New York The Latest To Propose Taxing iTunes Downloads

from the for-no-reason-at-all dept

Wed, Dec 17th 2008 6:58am — Mike Masnick

Earlier this year, some politicians in California, which is struggling with massive budgetary problems, proposed adding a tax to iTunes downloads. Now, Governor David Paterson in New York is proposing the same thing. There's no functional reason for this, other than the fact that the state desperately needs money, and so it's trying to add taxes to just about anything it can find. Of course, back in the old days, the point of a sales tax like that was to contribute to gov't-funded infrastructure (roads and such) that allowed folks to go and buy something. There's no such rationale for taxing internet downloads. It's a blatant money grab and Paterson seems to have no problem admitting that.

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Filed Under: david patterson, downloads, itunes, new york, tax

35 Comments

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Xiera, 17 Dec 2008 @ 7:24am

Sucks to be iTunes?
Isn't this essentially a tariff on a domestic product? Isn't that bad for the economy?

What's more disconcerting is the precedent this establishes for other states (or the federal government) and other industries. As the government has done nothing but become more bloated and exploitative in recent years, this seems like just another step in the wrong direction -- a way of bandaging problems rather than fixing their sources.

Is there even anything a citizen can do in a situation like this, realistically speaking?
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Anonymous Coward, 17 Dec 2008 @ 7:27am

Re: Sucks to be iTunes?
Lie about your address and use a proxy to hide where you really live :)
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Anonymous Coward, 17 Dec 2008 @ 7:38am

It is a sales tax, what makes the Internet special that there shouldn't be a tax on things purchased over the Internet?

If you live in New Jersey and buy something in NY, you are supposed to let NJ know and pay NJ sales tax on the product.
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Matt, 17 Dec 2008 @ 7:42am

Re:
Right, do you remember how well that worked with the newegg fiasco?

Apparently not.
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Michael B, 17 Dec 2008 @ 7:50am

Re:
Exactly who doex that?

If we had a standard, nationwide VAT, then the collection process would be easy, but since each state is different, it has long been held that collection of sales taxes for companies with no physical presence in a state is impossible. Of course, since Apple has stores in NY, one could make the case that they should collect the taxes, but, as one poster already noted, it's very easy to avoid the tax by using a fake address and a proxy.
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Rizwan, 17 Dec 2008 @ 8:07am

LOUUUDDD NOIIISSESS

(newegg fiasco +1)
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:Lobo Santo, 17 Dec 2008 @ 8:09am

Re: Sucks to be iTunes?
"Is there even anything a citizen can do in a situation like this, realistically speaking?"

Viva la Revolucion!
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Tony, 17 Dec 2008 @ 8:17am

Re:
"what makes the Internet special"

Good point.

"If you live in New Jersey and buy something in NY, you are supposed to let NJ know and pay NJ sales tax on the product."

Also a good point.

That was the case even before the advent of internet shopping. If you mail-ordered something from in your state, the seller would collect sales tax - pretty much like it's done online as well. If you mail-ordered something from OUT of state, the seller, who was not subject to your state jurisdiction, did NOT collect sales tax. It was YOUR obligation to report and pay it.

The proposal here is that the out of state business now be obligated to collect sales tax for your state: that is, the NY company you are buying from is supposed to collect tax for the sale made to you in NJ.

As you said, what makes the Internet special?
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Joe Dirt, 17 Dec 2008 @ 8:24am

New York Stinks
I hate New York state so much. We already have the highest property taxes in the country, and one of the highest sales tax. Patterson is too lazy to cut spending on some of the useless state run programs we have but decides oh we're going to cut EDUCATION by $700 million and lets just start taxing whatever the hell we can. They nickel and dime us EVERYWHERE. It's ridiculous. And back to pirating music.....
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eleete, 17 Dec 2008 @ 8:28am

87 Other taxes to consider
lol, poor NY. They will also be dealing with 87 other new taxes. I expect this will spread across the nation, then when the crisis is finally over they will stay in place. More of the same. Polluticians, I tell ya.

http://www.nydailynews.com/ny_local/2008/12/16/2008-12-16_gov_david_paterson_unveils_dire_new _york.html
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micmac, 17 Dec 2008 @ 8:30am

tax is inevitable
Sales tax is just a tax like any other. It is, however, hard to collect when the sale crosses jurisdictional boundaries. Without computer assistance, it would be impossible to calculate the correct sales tax for mailed merchandise just withing my state of Colorado. There is a state sales tax rate, a county tax rate, and a city tax rate. The amount you pay is the total of all of these, and is different in every county and town. I suspect that this is getting to be the case in most places.
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Xiera, 17 Dec 2008 @ 8:30am

Re: Re:
We're not talking about mail-order here. If anything, it's more like getting in your car, driving to the next state over, and purchasing something there.

