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CA lawmakers want to tax iTunes downloads

The California Assembly, apparently facing an $8 billion deficit, has introduced a bill that would apply sales taxes to "media downloads," namely the music sales going through iTunes (which, as we've reported, is challenging even retailer giant Walmart for music sales numbers). But it seems as though (since new taxes require a 2/3 majority in California) they're going about it in a pretty weird way.

Basically, to duck the majority rule, they're instead trying to have "digital property" count like normal, taxable property. That way, all they're doing is changing a definition, not actually adding a new tax. Even then, they've got another hurdle to jump -- the California Assembly, of course, can only tax things bought in California, unless they charge a "use" tax, which is for people things buy elsewhere but only use in California. Which no one ever pays anyway. Yeah, it's weird.

Eventually, they'll probably pull something off -- Apple already charges sales tax in quite a few states, so it's not surprising that California, Apple's home base, would try as well. It seems like politics is making the process a little bumpier than elsewhere, though.

[Via Macdailynews]

The California Assembly, apparently facing an $8 billion deficit, has introduced a bill that would apply sales taxes to "media downloads,"...
 

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Robert Nienburg

ahem

April 03 2008 at 5:42 PM Report abuse rate up rate down Reply
Kirk Rheinlander

The Mail Order law requires that you collect sales tax on sales in any state where you have a physical retail presence. The US Supreme Court ruling supports this and has upheld that you do NOT have to pay sales tax in any state where you do not have voting rights (taxation without representation), unless the sales agent has a retail presence in that state.

As such, Apple collects sales tax in states where they have a retail outlet, and do not collect sales tax in states that do. If California attempts to enforce the collection of sales tax on product sold in other states, there will be an immediate court challenge to this, as has been done many times.

At one point, the government wanted sales tax collected for every tax zone in the US. In 1986, when I was a CA retailer, and part of the legal action going on, there were about 7,136 tax zones in the US, including state, county, city, school district, metropolitan transit taxes, etc. - a nightmare to collect, but overturned on constitutional rights relative to collecting tax revenue from people that had no vote in the use of those funds.

March 20 2008 at 10:44 AM Report abuse rate up rate down Reply
Troy Banther

Living in a republic which is based upon free and democratic principles, I, personally do not mind paying taxes. Honestly, I don't.

I object to paying taxes when said taxes are a failure by elected officials when they can not do what they are elected to do. Be thinkers and responsible stewards.

March 19 2008 at 8:40 AM Report abuse rate up rate down Reply
Blake Sobiloff

Apple does not currently charge sales tax to California residents on music downloaded from the iTunes Store.

The assembly will have to tread very carefully on this one, as most enterprise software companies in California use "electronic delivery" to avoid charging sales taxes. If the assembly changes the definition so that it encompasses any digital delivery there will literally be thousands of companies that will move their corporate headquarters to Nevada.

March 18 2008 at 4:23 PM Report abuse rate up rate down Reply
Breezer

Life is so much less complicated when the sales tax/VAT/whatever is just lumped in and the price you see is the price you get.

March 18 2008 at 12:56 PM Report abuse rate up rate down Reply
1 reply to Breezer's comment
Tim

Yeah that would be really easier.

March 18 2008 at 1:17 PM Report abuse rate up rate down Reply
freediverdude

They may have a tough road trying to get internet downloads considered tangible property. I know here in Florida, the courts have ruled that downloaded software, stock ticker info, etc. are not tangible property for the purposes of sales tax, unless you obtain a physical cd with it. The courts in CA may have already ruled something like that as well.

March 18 2008 at 12:36 PM Report abuse rate up rate down Reply
Austin

Thats messed up. I agree with mike. How can we take advantage of, oh, i dont know, everyone. Who doesn't buy online media? My GRANDPARENTS do. Another group tryin to make money thats all.

March 18 2008 at 11:49 AM Report abuse rate up rate down Reply
kc! Bradshaw

BOOOOOOOOOOOOOOOOOOOOOO!

March 18 2008 at 11:45 AM Report abuse rate up rate down Reply
Brian

Your graphics department must have been up all night creating that masterpiece!

March 18 2008 at 11:32 AM Report abuse rate up rate down Reply
alex

Good!
If it was up to iTounes and Apple Inc. They would charge u s to turn the iPhone on and off LOL! That goes for iTunes aswell hehehe!
http://hacktheiphoneitouch.blogspot.com/

March 18 2008 at 11:30 AM Report abuse rate up rate down Reply
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