stories filed under: "taxes"
New York Tries To Rope Amazon Into Playing Tax Collector
from the bit-of-a-stretch dept
The New York Times reports that the state of New York is demanding that Amazon and other e-tailers begin collecting sales taxes from customers in the state by June 1 or face audits and bills for unpaid taxes. Under federal law, a state can only require a business to collect sales taxes for it if the business has a physical presence in that state. So Amazon collects sales taxes in Washington state, where it has its headquarters, but not in most other states, including New York. But New York has hit upon a novel legal theory: Amazon might not have a physical presence in New York, but many of Amazon's affiliates do, and New York argues that those affiliates constitute a "physical presence" sufficient to require Amazon to collect taxes for the state. It's a novel theory, and one that Amazon will almost certainly challenge in court. It doesn't make a whole lot of sense to me. Amazon's affiliates are essentially selling Amazon advertising space on their websites. They're not employees of Amazon any more than I become an employee of any site that purchases advertising space on my blog. If New York's interpretation is accepted by the courts, it would spawn endless litigation about which types of relationships establish a "physical presence." There's also a good chance Amazon would just cut off New York residents from participating in the affiliates program to save itself the headache of potentially having to comply with thousands of different taxing jurisdictions. Either way, nothing good is going to come from this.
Filed Under: e-commerce, local presence, new york, taxes
Companies: amazon
Recording Industry Testing Out New Theory: It Deserves More Money Because It Lets You Transfer Music
from the the-audacity-of-greed dept
William Patry has a long, but fascinating, discussion on the latest trick being used by the recording industry to try to squeeze more money out of you: telling governments that because it's now willing to let people transfer the music they legally purchased between devices, it deserves extra money for it. To back this up, it's claiming that there's obviously value in being able to transfer music around, otherwise why would people want that ability. The audacity of such a statement from the industry shouldn't be understated. After all, this is the same industry that has, for years, ignored pleas from fans all over the world to get rid of DRM because it would make digital files increase in value. And, now, that the industry has finally been forced to recognize this, it seems to be claiming that all of the value belongs to the industry itself, and it's the government's job to hand over that "value."The reasoning for this seems to go back to the psychological explanation for why the recording industry keeps getting itself into trouble (and it's similar to the story we had recently about bloggers worrying about a new aggregator). They assume that all of the "value" needs to be captured by them, and not anyone else. In economics, this is effectively an industry telling the government that it needs to be compensated for all of the positive externalities it created -- even if it's better off at an absolute level. Basically, the industry is so overvaluing its own content, that it assumes that any additional value that people get out of music, even if it's through no effort of the recording industry itself, should be entirely converted to more revenue for the industry. As an analogy, it's like your automobile maker demanding an ongoing cut of your salary, since without the automobile, you wouldn't be able to drive to work. Unfortunately, though, unless you're a copyright wonk, you might not even notice that the recording industry is trying to do this. Instead, it presents its case in a logical fashion, focusing on how much "value" it's suddenly creating by "allowing" people to transfer the music they already legally purchased to the device of their choosing.
