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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?"

28 of 451 comments (clear)

  1. Sounds good... by wirelessbuzzers · · Score: 5, Funny

    I'll pay them 8.25% of what I paid for the song.

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    1. Re:Sounds good... by Magic5Ball · · Score: 4, Insightful

      But you didn't download the song. You downloaded several chunks of random (encrypted) data which could be assembled into a song. The chunks didn't even all come from the same place.

      Also, if these downloads are illegal or part of illegal activity, there's a conceptual issue of being able to tax them in the first place, and secondly, an issue with the state using funds derived from the proceeds of crime.

      --
      There are 1.1... kinds of people.
    2. Re:Sounds good... by Goldberg's+Pants · · Score: 5, Interesting

      Conceptual issues are irrelevant. The RIAA has big, high paid lawyers who will bend you over a barrel and rape your virgin ass all while telling the judge how you downloaded a song and are now guilty of tax evasion.

      If they got Capone on tax evasion, they can sure as hell get you!

    3. Re:Sounds good... by smellsofbikes · · Score: 5, Informative

      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.
    4. Re:Sounds good... by N3Roaster · · Score: 4, Funny

      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.

      I wonder... If you steal something and in the same year are caught by law enforcement who then confiscates the stolen something and does not return it to its rightful owner, do you still need to pay the tax on it? This would seem to be a good opportunity for interdepartmental information sharing for the purpose of reducing tax increases on honest, hard working Americans.

      --
      Remember RFC 873!
    5. Re:Sounds good... by Maxo-Texas · · Score: 5, Interesting

      I think they would need to prove that
      a) I didn't rip it from my CD (and then the CD was lost/broke/destroyed so I no longer own it).
      b) I didn't record it off of the radio.
      c) I didn't record it off of my cable music channels.
      d) I didn't record it off of an internet radio station.
      e) I wasn't given the song by someone else who owned it legally and gave me their only copy.

      Still- it's a novel concept and it motivates the government to do RIAA's enforcement for them. Once again externalizing corporate costs.
      Given the hell that is coming in the economy, I wonder if it will be worth it.

      e) Provides the most interesting possibilities for creating extremely long chains of custody between various people who each legally owned the song and gave it to each other. For example, you could give your only copy of a song (not retaining anything) and take another song from a library. You can do this now legally. We check out DVD's for tv series and movies and CD's for songs from our library. You listen to it for a while and then return it.

      ---

      Something that people always trip up on (in TV shows and in real life) is that lying or conspiring is often a separate crime. So they fail to get you on the original charge but can show that you lied or conspired to break the law and so you are tagged for that. Basically, so much is illegal now that if the government really wants to put you in prison it probably can.

      --
      She was like chocolate when she drank... semi-sweet at first and then increasingly bitter.
    6. Re:Sounds good... by Blakey+Rat · · Score: 4, Funny

      Well, true, but California is also about 5 propositions and an earthquake away from becoming a Max Mad-esque post-apocalyptic wasteland. Would be nice to see some responses from states filled with sane people.

  2. Drug tax stamps? by argent · · Score: 5, Insightful

    Don't forget to buy your drug tax stamps while you're at the post office.

  3. No different from sales tax evasion by Yossarian45793 · · Score: 4, Insightful

    Technically whenever you order a product from another state and the seller doesn't withhold sales tax on the purchase, you're required to pay that sales tax in your state. Nobody does this -- so technically nearly everyone is guilty of this kind of tax evasion. How is this any different?

    1. Re:No different from sales tax evasion by Tiro · · Score: 4, Interesting

      Interesting. How much should FreeBSD or Darwin OS cost? Similar to Linux, to Mac OS X or to Windows? What about XCode tools, a 1GB+ dvd image? Pretty much impossible to implement this without pissing everyone off.

    2. Re:No different from sales tax evasion by rmjohnso · · Score: 4, Informative

      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
    3. Re:No different from sales tax evasion by spun · · Score: 5, Interesting

      Crap. I have free software worth tens of thousands of dollars on my computer at home. I shudder to think how much we have here at work. I'm thinking Microsoft might want in on this action, to put a tax smackdown on Open Source.

      --
      - None can love freedom heartily, but good men; the rest love not freedom, but license. -- John Milton
    4. Re:No different from sales tax evasion by harlows_monkeys · · Score: 4, Informative

      TFA is wrong. TFB (the fucking bill) says there is no tax on digital goods an end user receives for free

      The provisions of this chapter do not apply in respect to the use of digital products or digital codes obtained by the end user free of charge.

  4. Impossible to enforce by guspasho · · Score: 4, Interesting

    So if I were to download Ubuntu, would I have to pay taxes based on Windows Vista or Windows 7? Ultimate? Professional? Home starter?

    1. Re:Impossible to enforce by KPU · · Score: 5, Informative

      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.

    2. Re:Impossible to enforce by GMFTatsujin · · Score: 5, Funny

      "Computer software is not a digital good."

      Hell, in most cases it's barely a digital okay. I consider myself lucky to find a digital I can live with it.

