Wisconsin Governor Proposing Tax On Downloads

Christopher Reimer writes "Ars Technica is reporting that the Wisconsin's governor is proposing a tax for downloads. From the article: 'Wisconsin's Democratic governor thinks it's not fair that tangible items get taxed while downloads, like music, ebooks, software, etc., go completely untaxed. So, he proposes to rectify the situation by having Wisconsin's 5% state sales tax apply to Internet downloads.'"

Does this mean

[the_mighty_$]

Users will have to pay tax each time they visit a webpage on a subscription based website? Visiting a page does involve downloading, of course.

Originating state

[Visaris]

Wouldn't it be hare to figure out what state the downloaded files were comming from? I was under the impression that states could only tax items purchased which originated in their state, is this true?

Enforcement?

[kuzb]

I wonder how he intends to enforce such a tax, considering any time your computer recieves data, it could be considered a 'download'.

Wisconsinite here.

[k96822]

Having lived here all but 1.5 years of my life, I can say this certainly doesn't surprise me. We know we're one of the most taxed populations in the union. We know our state government is corrupt and unethical. In a state that is almost entirely M$ dominated, it shouldn't be surprising the population is ignorant about the nature of the Internet. I'd be surprised if people put up a fight here about it.

as a resident of wisconsin...

[eobanb]

...I can truthfully say, I'm slightly scared by this, but at the same time, I have no idea how they'll enforce this. I caught this little gem in the article:

There would be no Internet sales tax police, however, because compliance would be on the honor system

Right.

Stupid, yet Illegal. Brilliant!

[Onimaru]

Okay, so this is obviously dumb, but I'll go one better. It's also probably unjustifiable and unconstitutional.

The general justification put forth for sales tax is that it's a tax on doing business in the state and using the existing infrastructure of that state so to do. The internet doesn't really do that.

Also, there's a good argument to be made that the Negative Commerce Clause [rnoon.com] prohibits this kind of action by a state or local government. In essence, Congress gets to regulate interstate commerce, not Wisconsin.

The power to tax is the power to destroy...

[GreyWolf3000]

The Wisconsin government could theoretically shut down the local computer store, but it does not have the power to shut down out-of-state websites.

If I lived in Wisconson, I would only be even willing to discuss the matter if it only applied to online stores located in Wisconson, not online customers. If someone drives over to where I live, they pay my local and state sales taxes when they buy stuff at a shop located in my community.

Re:Great!

[Anonymous Coward]

Wouldn't that fall into federal law? Most internet purchases (especially in Wisconsin) are from over state lines. Unless they started enforcing their state sales tax nationally--which is regularly collected from the seller, not the buyer--then they would be out of their jurisdiction. They would only be able to collect from sellers within the state, so then the internet vendor would just have to establish their business out of state.

Good luck Wisconsin

[rjelks]

I'm wondering how they'll keep track of this. I just read how New Jersey residents were sent back tax bills for online cigarette purchases. So I could see, if this passed, downloaders getting back tax bills for ignoring the new sales tax.

What happens when a Wisconsin resident has an out of state friend purchase mp3's, software, etc. and then just emails them (or mail them on a CD)? How could you possibly keep track of all of the shareware authors? Does this governor think he'll be attracting IT jobs? I'm guessing he's one of the folks that still thinks the US government is going to add a charge for emails to save the USPS.

I hope this line of thinking doesn't spread to other states. This seems like a creative way to ruin legal mp3 downloads in that state.

District of Columbia

[Anonymous Coward]

I am a DC resident and I sell my software online, both through an ESD and more directly. I asked the DC finance people about whether I need to charge sales tax to DC residents for the downloads, and they said "Yes." Since I was under the impression the sales tax didn't apply to intangible goods, I asked them for the legal basis for that claim, and, strangely, never heard back from them.

Anyway, just to be safe, I just don't sell directly to DC residents. If I find that a DC resident tried to buy my software directly (strangely, it hasn't happened yet), I will just refund him his money and tell him he's got the software for free. This way, I don't need to navigate the DC beaurocracy, and the losses will be minimal.

Yes, I would have.

[Seoulstriker]

I actually am a republican, and I would have said the same thing had it been a republican. Everyone knows that democrats are tax and spenders, I just didn't want it to be a part of the important discussion of how serious this internet tax is.

Re:Does this mean

[somethinghollow]

Technically, I pay a subscription to my cable company get on the Internet. If I go to an Starbucks, say, I might be getting on for free, but they are paying the subscription. This can be narrowed down to "paying to download websites." So, every page I download should be taxed.

What the guy needs to address is what KIND of file can be taxed and what it means to buy something. If he means any file you pay for, there is trouble. If he only means certain kinds of files (say, MP3, for example), every time I download a demo from my friend's site, I would get taxed for that. Alternativly, my friend could swap formats (say, to .wav) to escape the tax. If the kind of file is described as "audio files", then that could be zipped and it is now a zip file, which may be tax-free. If the file is "anything other than text and images", then we can start converting audio, etc., to images then convert them back later.

If by purchase, he merely means something you pay for above and beyond costs to access the file, then we may be getting somewhere, but we still have a problem, as the parent mentioned, with subscription based news sites. But that might be more like having a subscription to the NY Times. I don't buy news papers, so I don't know what sort of taxes are included in those types of purchase.

