I warned last year that state governments desperately looking for new sources of revenue would look to place taxes on downloads including songs and videos from itunes.
Today the Governor of New York David Patterson, announced he is proposing a tax on all on Internet downloads.
The so-called “iPod tax”, would levy a 4% tax on all music and video downloads, including porn.
According to reports the only holdup maybe some New York Republican who don’t like the idea that the state would be making money off of porn.
But, with state economy’s facing reduced income tax and property tax collections, there will be a hard push to find revenue from sales and downloads on the Internet, moral objections or not.
The tax free internet will most likely become a thing of the past.
Uh Oh… I can see this becoming a trend. A download tax. This will be a whole new massive revenue stream for every state. I can see this catching on.
Well, on second thought, never mind. It’s one thing to impose a tax, but how are they going to collect it. Imagine this on a larger scale. Imagine every state and country etc… collected their own download tax. So do you think any business, even the Apple’s of the world are going to keep track of all these downloads, and the different tax rates or each tax district, and pay the taxes on the right day and so on….
This could become a widespread thing but its going to cost millions of dollars to build the system to maintain it. The only way I can see making this work would be to implement some sort of interet toll-booth at ISP’s or wherever that could stop the user to collect the toll before making the download. Good luck.
I’ll agree to that if they get rid of Federal and State income taxes. 🙂
FairTax.org 🙂
If the selling company and server are located in a foreign country, why should they be subject to a state sales tax?
The selling and delivery point is outside of the U.S.
Does the location of the payment vehicle (paypal, credit card company) become a factor?
@jp
I agree with your point. NY has been able to tax physical goods delivered to residents of NY.
But how is NY going to collect tax from a company not located in NY state or in the USA, even?
What if Apple serves all of its itunes from its hosting location in Europe, through a European subsidiary?
– Richard
Guys
I think the billing address for the Credit card on file is going to determine who get taxed and how much.
Retail sites like Neiman Marcus as used to it.
If a retail store has a physical location in a state then they tax internet transactions shipped to billed to an address in that state.
Is it expensive
Sure
But that is not going to stop states from imposing it on online businesses.
If you run such a service outside the US, then the US is going to be out of luck collecting the funds, but US businesses are going to be stuck with collecting and paying the tax and the costs associated with it
Crazy! For a while now the EU has required companies OUTSIDE of the EU to pay VAT (similar to sales tax) on the sale of digital products to EU citizens.
If you are using a 3rd party payment provider, they are sometimes treated as the merchant of record. This means that the sales / VAT / download tax would be there problem. (as long as you do not use a provider in one of the affected states).
Any law, which is effectively voluntary, is a stupid law!
not to worry… If they couldn’t catch Mr Madoff they won’t be able to keep up with all those Internet transactions.
Seriously though this is a good reason to have good domains that sell display ads directly to advertisers… No muss, no fuss.