Who Doesn’t Want To Pay More For iTunes?

There’s a dark cloud on the horizon for everyone that enjoys downloading their media. Music, movies, software; they’re all being targeted by state legislators. Their goal - taxation. That’s right, folks, you may be seeing pennies added on to your dollars.

At least that’s the plan for several states. As reported on CNET News, a trend is starting to develop where states such as Indiana, South Dakota, Tennessee, and Utah have enacted digital download taxes. These taxes span several popular media sources, including iTunes and Amazon. Naturally, there’s no shortage of protestors. NetChoice, a tech industry group which represents the likes of AOL and Yahoo, has been trying to keep these “iTaxes” out of state legislature. Executive director Steve DelBianco makes a good argument against taxing digital downloads:

“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. 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.”

Unfortunately, the efforts made by NetChoice and other groups hasn’t been very successful. So far, DC and 17 states all have some form of a digital download tax. This shouldn’t be too surprising, however, as digital downloads have become a juggernaut in U.S. consumer spending. How can a politician not be tempted to tap into that? Still, there are consequences yet to be felt.

Thanks to the complexity that is online sales, it’s possible for a distributor to not have to tax a customer if that distributor operates outside of the customer’s state. Ergo, if Tennessee wants to tax a customer for buying an e-book, that customer would be wise to make their online purchase with a retailer based outside of Tennessee. Bye-bye local business. How does Tennessee compensate? Well, they may seek legislation to better mandate state taxes on national products. Now the burden is displaced onto the distributor, who has the immense pleasure of trying to track each state’s laws as customers come to make their purchases. This results in more money spent by the distributor, and just wait and see how long it takes for that expense to be displaced onto the consumer.

The CNET article does a great job of going into specifics on the types of legislation being worked on right now from both sides of this debate, and I encourage you to check it out. While you’re doing that, I have to run out to the convenience store and purchase $50 of gas along with a $5 pack of cigarettes.