But it's all BS anyway, as TFA says that there would be no internet tax police... that it would be on the honor system. That doesn't really give us a reason to comply. Not that I live in or plan to live in Wisconsin.

Re:They're taxing sales, not the Internet

[kuwan]

Well, what happens when you purchase iLife from Apple in California and have to pay the California Sales Tax, but then since you live in Wisconsin you have to pay an additional %5 on top of the tax you already paid?

That's the problem that I see with stuff like this. You're going to start getting double taxed - once for purchasing in one state and again for using it in the state you live in.

No more new taxes, no more increases in taxes. The government needs to make due with what it has (which is already an enormous amount of money).

--
Join the Pyramid - Free Mini Mac [freeminimacs.com]

Every state needs money and here's the solution

[hotspotbloc]

Legalize and tax marijuana instead. Seriously, between the 13 billion the US spends on the prohibition of marijuana every year (1) and the 20 billion in likely tax revenue (2) the US is missing out on a much bigger fish that's much easier to catch. Chasing down people to pay $.05 for an iTunes or ebook purchase is manpower intensive and I suspect has a low rate of return. You might as well pass a "swearing tax" and require people to pay a dollar to the State every time they use one of the seven dirty words. Putting aside the "fairness" issue some taxes are just much easier to collect than others. Marijuana, like alcohol, could be required to be sold with a tax stamp, at say liquor stores, making enforcement and collections rather easy. At a $1 a joint you wouldn't need to waste your time with the nickel and dime stuff. That's over 30 billion a year that could be spent on schools, paying off State debt, returned to the taxpayer or a combination of all of the above while using the existing alcohol tax system for collections.

Besides, taxing interstate transactions is illegal under the "Commerce Clause" of the US Constitution (3) so it'll most likely be placed in within the State "use tax" category which has been very difficult in the past to enforce.

Putting aside the fairness issue taxing ultra low dollar electronic purchases IMO just isn't worth it.

(While many states currently do require a State issued drug tax stamp, because of marijuana's current status as illegal under prohibition few people actually purchase them. The "drug tax stamp" law is most commonly used to add the extra charge of tax evasion to a drug dealer and squeeze him for a little extra money and jail time.)

1. Marijuana prohibition facts [mpp.org]
2. Thinking about Drug Legalization [cato.org]
3. Interstate Taxation and the Commerce Clause [umkc.edu]

Re:No, you are NOT taxed enough! Please read:

[magarity]

Votes are the key to power. If you're a politician, then why don't you take someone's money and buy some?

Congradulations, you've discovered the reason democracies over history eventually fail; the proletariat discover they can vote themselves "free" benefits from the public coffers and get into a greedy spiral until the system explodes.

sales tax is for GOODS not Serv ices

[DunbarTheInept]

The way most downloads you have to pay for work, you technically haven't bought a product. You've bought a service. Downloaded songs? You don't own your copy - you own the right to play the copy that you have stored but don't own. Software? You don't own the software, you just bought the right to use the copy of it you downloaded but don't own.

You should never, ever pay a "sales tax" on a DRMed download becuase you haven't actually really bought a product - you've bought a service, and those don't get taxed as sales tax.

Possible work around?

[aztektum]

If this catches on couldn't ITMS just charge you 20 a month for 20 songs instead of .99 per song. Isn't this how Napster already works -- a monthly fee for unlimited access?

Then its a service fee to access their servers, not a "payment for goods".

Re:Democrats vs. Republicans

[Nize]

"Geez....why can't the legislatures see we're freaking taxed ENOUGH. My paycheck is near 30%+ taxed with Fed, State, Medicare and fucking SS that I'll never get back fully. Sales tax here is like 9%...over and over and over again."

No, you are not. I live in Denmark, and I am income taxed something like 56% in total. Add to that, that there is a 25% sales tax on everything.

Oh, and we are taxed 180% on top of the 25% on car sales. Thats the highest car sales tax in the world.

And a gallon of 95 octane fuel goes for $5.5 here.

So, no, you are not overtaxed. You are just taxed :)

Wrong.

[delmoi]

People, in general, are too stupid to realize that voting for X or Y is going to save or cost them money in taxes. Look at all the poor people voting republican despite the fact that their tax burden is going up because of it.

Now, what politicians actually do is give money to their campaign (and pro-them PACs and 572s) contributors, who then give them the money they need to stay in office.

It's an inherent flaw in democracy. Unless you can think of a better solution, suck it up and pay your taxes, whiner.

Re:Don't think it is related to p2p...

[anagama]

• Since we're talking about non-physical goods, there's no shipping address, and even if there was, what says you aren't shipping it to a friend in another state. The only thing I could think of would be if you could validate the "home" address of the credit card and base it on that address, but there are ways around that as well.

I live in Washington State just a stone's throw south of the border. Anyway, WA get's its money -- at least every iTune I buy costs me $1.07 (99 cents plus our 8ish % tax). I need to get myself a credit card with an Oregon address - perhaps that would save me the tax.

Makes sense

[guacamole]

How the sales of software or other digital products that can be simply downloaded are different from the sales of tangible goods that get shipped by snail mail? I think he probably has a good point.

Double taxation?

[minion]

Has everyone completely ignored the whole "double taxation" thing our country's Founders were against? We're getting taxes on INCOME that is being spent and taxed AGAIN. That is double taxation.

Its time for a political uprising.