But there's really no "in state" or "out of state" on the Internet. THAT is what makes the Internet special -- it knows no political or geographical boundaries. It shouldn't be able to tell which state you're from or which state the company is located in. Even if you argue that it should, it is extremely easy to get around that by using proxies (as mentioned earlier).
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Dave Barnes, 17 Dec 2008 @ 8:50am

Erratum
It is spelled Paterson with only one t.
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PaulT (profile), 17 Dec 2008 @ 9:03am

Re:
"If you live in New Jersey and buy something in NY, you are supposed to let NJ know and pay NJ sales tax on the product."

Really? i don't know how things work over there but I work in Gibraltar, live in Spain and often buy things from UK web sites. I don't have to tell the Spanish government when i buy things elsewhere. Do you really have to tell other states?

If so, that sucks for you, but it doesn't negate the fact that a localised sales tax is becoming an increasingly outdated concept. As is alluded to in the article, the whole idea of sales tax to begin with was to recoup the wear and tear on things like public highways and other infrastructure that get used when stocking and purchasing items. You think this is still applicable on the internet?

Also, how exactly would this be policed? You think it's going to be hard for an NY citizen to set up a proxy and an out-of-state credit card to avoid these taxes? Hardly, and the cost of chasing people would probably be more than they collect.
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Joe, 17 Dec 2008 @ 9:13am

Absurd
I'm taxed by my ISP, the electric company, Dell, and now iTunes..!!! Don't forget to tax the air I breath while surfing...

Get ready for change everyone...
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Anonymous Coward, 17 Dec 2008 @ 9:14am

"owning" music
In previous discussions many people argued that music, like other products, is bought by the customer and the customer should be able to use it as she feels. There was also a post on a site that sells used mp3s.

Music is also a product. I don't see why it should not be taxed. Agreed, it is going to be difficult implementing this tax. But still.....
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PaulT (profile), 17 Dec 2008 @ 9:36am

Re: "owning" music
Why do you feel that every "product" should be taxed, even when no public facilities are used to produce them? Why aren't the income taxes, property taxes, etc. levied on the studios and musicians enough?
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Anonymous Coward, 17 Dec 2008 @ 9:38am

Creating 88 new taxes to pay for programs is program welfare. These taxes cover virtually any consumable except those sold by Almagated Foodstuffs, Inc.: Soda pop, concert tickets, movie tickets, massages, taxi fares, and clothing purchases to name a few. Taxing virtually every entertainment and consumable-related will just drive down that type of consumption. It lacks long term vision that they'll be able to expect demand to stay at current levels, and the plan will be successful at making up the $15B shortfall. It's almost as cynical as Berlin's plan.

It'll be a great time to be a retailer anywhere off of the Jersey Turnpike. It wouldn't be a surprise if WalMart breaks ground on a a dozen stores right at the NY/NJ border next week.
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Haywood, 17 Dec 2008 @ 9:48am

Re: 88 New Taxes
+1 the saying; "You get less of what you tax and more of what you subsidize" comes to mind.
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Steinbrenner, 17 Dec 2008 @ 10:10am

Re: Re:
Not necessarily. If the Apple stores are incorporated separately from Apple, the iTunes seller, then that doesn't apply. The state tax authorities call that "nexus" - having a presence.

But aside from the legalities, how in the name of all things great and small do they think this could work? I guess the NY Governor is blind in more than one way.
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Anonymous Coward, 17 Dec 2008 @ 10:11am

Re: Re: Re:
The internet doesn't but the seller and the buyer most certainly have geographical boundries
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Anonymous Coward, 17 Dec 2008 @ 10:26am

Re: Re: Sucks to be iTunes?
Viva la Revolucion!
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Anonymous Coward, 17 Dec 2008 @ 10:28am

Polititions should be the SERVENTS they are and not get paid if there is no money, BUT THE PEOPLE SHOULD NEVER BE TAXED TO DEATH, THATS WHY WE DECLARED INDEPENDANCE FROM BRITAIN! DUH, HAVE WE ALREADY FORGOTTEN THAT?
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Xiera, 17 Dec 2008 @ 10:36am

Re: Re: Re: Re:
So, basically, because an Internet transaction has a buyer or seller in a state, someone should have to pay a tax on that transaction?

If that is so, we'll simply see the sellers relocate (less money for the state) and the buyers who know how to proxy will do so. In the end, the state will not make as much money from the tax as they will lose from the sellers leaving. It's a lose-lose situation.

And, again, this is something that makes the Internet special: it's relatively easy to pack up and relocate an online business.
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Anonymous Coward, 17 Dec 2008 @ 10:38am

Re:
"[ranting] but the people should never be taxed to death [ranting]"

Or for death...
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Chuck Norris' Enemy (deceased), 17 Dec 2008 @ 11:14am

Re:
We'll be taxed back to the 18th century!
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TDR, 17 Dec 2008 @ 11:44am

I sense a new Boston Tea Party coming. Crates and crates of iPods and iPhones and more being dumped into the harbor...
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Anonymous Coward, 17 Dec 2008 @ 12:53pm

No iPod dumping into the Hudson, its bad enough as is.

