The Internet tax debate

(From this morning’s Future Tense)

Cash-strapped states are targeting Internet merchants. Several are considering bills that would require merchants to collect sales taxes on digital downloads. Under a Supreme Court ruling, states can only require the merchants to collect the taxes online if they have a bricks-and-mortar presence in the state. In Minnesota, for example, a bill being considered by the Legislature would add a sales tax to downloads from iTunes and WalMart.

I talked first with Minneapolis representative Jim Davnie, the bill’s author, and then to Steve DelBianco, the executive director of NetChoice, a coalition of some of the biggest online corporations.

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  • TomL

    If individual states start enacting these laws, it just seems like it would get incredibly complicated for online merchants to do business.

    I say figure out a better way to generate a revenue. At the very least have a uniform national system that everyone can agree upon so that companies can apply one standard to all of their sales.

  • Justin

    I already use bit torrent and other p2p means to get all my music and other digital downloads. They can’t tax these types of downloads, and if such a tax does come to pass it will turn even MORE people to P2P as a means of getting the files they want at no cost.

  • David

    Here is what I do not understand. I buy an album on iTunes for 9.99 – I am not charged tax. I just bought the MLB At Bat App for my iPhone it was also 9.99, I was charged tax. I don’t really care either way since my purchases like that are minimal at best, but I am curious.

  • BJ

    @David – Software is always taxable – even if the site doesn’t collect it (use tax), it is considered a product at all times (ok there are exceptions, but generally).

    Music downloads are considered ‘service’ from my understanding. Physicial album / CD is a product. That is why they, whoever they are, talk about ‘closing’ a loop hole.