    3. Re:Impossible to enforce by gartogg · · Score: 4, Funny

      In economics, we would call windows a "bad."

      --
      I'm a concientious .sig objector.
    4. Re:Impossible to enforce by jyx · · Score: 5, Insightful

      If computer software is not a digital good, what the hell is it? Do legislators live on a planet even remotely similar to ours?

  5. How is this unreasonable by paeanblack · · Score: 4, Interesting

    If I won a $10,000 iTunes gift card, I'd have to pay taxes on that. (Assuming deductions/exemptions were unavailable/already used)
    If somebody gave me $10,000 as a gift, I'd have to pay taxes on that. (Assuming deductions/exemptions were unavailable/already used)
    If somebody "gives" me $10,000 in music via bittorrent, why on earth should that be tax-exempt?

    In almost every state, items purchased out-of-state must be declared and a "use tax" is due when imported. There is a reasonable exemption limit so you don't have to declare that bag of Cheetos you bought driving home from trip, but if you purchase a car in New Hampshire to avoid Massachusetts sales tax, you still owe money to Massachusetts, and they will collect it.

    Just because you downloaded it doesn't mean you shouldn't pay gift/sale taxes. Taxes are part of life. Deal.

    1. Re:How is this unreasonable by 0100010001010011 · · Score: 4, Informative

      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.

    2. Re:How is this unreasonable by nxtw · · Score: 4, Interesting

      If you buy used CDs for $1 each, do you pay taxes on the $1 price or on the original retail value?
      If you record FM radio on a cassette player, do you pay taxes based on how much the songs would have cost to buy on a casette tape?
      If you record a song from Internet radio on your computer, do you pay tax based on the cost for the radio service to license that song and transmit it to you?
      If you download the 30 second sample of a 3 minute song, do you pay tax on 1/6th of the purchase price?

    3. Re:How is this unreasonable by Twanfox · · Score: 5, Informative

      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

  6. Re:Taxes only? by rjstanford · · Score: 5, Funny

    So if I was to upload pirated movies, could I claim a tax deduction for their value as well?

    --
    You're special forces then? That's great! I just love your olympics!
  7. Could be an interesting precedent ... by jc42 · · Score: 4, Insightful

    It occurs to me that if this happens, it has the potential to be applied to anything else that's covered by copyright. Consider the results.

    If you check a book out from your local library and read it, you'll be liable for the sales tax on the retail price of the same book (at a book seller of the prosecution's choice).

    If you leave a newspaper (hey, remember them?) lying around in your house and a visitor reads it, they'll be liable for the sales tax on not just that paper, but for a subscription to the newspaper.

    If your local school has textbooks that they let students study from, those students (or their parents) will be liable for the sales tax on the price of the books.

    If a store is playing music audible from wherever you may be (sitting at a table in a restaurant, using an elevator, walking by on the sidewalk), you are liable for the sales tax on the album that contains the music that you heard.

    Since everything is by default copyrighted as soon as it's "published" (whatever that actually means), any time you read anything from any source or hear anything that was recorded, you will be required to learn the retail price for the copyrighted work, and pay the sales tax on it.

    We've been in the habit of being a bit bemused by the fact that, when the authorities don't have any evidence against some supposed criminal, they customarily just charge them with tax evasion. But this is no longer just something that big-time Mafia capos and politicians have to worry about. Now we can all be tax evaders, by merely reading something somewhere and neglecting to determine its retail sales price so we can pay the sales tax.

    And I can make you a criminal by merely putting copyrighted text somewhere that you read it, or by putting recorded sound somewhere that you hear it.

    It can be fun to think of what might be the ultimate motive for passing laws like this. Look up the phrase "nuisance law" for further explanation.

    --
    Those who do study history are doomed to stand helplessly by while everyone else repeats it.
  8. OpenOffice.org by Citizen+of+Earth · · Score: 4, Insightful

    'the value of the digital product ... determined by the retail selling price of a similar digital product.'

    They'll make a lot of money off downloads of OpenOffice.org... which is similar to the outrageously priced Microsoft Office.

    1. Re:OpenOffice.org by S77IM · · Score: 5, Insightful

      Or, will MS Office become downloadable tax-free, since it is similar to the $0.00 OpenOffice.org?

      --
      Student: Is it true that the foundation of the universe is paradox?
      Master: Well, yes and no.
  9. Re:It's my money by db32 · · Score: 4, Insightful

    It isn't the government's fault. It is the people. Collectively we make unreasonable demands and expect government to magically meet those demands. We want the best roads, best fire departments, best police, etc, etc etc, but we aren't willing to do anything ourselves about the problems.

    In Hawaii there was a bridge out that lead to an important tourist area, no bridge meant no business. The government said $4 million and 2 years. The locals people got together and did it in 8 days for "free" with donations from the community.

    Our government is only "out of control" because we have demanded that it fill every whim and desire we have.

    --
    The only change I can believe in is what I find in my couch cushions.
  10. Re:Taxes only? by Anonymous Coward · · Score: 5, Funny

    *bludgeons you repeatedly* WERE, WERE. This is not Kentucky!