State Technology Taxes Face Stiff Resistance

SonicSpike writes "As the nation moves from a tangible goods-based economy to a service-based economy, a few states are trying to keep revenues robust by taxing technological services such as software upgrades and cloud computing. But a backlash from the high-tech industry has quashed most efforts. As a result, the U.S. has a patchwork quilt of state taxes on technological services. Some states that have tried to impose such taxes have failed spectacularly, and most have not tried at all. According to the Tax Foundation, a nonpartisan think tank that studies taxes, only 10 states (Connecticut, New Mexico, Hawaii, South Dakota, Mississippi, Missouri, Nebraska, Tennessee, Texas and West Virginia) and the District of Columbia tax all writing or updating of software. Only New Mexico, Hawaii and South Dakota levy their general sales taxes on all software services. States with sales taxes do, however, levy those taxes on software that is sold on CDs or other hard storage materials. About half the states also tax 'canned' (non-altered) software that can be downloaded, according to the Tax Foundation. Elia Peterson, an analyst with the foundation, said in a recent paper that states are reluctant to tax computer services in large part because it 'is an especially mobile industry and could easily move to a lower tax state.'"

Comments

"nonpartisan think tank"

[Anonymous Coward]

There ain't no such animal, Jim.

Nonpartisan?

[Sponge Bath]

The Tax Foundation is nonpartisan in the sense they are against taxes and regulation and are run by representatives from Koch Industries, Exxon, former Bush-Cheney campaign advisers and Republican politicians. That kind of nonpartisan "think tank".

Re:Nonpartisan?

[Sponge Bath]

Did you get the info from your MSM pimp?

From Wikipedia:

Former directors: Wayne Gable (Koch Industries), Joseph Luby (Exxon), Pam Olson (Bush-Cheney campaign), current director Bill Archer (former Texas Republican congressman)

"criticized by other think tanks, such as the Center on Budget and Policy Priorities (CBPP)[31] and Citizens for Tax Justice (CTJ),[32] citing repeated "methodological errors" and "reliance on early projections without hard data."

"Krugman has also accused the Tax Foundation of "deliberate fraud" in connection with a report it issued concerning the American Jobs Act.[47]"

In Canada

[msobkow]

In Canada, all goods and services are subject to the GST (Goods and Services Tax.) In many provinces, they're subject to HST (Harmonized Service Tax), which basically takes the rules of GST and adds on a provincial percentage.

It hasn't caused our software industry to implode because the taxes are applied across the board throughout the country.

Unlike the US, you can't just lobby your way to a tax exemption here. The goobermint is gonna get their share come hell or high water.

Re:In Canada

[Entropius]

I live in Washington DC and went to go buy some soup at a Vietnamese takeout place the other day.

The sales tax is 6% here, but it's 10% on food. (It's an "entertainment tax"). Fine, I knew about that. But the check didn't add up.

There's a nickel tax on plastic bags: the city claims that it's to protect the Anacostia River from being polluted with bags. (Nobody has ever considered trying to get the folks who live by the river in Southeast from throwing their damned bags into the streets.) But I knew about that too, and the check still didn't add up.

Turns out there is also a quarter tax on to-go containers of any kind, including the little thing my soup came in.

Meanwhile, the last time Massachusetts Ave. was paved, it was paved by Barney Rubble. So these soup taxes sure aren't going to anything useful.

Urban tax codes are ridiculous.

Make your mind up

[PhilHibbs]

Are you a country, or are you a federation of states? If you are a country, then get your taxes sorted out. Your states seem to be willing to deprive another state of $100 in order to get $10 themselves, that way has just led to a crisis in state finances.

Flawed premise

[barlevg]

As the nation moves from a tangible goods-based economy to a service-based economy

Because in the future, we will all move out of our houses to live in the cloud, we'll forego food in favor of HTTP cookies and email spam, and we will transport ourselves to our destinations not with cars but with through internet traffic.

Now, I know what you're thinking--we'll still need to buy computers to make this magic happen. But, you see, in the future, all of our computers will be virtual machines.

Sales tax

[Charliemopps]

There should be only a single tax. Sales tax. It should apply to all sales equally. There should be no loopholes and it shout not be "progressive" (i.e. higher rate for the rich) There should be no deductions or tax deadlines. It would be very simple and fair. Lastly it would encourage savings rather than consumption which is something we need desperately right now. Our current "progressive" system results in the rich paying less than the poor in many cases because they are better equipped to use the system in their favor. In a sales tax only system they would naturally pay more in taxes because they have more discretionary income.

There is absolutely no reason we need separate little "mini" taxes on every product, sales event, and service there is. The sole purpose of all of our tax mess is to obfuscate the real percentage we're all paying in taxes.

Re:Sales tax

[MozeeToby]

You can have your flat tax when you have a guaranteed minimum income for every man, woman, and child in the country. Until then, all you're doing is massively, massively increasing the burden on the poor. There are basic requirements to live, levying a 25% sales tax (more realistic would be 40% or more to maintain current funding levels) on poor people who already don't meet those requirements is just incredibly stupid.

Re:Sales tax

[aralin]

Sales Tax is actually a reverse progressive tax. Depending on the percentage of your income spent each month, you are taxed more or less. The most at 100% income spent, which is poor and lower middle class. Then middle class gets to about 95% spending, upper middle class 85% spending and then you get the rich, which spend generally at 10% or less. So their tax burden is 10 times lower than the poor and middle class. There is nothing fair about a sales tax.

Re:Sales tax

[Entropius]

What would you say to a flat sales tax (or VAT or goods+services tax or similar) combined with a national income?

25% tax (or whatever) on everything, everyone gets a check for $thousands per year, which they can spend on ice cream, rent, food, or whatever else they please, replacing all other handout/welfare programs. It's been proposed by quite a few people.

Adam Smith vs. Service Economy

[EngineeringStudent]

Read "Wealth of Nations" by Adam Smith and take microeconomics 101.

Service economy is a transitionary state where you have no creation of value, and the money hasn't yet been drained, and poverty. People pass around the same dollar bills, but only a tiny minority actually create value. Given the natural system perturbations that must come - that is an unsustainable model. It is the glass vase on the top of the wobbly table. It must crash.