Tomorrow’s Bad Ideas Today: Taxing Digital Downloads!

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Now is the time to weep for the good people of Connecticut! In addition to having to live with the indignity of being denizens of “The Nutmeg State,” they now must suffer lawmakers who are seeking to slap a sales tax on their digital downloads. Buying a book for your Amazon Kindle or downloading a couple of tracks off iTunes? Pony up, kiddo.

I called the Arkansas Dept. of Finance and Administration (DFA) sales tax office, where an informed and helpful lady swiftly reassured me that no such tax on digital items is on the books in Arkansas—you’ll only have to pay up if there’s a physical artifact in your transaction.

From the Connecticut story, courtesy of the Hartford Courant:

About 25 states have begun taxing digital downloads, said Kelley Miller, an attorney with Reed Smith LLP in Philadelphia. Miller specializes in state tax law.

“The taxation of electronic goods and services is probably the fastest-growing new tax that’s been imposed in the last five years,” Miller said.

Typically, the tax is applied by tracking a consumer’s credit card. “When you register your credit card, it includes the address of the user,” Miller said. If a consumer is in a state where a digital download is taxed, the sales tax is charged to the credit card.

As the attorney notes, roughly half the states already have some sort of taxation on some digital goods, as detailed in this nationwide survey (PDF) here. (Yes, that survey is four years old but it was the most recent I could find and how much more do you expect me to do, anyway, for god’s sake I already made a PHONE CALL to DFA.)

So be forewarned: It’s only a matter of time till some lawmaker here in the Natural State starts pushing for this tax. And of course, he/she will implore us to establish this tax as a way to “level the playing field” for local retailers. Mark it.

Legislature Considers Taxing Digital Downloads: Music, E-Books, Smartphone Apps | Hartford Courant (Connecticut)

Comments

  1. radical centrist says:

    Apple has been collecting local sales tax on digital downloads from the iTunes Store for years. We don’t need another “download tax” on top of that.

    • David Kinkade says:

      RC,
      I didn’t realize Apple collected sales tax on iTunes purchases. I would have assumed it was because they had a physical presence in Arkansas with the Apple Store in Little Rock, but it sounds like the tax collections predate that. Good to know.
      D.

      • radical centrist says:

        Yes, Apple’s local tax collection long predates the local Apple Store or the more recent Amazon controversy. I think they’ve been collecting the tax since the online store first opened. However, Apple has had a single employee in Little Rock for several years. He’s worked inside the CompUSA and BestBuy stores, but I’m not sure if he counts as a “physical presence”. I wouldn’t be surprised if Apple has had an employee in Bentonville for a while to handle the Walmart account too.

  2. DumbArkie says:

    David,

    I know you believe in personal fiscal responsibility, so if this is enacted here in Arkansas, you will have to reduce your monthly budget for porn downloads by 6%.

    • David Kinkade says:

      Dumbarkie,
      Sales tax on porn? We’ll have surpluses as far as the eye can see. New schools for everyone!
      D.

      • DumbArkie says:

        “We’ll have surpluses as far as the eye can see.”

        Assuming you don’t go blind!