Filed Under: copyright, externalities, recording industry, taxes, value, william patry
California Lawmaker Wants To Change Law To Tax iTunes; Pretending Infinite Goods Are Tangible
from the reality-is-meaningless-if-it-gets-in-the-way-of-tax-revenue dept
Slashdot points us to the news that a Los Angeles (surprise, surprise) area politician is pushing to change a California law that requires sales tax on the sale of tangible goods. He wants the law to be adjusted such that digital goods would be considered tangible goods so they can be taxed. Effectively, this is a way of applying a sales tax on iTunes downloads as a way to make up the California budget shortfall. Considering that the entertainment industry has been trying to convince the world that intellectual property is no different than tangible property, it's not surprising that a politician coming from LA would see no problem with pretending infinite goods are tangible goods. However, it seems likely that such a plan would backfire. If anything, it will push more people to look for alternatives (potentially unauthorized) alternatives if California forces an unwanted price increase on iTunes. Also, if the law starts treating digital goods as tangible goods, will that give people other rights -- such as the right to do what they want with the content after purchase? It looks like there's plenty of opposition to this plan, so it probably won't go very far. In the meantime, though, does someone want to explain the difference between tangible goods and infinite goods to Assemblyman Charles Calderon?Filed Under: california, charles calderon, digital goods, infinite goods, itunes, tangible goods, taxes
Egypt's Plans To 'Copyright' The Pyramids
from the you-have-got-to-be-kidding dept
We've had plenty of posts discussing the ridiculousness of copyright extension, especially when it applies to works retroactively. However, we're usually talking about content created in the last century. Not any more. It seems that this era's obsessions with misunderstanding the purpose of copyright is about to taken to a new level of absurdity. Chris was among many of you who took time out of your holiday feasts to alert us to the fact that Egypt is preparing to "copyright" the pyramids, the sphinx and other Egyptian antiquities. Of course "copyright" is being used loosely here. Realistically, it sounds like some Egyptian politicians need to come up with a plan to raise more tax revenue for the government, and so they came up with this bizarre plan to pretend that they can tax anyone who creates a likeness of famous Egyptian monuments. Apparently this decision came just days after a newspaper editorial suggested that the Luxor Hotel in Las Vegas owes the Egyptian gov't a share of its profits. Realistically, this has nothing to do with copyright at all, but is simply just an excuse to try to try to bring in additional tax revenue by misappropriating the concept of copyright as a weak rationale for the tax. However, in an age where copyright supporters want people to think that copyright is the same thing as real property, it's much easier to get people to believe this is a reasonable proposal. Of course, given that the real purpose of copyright is supposed to be about creating incentives for the creation of new content, does this mean we're going to start seeing new pyramids start springing up in Egypt anytime soon?House Moves Forward Plans To Change How VCs Are Taxed
from the good-or-bad? dept
For the past year or so the venture capital world has been up in arms over proposals to change how a portion of their income is taxed. The key issue is whether the "carry" that VC's get on profits should be taxed at regular income tax levels or at much lower capital gains rates. Since risk capital is an important fuel for innovation, some VC's make the case that a change in taxation rates could limit the interest in investing institutional money. However, others, such as VentureBeat, make a compelling case that while profits on your own invested money should (and would, under the plan) remain as a capital gain, the carry (which comes from the profits VC's make by investing someone else's money) do not deserve capital gains rates. While the argument goes on, it appears that our Congressional Representatives have not yet been convinced by the VCs, as they've passed a new tax bill that would, in fact, change the treatment for VCs. It still needs to pass the Senate and get signed by the President -- both of which seem less likely to approve this change -- but some of the venture capitalists you know may be holding off a bit on buying anything big and expensive for a little while.Filed Under: capital gains, carried interest, taxes, venture capitalists
Low Taxes Aren't A Subsidy
from the logistical-nightmare dept
Economist Dean Baker thinks that Amazon owes its profits to the fact that it doesn't have to collect sales taxes for customers in states where it doesn't have a physical presence. The absence of sales taxes on Internet purchases, he says, is a "subsidy that Amazon gets from taxpayers." This is silly. Some states don't have sales taxes at all, but no one would consider that a taxpayer subsidy. My local Wal-Mart benefits from a variety of state and local government services here in the St. Louis area, such as police and fire protection, and roads and other infrastructure. At least in part, sales taxes go to cover the costs of providing those services. Amazon uses few if any services from state or local governments in Missouri, so it's hard to see anything unfair about the fact that it doesn't have to collect sales taxes here.On the other side of the ledger, sales tax collection would be far more burdensome to Internet-based businesses than to their brick-and-mortar competitors. A mom-and-pop retail store only has to learn about the tax rules in one jurisdiction. Most likely, there's just one tax rate, one set of rules about which goods are taxable at that rate, and one set of reporting requirements. In contrast, a small e-commerce site would have to familiarize itself with the rules in thousands of different jurisdictions. The state of Missouri, for example, allows municipal governments to tack a variety of local taxes onto the state sales tax. As a result, the tax rate varies from city to city. Even worse, different states have different rules about which goods and services are taxable. Missouri, for example, exempts custom software (but not boxed software), farm equipment, and medical grade oxygen, among other things. Colorado has exemptions for bingo equipment, cigarettes, food, fuel and oil, machinery and machine tools, newsprint, precious metal bullion and coins, and more. Each of the other 40-some states with sales taxes have their own lists of what's taxable. Many states exempt food and clothing from taxes, but the precise definitions of "food" and "clothing" varies from state to state. For example, in Wyoming, bagels are considered tax-exempt food unless they're sold with cream cheese and a knife, in which case they become taxable "prepared foods." Not surprisingly, small online retailers are worried about the administrative burden of complying with so many different requirements. Some states have banded together to create a unified, "streamlined" sales tax system, but e-tailers are skeptical about how much the system can be simplified. Unless states first radically simplify and harmonize their sales tax rules (which might be a good idea anyway), I don't think it's going to be feasible to "streamline" the system enough to make it affordable for small e-tailers.
