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Connecticut Considers Digital Download Tax 244

SonicSpike writes in with a story about the latest state contemplating raising revenues by taxing the net. "Downloading music, movies, e-books and Apps could soon cost Connecticut residents more as lawmakers consider a tax on digital downloads. The bill, proposed by the General Assembly's Finance, Review and Bonding Committee, would have consumers pay the 6.35% sales tax on any electronic transfer. Supporters say the bill would level the playing field for brick-and-mortar retailers in the state who are already required to charge Connecticut sales tax to consumers who purchase these products in their stores. About 25 states around the country have already begun taxing digital downloads."
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Connecticut Considers Digital Download Tax

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  • 6.whatever% of zero is still zero.
  • Three things... (Score:5, Interesting)

    by readandburn ( 825014 ) on Sunday March 18, 2012 @02:15PM (#39396837)
    1) The article is pretty much the summary? 2) "About" 25 other states? They can't even do the research to see exactly how many states already do this? 3) Half the states ("about" anyway) already do this, yet it is news on Slashdot now? Yes, I must be new here.
    • by Morth ( 322218 )

      It's been on slashdot before, probably for other states, can't really remember. Frankly, as a European (Sweden to be exact), I'm still surprised you don't have taxes on internet purchases. Any online US retailer exporting to EU does have to add VAT to those transactions (which are then sent off the to EU state).

      • Well, in Australia, they only have taxes on internet purchases greater than $1000.

        The reason being that when the tax office actually crunched the numbers, they found that collecting such a tax would cost more than it brought in.

        Looking at the global situation, I guess it was a rare flash of honesty, most government departments generally leap at the chance to increase their budgets and hire more staff.
        • Well, in Australia, they only have taxes on internet purchases greater than $1000.

          Just to clarify, goods and services tax (GST) is only collected at the border on shipments in excess of $1000 coming from overseas. GST is payable on purchases made within Australia, Internet or not, and the selling business is required to account for, remit the tax and absorb the cost of tracking it. I do not doubt the cost of the tax office collecting the numerous small amounts would swamp the revenue, but that did not stop them collecting the old piecemeal sales taxes on values over $400 (but it was

      • Whenever you wonder to yourself why American government does something really odd, think of our Constitution. It was written in the late 1780s as a compromise that had to get several small and several large states to agree to a single overarching government. The smaller states were jealous of their priorities and power, and so there are actually quite a lot of things that the federal government isn't allowed to do. State governments in the US are part of a federal system - at times, the division of powers s
  • by Creepy ( 93888 ) on Sunday March 18, 2012 @02:17PM (#39396841) Journal

    http://blog.ctnews.com/takeonlife/2011/01/22/forget-nickels-the-%E2%80%98use-tax%E2%80%99-could-generate-millions/ [ctnews.com]

    Some exemptions are mentioned in that blog, but it misses the "single purchase under $25 is exempt" written on the form itself.

    I ALWAYS pay my use tax when it is due (which is rarely due to exeptions, but I have paid it twice) and this sounds like double taxation to me, unless they also change their laws on the books.

    • I ALWAYS pay my use tax when it is due (which is rarely due to exeptions, but I have paid it twice) and this sounds like double taxation to me, unless they also change their laws on the books.

      It isn't. You don't have to pay use tax on items for which you've already paid sales tax. If you pay out of state sales tax on something, you only have to pay use tax if the rate you paid is less than your own state's sales tax and you only have to pay tax on the difference. The tax described here is paid to your OWN state as a sales tax, so use tax wouldn't apply.

  • by Dolphinzilla ( 199489 ) on Sunday March 18, 2012 @02:18PM (#39396855) Journal

    if they thought they could tax the air we breath they'd do it....

    • Re:I am not surpised (Score:5, Interesting)

      by hairyfeet ( 841228 ) <bassbeast1968@[ ]il.com ['gma' in gap]> on Sunday March 18, 2012 @02:54PM (#39397047) Journal

      But if they didn't how could Sen Porkman and Congressman Kickbackus waste money like drunks in vegas and throw away billions on useless military shit? I mean look at the F35, stealth makes it both a lousy fighter (lack of engagement time due to no external fuel tanks and lack of firepower due to no missile hardpoints) AND a lousy bomber (both the fuel and hardpoints problems) so you'll end up with the F15 having to babysit the damned thing so it don't get its ass kicked, then of course there is the Ford carrier, we already have TEN to the next largest countries TWO but hey, who cares if we are ass deep in red ink,gotta show our military muscles right?