And yes, you are supposed to report to the state what you buy in other states, but I doubt if anyone actually does, at least until they get caught.

I am expecting soon the annual articles in the local papers about how state officials will be writing down plate numbers of cars that are parked in NJ shopping malls. You see those articles every year, but I doubt if govt. officials ever actually do that.

And most of you are coming at this from the wrong angle, the tax has nothing to do with what should and shouldn't be taxed, because the govt. is just trying to raise money. Reason doesn't really play into the equation.
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Rick, 17 Dec 2008 @ 1:11pm

NY iTunes tax
After the relief of Spitzer wore off, I found myself agnostic on Patterson and generally wondering whether he would be work constructively for NY. Given the scope of the new & increased taxes being proposed in the current economy, he's provided an answer. While the rest of us are all busy belt tightening, we have Mr Patterson scheming up there in Albany to further exacerbate the situation with taxes, versus the sane & logical thing to do: go program by program prioritizing, figure out what we can afford to do, and what has to be cut. This increased tax proposal just further proves to me how detached and dysfunctional government has become! The only reasonable response we have as citizens is to remember him when/if he eventually has to run for his office.
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no one, 17 Dec 2008 @ 1:20pm

I believe NY told amazon that they can collect sales tax from any business that directly advertises to ny citizens. So I guess if you have an ad in the new york times or post or you air a commercial on ny channels 2, 4, 5, 7 they can collect tax from your company regardless if the company has any presence in the state. It is just ny trying to make any money they can. they are trying to tax regualar soda for christ sake. i do hope amazons legal team can throw this out though.
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Anonymous Coward, 17 Dec 2008 @ 1:40pm

Policy Decision
This appears like an attack on Quality of Life and Standard of Living, which can correlate a business challenge of maintaining a well educated workforce.

If it goes through, it won't be surprising to see companies strategizing for options to relocate out of NY.
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Anonymous Coward, 17 Dec 2008 @ 6:33pm

Follow the money
Since the only money going anywhere these days is bailouts and "retention incentives" why not tax those ?
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Mark Regan, 17 Dec 2008 @ 7:59pm

I Can See It Now
Ninety nine cent download, plus 10% tax, pretty soon that adds up to real money.

So then there will soon be some shady looking guy standing in a dark alley asking you when you come out of the bar, "Hey Buddy, wanna buy an illegal download and save the tax?"

When is the government going to begin taxing church bulletins, or traffic lights that require a wait of more than a minute, or flights that take two hours to depart after boarding is completed?

We need to elect some more imaginative legislators. What do you say we begin taxing votes, that way only the rich will be able to afford to vote. And we could tax the contents of oxygen bottles which the elderly use to assist their breathing, so we couldn't run up so many Medicare bills taking care of all those OLD people.

We could give tax CREDITS to the estate of any unemployed or elderly person who commits suicide. We could set up tax payment stations along the Mexican border to collect a Rio Grande River Crossing Tax. (Ask anyone in Virginia how they like paying to cross the Chesapeake Bay to get to work.)

What about taxing Microsoft for every time their Internet Explorer allows another computer to become infected with malware? Or taxing Adobe for each second that their Reader takes to load?

Heck, we might as well hook up a taxi meter to each computer and charge a buck a minute for internet usage and be done with it. We can allow our legislators to tax us right back into the stone age. Because they would rather tax US instead of having to tax their billionaire buddies (Like Bill Gates) who donate their taxable wealth to foundations and charities which they control, and then use to manipulate the system to their advantage so that WE, the middle class and lower classes pay all the income, sales, property, and download taxes, while the wealthy work for a dollar a year PLUS hundreds of millions of dollars in tax exempt bonds or stock options as bonuses for coming to work now and then, live mansions around the world owned or controlled by their "charity", and fly on private jets owned by their "charity" and eat food at banquets paid for by their "charity" and, well, you get the point. WE PAY, THEY PLAY.

It's time for CLASS WARFARE, except that HE WHO HAS THE GOLD MAKES THE RULES, and there's nothing we can do about that.

I'm with the government, and I'm here to collect the $2.30 you owe plus the $35 penalty plus 25% interest from the date of your download. Pay me now or I will have to impound your mp3 player.
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eleete, 18 Dec 2008 @ 12:42am

Obviousness
In addition to the fact that many New Yorkers will be running across the borders to bypass the taxes leaving New York retailers in the lurch I see another situation starting. How about tax evasion for file sharers ? Yet another way to increase the grip of copyright monopolies ? I'm just saying.

Also.

So many people voted for Obama because only people making more than 250K would see a tax increase. How's that working out for ya? Both of those clowns should have told the People the truth, that hard times would lead to things like this regardless of who won. And yes, I do know the difference between federal income tax and state tax. As I said before, how likely is it that if/after the financial crisis ends, these taxes and fees will be removed ?
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Anonymous Coward, 18 Dec 2008 @ 6:25am

"it's time for CLASS WARFARE"

I thought this had been going on for, ummm forever ?
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