Wisconsin Passes Digital Download Tax

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.

Comments

I live in WI, and I say this sucks

[neo-mkrey]

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.

Re:I live in WI, and I say this sucks

[mabhatter654]

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.

How do they enforce this?

[SigNuZX728]

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.

Re:How do they enforce this?

[doktor-hladnjak]

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.

Re:How do they enforce this?

[dedmorris]

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.

Re:How do they enforce this?

[KingFeanor]

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.

Re:How do they enforce this?

[Anonymous Coward]

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

Re:How do they enforce this?

[Atomic6]

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.

Not too hard to ditch...

[Penguinisto]

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

economy

[Anonymous Coward]

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

Re:economy

[Heather D]

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.

Why now?

[ShadowRangerRIT]

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.

WHAT "brick and mortar" stores?

[nasor]

"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?

Re:"FAIR"??? What's fair about taxes?

[Mr2001]

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.