wealth producing jobs.

    Ah damn. Another one who thinks that the goverment doesn't produce wealth. I guess you are now thinking about claiming that the goverment doesn't earn money, it just taxes the private sector. That is the standard propaganda used. The statement is literally true, but is a simple deception.

    Using that incorrect reasoning, no private business makes any money either. Because every single one has to get their money from other companies in the private sector. One company getting more money means that the remaining companies gets less. A wealth transfer as some like to call it. And no, taxing is no different than private companies charging for services. It is just that anyone living in a country has a life long contract with the Goverment business. It sucks to be in such a contract. But that is the price for not having your own private army.

    All of this of course have nothing to do with wealth creation. Wealth is created by workers who do productive work, farmers, factory workers, miners, teachers, policemen, road workers. Some work in the public sector, and some in the private sector. There are of course also many mostly unproductive or even contraproductive jobs in both sectors.

    So we have this big slow down, with many private sector jobs lost, yet government keeps growing

    That one is simple to understand. Firing someone costs a private company nothing, but it costs the goverment in a loss of production that can no longer be taxed. By employing the citizen instead of letting him go unemployed the goverment creates work that can be taxed.

    As long as the value of the work created is greater than the surrounding expenses of employing, it is a win for the goverment. This of course only applies as long as the person in question don't have a large chance of getting employed in the private sector, because in that case you have to start comparing the relative worths of the private and public sector jobs.

    We are simply running amok. The real problem with government paid jobs is that are nearly impossible to do away with them.

    And yet the republicans cried when the jobs the stimulus package created temporary jobs. That of course was the whole point. Creating temporary jobs in a recession to avoid having labor go unused while not creating permanent jobs that are difficult to make away with.

    If you want to yell at wastage, yell at the bailouts (bank, auto industry, mortage). Those are about throwing money at bad investments which is almost always a bad idea.