With iTunes downloads topping 5 billion, some states have begun to levy sales tax on digital downloads.
Call it the iTax.
In 2008 alone, at least nine states have considered digital download taxes, and at least five of those states have enacted them into law.
Nebraska’s governor signed a digital download tax bill into law in April, and a similar measure was adopted in Tennessee in June.
As CNET News reported a few months ago, Indiana, South Dakota, and Utah also passed sales tax on digital downloads this year.
Tech industry groups like NetChoice, which counts eBay, AOL, and Yahoo as members, have been lobbying against the rise in so-called iTaxes–with limited success.
“With global warming and a world that’s running out of oil, the last thing governments should do is add taxes on something that uses no oil and produces no carbon,” said Steve DelBianco, executive director of NetChoice. “A digital download is the greenest way to buy music, movies, and software, since it requires no driving to the store, no delivery vans, and no plastics or packaging.”
Wisconsin and California attempted to impose sales taxe on digital downloads but failed.
Other states are considering the tax. Massachusetts has a draft bill circulating and legislators in both Wyoming and Washington will be reviewing their download tax policies at the request of tax collectors.
Including Nebraska and Tennessee, there are 17 states, plus the District of Columbia, that tax digital downloads: Alabama, Arizona, Colorado, Hawaii, Idaho, Indiana, Kentucky, Louisiana, Maine, New Jersey, New Mexico, South Dakota, Texas, Utah, and Washington.
Other downloads that might be subject to sales tax include digital audio works, digital audiovisual works, including movies, music videos, TV shows, and digital books.
Digital sales account for 30 percent of revenues in the U.S.
Electronic book sales in the U.S. are up more than 25 percent from a year earlier.
You know how you have to pay tax stamps to transfer property? Just a matter of time before some Senator somewhere figures out the government can tax domain transactions and ALL domain sales will have to be reported to a central registry for verification and payment of taxes.
Just a matter of time.
Rob
Lets hope your wrong
Only yuppies and over-privileged kids pay for mp3s anyway… “Ahead of their time” music makers are already giving their digital music away.
True fans go to the shows, visit the band’s website, buy the band’s merch, and tell other people about them. Most musicians I’ve spoken to here in Austin are more than willing to give the digital versions of their music away. They just want people to hear their music and come to the shows.
Welcome to the Gift e-conomy. Where everyone is a creator of something worth sharing.
Jamie
With 5 Billion downloads that is a lot of Yuppies and over privileged kids, I think you are down playing the saturation of these services.
If you want the music of an unknown struggling band I’m sure you can get it for free legally, but if you want some Usher songs, I don’t see him giving any away
Do you listen to Usher?
I see a day when acts like Usher won’t matter too much to too many people. I’m interested in supporting artists, makers and creators that I can say I really know. Real people, not ACTS shaped and formulated by Century City’s crafty entertainment lawyers.
My point in the previous comment was not at all submitted to discount the technology or the innovative services like itunes that are being developed on top of it, but rather (and actually 5billion downloads over 4 years is a relatively low number of downloads IMO. I’m confident that annual peer to peer file transfers during Napsters day would easily topple that number and I’m sure the amount of files downloaded via peer to peer or directly from artists today far exceeds that number as well.) My point was that these download taxes aren’t going to affect the explosion of creativity that we are seeing in the world today. They are not going to affect creativity in a bad way that is. If the legislation to tax digital downloads is enacted by some states, then by all means I hope that the extra monies that eventually flow into these communities stands to benefit their economical infrastructures and the people who reside there. Possibly the extra funds will help stimulate and improve the communities and attract more creative type people to move there or better yet actually foster the creativity already present in it’s own native populace. Wouldn’t that be revolutionary?
Music is not a product anymore, it is a piece of “content”. This is not news to most record labels. They are not interested in releasing “full length” albums anymore, but rather have opted for “single” recordings being released over a span of time.
It’s obvious to me where digital content distribution is headed, because I’m helping to shape it’s future. I DO SEE that day when no one will pay for downloads of music. Instead, all digital content will be made available to the consumer whenever they want it and downloadable in whatever format that they need it in, to whatever device they need it to be shared with. Again, especially with respect to the future of the music business, it all goes back to the LIVE shows and absolute artist empowerment.
Itunes currently works because it’s convenient and because the user interface supports search, which equates findability for the enduser. But you know just as well as I do that Apple makes very little profit (like less than 5%) on revenues that it pulls in from its music sells with itunes.
itunes sells ipods.
Advertising will be the future business model for the “content” distribution platform that itunes has built. Google knows this and could easily make itunes irrelevant in the coming years by connecting any person to any piece of music (or content) that they are looking for absolutely free of charge. They are assembling a legal staff to deal with the expected litigation.
Things like the APP store on itunes is where states should really be looking if they want to levy some taxes. But here again, app developers would rather give their applications away for free in hopes that they connect with the consumer and generate buzz and users.
Again, Apple is interested in distributing mobile APP developers content, not because they plan to make a ton of ca$h off of the APP’s (although they are making a killing right now!) but because it will help sustain the popularity and continued use and sale of the iphone…
The market will find and acquire whatever “digital content” that it is seeking. No matter how far down the tail the creator of that content may appear to be. There were days when bands like Trent Reznor’s NIN, and Europe’s infamous Radiohead we’re unknown and struggling. They started out solo, then we’re picked up by major labels, run through the ringers, and are now back to releasing their own musical content with a “gift” mentality, free from middlemen, from their own websites.
This shit is just getting started. But people can keep giving their money to Usher if they want. If it were not for the guy being from Texas I would have lost respect for him many moons ago. Usher is a perfect example of what StarSearch & A&R guys can do to a truly talented musician.
Who knows, maybe with the profits Usher has accumulated though his successes over the years with the old music business model he will soon reconnect with his roots and really cause SOME CHANGE in the way music (and all content for that matter) is being distributed from within his own recording label. At least he does have that bit of independence going for him.
Anyway, this response got a bit winded but as you can tell I am very passionate about what people make on this planet and how they get it to the other people of the planet. I really believe that the greatest makers of content, be it audio, video, or text will eventually break free from traditional marketing and distribution arms and begin publishing, promoting and distributing their own creations free from corporate or shareholder pressures. THIS IS THE DISRUPTION that I fight for on a daily basis.
Thanks again for the informative post and I truly enjoy reading your writing and comments.
Great post and response by Jamie Parks