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Download Taxes As a Weapon Against File-Sharing
An anonymous reader writes "An examination of a new "digital downloads" taxation law in Washington State suggests that files downloaded via file sharing programs may be covered by the law — meaning that you may be expected to pay taxes based on 'the value of the digital product ... determined by the retail selling price of a similar digital product.' Thus, if you were to download music or movies and not pay the taxes, would you be liable for tax evasion charges? How much do you want to bet the RIAA will push exactly that claim?"
No. According to line 33 of page 4 in the bill, computer software is not a digital good. Perhaps not the reason you were hoping for, but it does answer your question.
http://en.wikipedia.org/wiki/Use_tax
Oh, and I'm a CPA. The OP is correct.
"Extremism in the pursuit of liberty is no vice. Moderation in the pursuit of justice is no virtue." --Barry Goldwater
If someone gave you $10,000 gift card it'd be a gift. They paid the taxes when they bought it.
Go to the store. Buy X as a gift for someone. Notice the line at the bottom that says "Tax".
Only time it's tax exempt is if you're going to resell it. I had friends who bought stuff at Sams Club to sell in their small gas station, they didn't pay taxes at Sams. Their customers paid tax at their place.
You can give up to $12,000 (2008) or $13,000 (2009+) in gifts to any single individual through the year and not have to pay a gift tax on it. However, once you gift more than that to any one person, you are obligated by federal law to pay federal taxes on it. At least, that was my understanding when I looked it up last year. However, the person receiving the gift does not have to claim it as income, as the responsibility is placed on the giver.
Sales tax is a different beast, and yes, is applied when you use the gift card at a location. So nice when the government goes double dipping in the same pool of money.
Ref: http://www.irs.gov/businesses/small/article/0,,id=108139,00.html
While I certainly can't attempt to answer the above, I do offer IRS Publication 525: Taxable and Nontaxable Income, which offers these gems:
Bribes. If you receive a bribe, include it in your income.
Found property. If you find and keep property that does not belong to you that has been lost or abandoned (treasure-trove), it is taxable to you at its fair market value in the first year it is your undisputed possession.
Illegal activities. Income from illegal activities, such as money from dealing illegal drugs, must be included in your income on Form 1040, line 21, or on Schedule C or Schedule C-EZ (Form 1040) if from your self-employment activity.
Kickbacks. You must include kickbacks, side commissions, push money, or similar payments you receive in your income on Form 1040, line 21, or on Schedule C or Schedule C-EZ (Form 1040) if from your self-employment activity.
Stolen property. If you steal property, you must report its fair market value in your income in the year you steal it unless in the same year, you return it to its rightful owner.
Nostalgia's not what it used to be.
TFA is wrong. TFB (the fucking bill) says there is no tax on digital goods an end user receives for free