      Frankly we could probably lower taxes AND pay for our social programs if we just got rid of really dumb shit. Get rid of the dumbass F35 for more F15s and add some stealth eagles if you want something "stealth", fix the damned border so we aren't wasting billions in law enforcement and security theater when a terrorist could literally drive a rider truck with a bomb right across the border and into any city they wanted, get rid of all the loopholes that let corps like GE pay ZERO taxes on billions in profits, tax the living shit out of the speculators that are constantly flipping stocks and instead reward actual long term investment so that companies can actually do things that will grow their businesses without fear that the speculators will tank their stock price, basically bring common fucking sense back into the system because lord knows we are severely lacking in it ATM.

    • "How did he die?"
      "He suffocated."
      "How could that happen?"
      "He tried to save taxes."

  • How (Score:4, Insightful)

    by wisnoskij ( 1206448 ) on Sunday March 18, 2012 @02:25PM (#39396889) Homepage

    How do they actually make these online taxes work? force every single online payment gateway to tax every transaction from your state and send you the money?

    • See, therein lies the catch - they can then sneak in a tax on your ISP bill to help fund the infrastructure required to implement this, and make even _more_ money! It's win-win for everyone except the end-user.
      • by dmomo ( 256005 )

        I don't think that has anything to do with this story. The article says nothing about taxing at the ISP level. It's a legitimate concern, but not what we're talking about here. Cut with the FUD.

    • Why is this such a hard concept to grasp? When you buy something on your phone you're already charged and given an invoice. Now they just added tax to that like any other transaction.

      So unless you're going to commit tax fraud, Turbotax is all they'd need to comply. This is already in place, and working fine, in Washington state.
      • It is not hard to grasp, it is hard to accomplish. All brick and mortar stores that pay sales take to a given state reside in that state.
        Imagine if the sales tax instead of being on a location basis changed to a personal basis. So if a Connecticut citizen took a holiday to Italy and bought a $10 sandwich then 60 cents had to be taxed and sent Back to Connecticut. How would you go about accomplishing this?

        • Simple

          If a person isn't forming a contract for digital goods with a company recognized as being inside of Connecticut; no tax. If a person forms such a contact with a business that is recognized as being in Connecticut; Tax on
          • I don't think the idea to to tax online Connecticut businesses but to tax Connecticut citizens online. This bill and all like it are for taxing citizens on all online purchases.

            And online businesses do not really have a location, Google or amazon have to have their servers somewhere but the location is immaterial.

            • Unless Connecticut is home to magical wizards they're going to tax this like any other state does, and so all online digital goods purchased from companies recognized as being in Connecticut will be taxed.

              That is not true at all. Every corporation has to incorporate in a specific state, and hence in bound by laws of that state.
  • by koan ( 80826 ) on Sunday March 18, 2012 @02:29PM (#39396907)

    in Bitcoin and Quatloos

  • by J'raxis ( 248192 ) on Sunday March 18, 2012 @02:29PM (#39396909) Homepage

    "We steal from these guys over here. So we should steal from you, too."

    Naturally the brick-and-mortar stores are going to favor fairness in the application of the tax laws. But why do we never see them saying, "You don't tax all these business, so stop taxing us?" Or, "Taxing these businesses is going to double your tax base, so how about cutting the tax rate in half?"

    No, instead, the government wants more money and more control over a greater number of people and businesses. So they sell it to local businesses as "levelling the playing field" and these businesses eat it right up and support the ever-increasing growth of government.

  • Texas does this (Score:4, Informative)

    by LittleBigScript ( 618162 ) on Sunday March 18, 2012 @02:38PM (#39396957) Homepage Journal

    Apple aleady does this in the App Store when I purchase in Texas. If I purchase an app in another state, Apple still charges me for Texas sales tax. I guess it is a shipment to my home, not to my device.

    • Same for Washington
    • by Hadlock ( 143607 )

      Yes, tax law has always specified that taxes are paid in the locale that the goods are delivered to.
      I used to work for a company that would ship things nation-wide. We were located in Texas, incorporated in New Jersey, the manufacturer was in Arkansas, shipped to New Mexico and billed to Arizona. New Mexico's state tax laws (the shipping address) were the ones we followed.

