States taxing "digital goods"

[unixronin]

States have figured out that people are spending money to buy digital “goods”, and naturally they want “their” share.

Including Mississippi, at least 18 states claim they have the authority to collect taxes on digital goods, and more are likely to join them.

On March 12, a bill was introduced in the North Carolina general assembly “to modernize the sales and use tax statutes by treating music, movies, books, and computer software that are delivered electronically the same as those that are purchased in a tangible medium.”

A digital goods tax measure was also introduced in the Minnesota House of Representatives in late March.  The bill could raise the state more than $8.2 million in 2010 through 2013, according to the Minnesota Department of Revenue (PDF).

Comments

[perspicuity.livejournal.com]

or it could cost the state $$$ in terms of overhead when people rebel against it, lawsuits, plain ignore it, or find other ways to get around it.

#

[house-pundit.livejournal.com]

It'll raise some money, but not nearly as much as they hope. Geeks will get around it based on principle. Non-geeks will get around it because the geeks find and establish methods that are so convenient.

[luxobscura.livejournal.com]

Awww, looks like they forgot to balance their State Check Books again. Maybe we should mandate that all legislative members on all levles of government attend (AND PASS) a Home Economics class at their local Community College prior to being eligible for the ballot or the comission of any duty relating to money or budgets.

[ilcylic.livejournal.com]

I think we should mandate that all budget shortfalls come straight out of legislator salaries, dollar for dollar, before any tax can be raised.

[pernishus.livejournal.com]

What the GST (goods and services tax here in Canada -- thrice-cursed be the name of Brian Mulroney, who introduced it back in the 1980s) does is suppress demand for goods and services -- not exactly what you want to have happening in the midst of a recession, one would think. I can't count the times I have refrained from buying something at Sears or the Bay, for example, once I add the 15% onto the advertised price... it's one of the reasons I'm postponing purchase of a refrigerator at this very moment, actually...

GST

[ewen]

Here in New Zealand, where we've had GST for 25 years, consumer goods are advertised including GST and all taxes. Any retailer trying to do otherwise when advertising consumer goods gets spoken to by the fair trading authorities and told firmly not to do it again. (I think a few may have been prosecuted for misleading advertising early on, but not IIRC in many years.)

As such there is some suppression of demand (because things cost more than they otherwise would have done), but there isn't the "I could afford that, wait no I can't when I add the tax" effect. Few if any consumers know or think about the "without GST" price.

Re sales tax on "digital goods", New Zealand has done this from the beginning. AFAICT the only reason that the USA put a temporary hold on doing so was because of the difficulty of dealing with the jurisdictional issues (whose sales tax applies, at what rate, etc). The net result is to provide a disincentive to purchase at "brick and mortar" stores since they have to charge sales tax, and the online stores do not. Which isn't an ideal thing in a recession either.

Ewen

Re: GST

[house-pundit.livejournal.com]

Yeah, but here in the US, we have a tradition of being cantankerous about taxes. You might have heard about it. LOL

[jhetley.livejournal.com]

Thereby reminding us that the Rulers would tax air if they could figure out a way . . .

[house-pundit.livejournal.com]

Yeah, but how easy is it going to be to pretend you're from some other state?

Or from some other country.

Belize speaks English, for example. Belize would probably regard the use of its name as free advertisement for its other services. How much money would Belize banks make for allowing you to use their address as a billing address for US$20 a year? It costs them nothing, and they can lightly spam your gmail box.

Easy peasy.

[ithildae.livejournal.com]

The sticking point is; What is the point of presence for the sale?

If the vendor has no physical presence in the state, do they need to deal with the state taxing authority? In today's legal framework, a vendor needs a physical presence in the state before it applies that state's taxes. What effect will any changes have on mail order sales? Do I get charged taxes if I order online, and not get charged if I mail in the order? How about email? Where does the actual transaction take place? At my computer? At the server location? At the warehouse location? At the business HQ location?

Right now, the set of Commerce laws governing interstate transactions has no definitions to resolve any of those questions. How many states are going to demand payment for the same transaction?

OTOH, the states reserve the right to tax transactions that take place in their state. They are also supposed to get taxes for transactions that are made in other jurisdictions, if the transaction taxes are not collected in that jurisdiction. (Everybody usually ignores that part of the law. There is no practical way of enforcing it.)

In spite of what the states are hoping, this is not a quick fix for their budget shortfalls. It will take several years in the federal courts to resolve the issues involved. It will likely cause several small businesses to fail before it is resolved, so this is yet another way to help the working man by damaging their employer. At least the lawyers will make money on it for several years.

[ithildae.livejournal.com]

Remembered: Quill vs. North Dakota, 1992. Discussion here (http://www.newrules.org/retail/rules/internet-sales-tax-fairness), and here (http://www.itepnet.org/pb2quill.pdf). This state action is a TARDIS of worms, most of which are dead and rotting due to existing law and court decisions. States lack jurisdiction over interstate commerce.