Proposed California Tax Law Targets Digital Downloads

Taxes Aimed at Digital Movies, Music and Books

[incrediBILL]

More changes in internet taxes as California AB 1956 is going after intangible goods, such as digital downloads of movies, music and books, possibly even ringtones and electronic reports!

[leginfo.ca.gov...]

(f) "Digital property" includes products like music, movies, and
books, which, if delivered in a tangible storage media, would be
subject to sales and use tax in this state under the Sales and Use
Tax Law, and, as such, is the digital equivalent of tangible personal
property.

[mercurynews.com...]

"The notion of taxing tangible, physical property is really an industrial-era construct when we made widgets and sold widgets," Calderon said Friday. "Now it's not about widgets, it's about information, and selling information and moving information."

It failed passage the first time around, but it's only a matter of time before it passes because traditional sales of CD's, movies and books are declining and being replaced with digital equivalents.

The big fear is that companies selling digital downloads will simply move out of California or create a shell company to sell it's digital wares outside of CA.

Would you relocate your business to avoid this tax?

[BaseVinyl]

old news...and hype...yawn

[edited by: BaseVinyl at 3:25 am (utc) on May 22, 2008]

[incrediBILL]

Hardly old news since it's going around for a 2nd pass and hardly hype as I just heard about it on the evening news just a few nights ago with our local politicians bickering about the state budget, which prompted me to look it up and post about it.

All those lost taxes from sales of previously tangible items will be recovered, it's just a matter of time before the "hands off" tax policy changes.

With CA's current state deficit, it could happen this year.

[Beagle]

If you want to get really technical -

"Digital property" includes products like music, movies, and
books..."

- means that digital property includes products similar to but not including music, movies, and books. If they want to include music, movies, and books in the law they should say "such as" -- Not that I'd expect this to help anyone out in court.

The state where I live has a mishmash of sales and use taxes. Sales tax covers only tangible goods. When it comes to digital downloads, the Powers that Be have declared that use tax applies to software downloads, but no other kinds. The idea, as I understand it, is that software programs are tools that are "used" by the purchaser in a way other downloads aren't. Fine with me at this point, as all I offer for download are graphics images. My state also considers my place of business to be the location where the transfer takes place, so from its point of view it doesn't matter where the downloading is done. Some customers could live in states that look at that differently.

I'm actually thinking of moving to California, although not for several years. This tax alone wouldn't change my mind - but, then, if I do move it'll be for family reasons that trump the negatives of paying a use tax. IMO, the cost of living in California would be more of a financial burden than this tax would be.