Filed Under: e-commerce, state's rights, taxes
Companies: amazon
New Chinese Taxes May Explain Export Slowdown
from the that's-all? dept
Last week we linked to a story about slowing export growth from China and wondered what it meant about both the US and Chinese economies. Obviously, slower trade could be a reflection of a weakening economy, although it also seemed possible that the mounting concerns over the quality of Chinese goods could be a contributing factor. Today, the Wall Street Journal notes the same trend, but offers a much more sanguine perspective. The claim is that the Chinese government has instituted a new tax on exporters, which will kick in later this year. As such, manufacturers have tried to front-load their sales, squeezing as much of their annual orders out before the tax comes into place. The Chinese government has tried hard in recent years to slow down the economy, which has been on fire. While this tax may result in a temporary slowdown, it's unlikely that it will do much to alter the fundamental economic equation of high American demand for cheap supply from China.Filed Under: china, manufacturing, taxes, trade
Internet Access Tax Ban Up For Renewal Again, But The Push To Make It Permanent Remains
from the doing-some-good-for-a-change dept
We've noted in the past how every once in a while, some good internet laws turn up, even though they're still far outweighed by the bad ones. One of the good laws has been the moratorium on taxes on internet service, which keep states from increasing the total cost of internet access for consumers. The only hiccup, though, is that this ban has never been made permanent, mostly thanks to the objections of the states. The current moratorium expires November 1, and discussions to extend it or make it permanent are ongoing. While there's bipartisan support for keeping internet access bills free from the morass of taxes and regulatory recovery fees that plague telephone and cable TV bills, a lobbying group representing the states say they current ban should only be extended temporarily, so that legislators can "return to this issue and make sure we've gotten it right." It's not entirely clear why they can't "get it right" now, particularly as two bills that would make the ban permanent have already been introduced in the House. What's heartening about the discussion, though, is that it seems to focus on legislators' desire to make the ban more broad, potentially covering backbone services and even basic cable. For the time being, the worst-case scenario appears to be that the taxes are banned for four more years, but it looks like there's too much momentum behind the ban eventually becoming permanent to stop it at this point.Fears Of New Taxes On VCs May Be Overblown
from the the-power-to-tax-is-the-power-to-destroy dept
The VC community has expressed concern that changes to the tax code, intended to hit private equity firms, will end up hurting them as well. Given the explosion in alternative investment vehicles and the large sums that these companies have been raking in, politicians have been keen to make sure that they're all paying their "fair share", whatever that means. But perhaps the issue is being overblown on all sides. According to one estimate, the change would only bring the government an additional $2 billion in annual tax revenue. From the perspective of industry and government, that's really a mere pittance. Of course, it should make one wonder why Congress is spending so much time debating this issue. If it's not about raising revenue, and only about going after a successful, high-profile segment of the economy, then the push would mainly seem to be about politics.