  • Empty Rhetoric (Score:5, Insightful)

    by lightknight ( 213164 ) on Sunday March 18, 2012 @02:46PM (#39397001) Homepage

    "Supporters say the bill would level the playing field for brick-and-mortar retailers in the state who are already required to charge Connecticut sales tax to consumers who purchase these products in their stores."

    An argument could easily be made that the playing field is already level. The advantage of ordering online is one of cost, with typically lower prices and less of a drain on local infrastructure (it costs the state / local government more to provide fire / police protection / emergency medical services / roads / etc. to a few dozen brick-and-mortar stores than to a single warehouse), and possibly hard to get items (ones which cannot be carried locally, for lack of space in a store; commercial space being at a premium). The advantage to brick-and-mortar stores is time, with the more popular items you are typically looking for already in stock, hence the price premium ("I need this item today").

    As such, the advantages on both sides balance each other out fairly well.

    This tax, of course, is then a simple cash grab. Going off a stereotype of legislatures, we will assume that the state coffers are beginning to, if not already are, empty. As such, someone took a look at things that are considered popular enough to tax (demand is unlikely to change, so it's *free* money they can skim off the top, without impacting the industry; this is also an economics-FAIL, but the people in charge love to hear things that confirm their bias), and barfed up a semi-palatable reason for this new tax.


    • Re:Empty Rhetoric (Score:5, Interesting)

      by artor3 ( 1344997 ) on Sunday March 18, 2012 @03:07PM (#39397131)

      Why shouldn't online purchases be taxable? Slashdotters always complain when people demand different laws for things "on the internet". Why is this an exception?

      We need to fund the government somehow. Having a mile-wide loophole for purchases made on the information super-highway is archaic and counterproductive. I'd prefer no sales tax at all, since it's a regressive tax, but if we're going to have one, it should be applied everywhere.

      • by Kenja ( 541830 )
        OK. Where do you apply the tax? In the state the buyer lives, the state the file is hosted from, the state the vendor operates out of or all the states that the data passes through? What if the file is not even hosted in the US?
        • This is already a solved problem. The tax is based on the location of the buyer. For all practical purposes the billing address they have on file (if they have a validated credit card) is good enough, though with location aware devices you can always go for more precision.

        • Re:Empty Rhetoric (Score:4, Insightful)

          by cob666 ( 656740 ) on Sunday March 18, 2012 @05:25PM (#39398041) Homepage
          In the case of the this story, the sales tax would apply to people that live in CT and buy something online from a vendor that does not have a physical presence in CT and currently pay no income tax. This is troublesome on many levels, the first being that why does the state of CT have the authority to force an entity in a different state to collect sales tax payable to CT (not to mention that in order to collect CT sales tax the vendor would have to have a CT sales tax permit that currently costs $100). Is every vendor in the entire country supposed to just up and order a CT sales tax permit? That is just absurd.

          Now what happens when other states implement the same thing? Is every vendor expected to have a sales tax permit for every state in the country that collects sales tax? There are quite a few states that have different tax rates depending on where you live (or rather based on where the vendor is located). So, once you alter the methodology from vendor location to consumer location the whole concept breaks down pretty quickly.

          But, what really bothers me is that the state of CT ALREADY has a system in place to collect sales tax for citizens of CT. The CT sales and use tax includes a use section, which means that if you buy something and the cost did not include CT sales tax then you are responsible for paying the use tax (which is identical to the sales tax percentage) when you file your state tax return. Wouldn't it be easier to enforce this than to try to go after venders located in states that CT could have ZERO jurisdiction over?
      • Taxes, in an ideal world, are levied in response to a need for services.


        Most property taxes go to fund local schools, police, fire, and local public services. While your consumption may not be proportional to the value of your real estate, it becomes a relatively fair basis for taxation.

        Motor fuel taxes fund road projects. That one is fairly proportional, since heavier vehicles cause more wear and tear on roads, and generally get worse mileage.

        Sales taxes - which are local - pay for local infrastru

      • by OhPlz ( 168413 )

        Why shouldn't online purchases be taxable?

        Why does everything need to be taxed? Don't we have enough forms of taxation already? Would you ever be satisfied so long as there was still a glimmer of capitalism left untaxed? In New Hampshire, we pay mostly via our property taxes. We don't have or need a state sales or income tax. Taxing us two or three different ways doesn't magically create money that couldn't have been collected the first way. All it does is create more bureaucracy, thus necessitating more taxation to fund the bureaucracy.


      • Re: (Score:2, Insightful)

        by BlueStrat ( 756137 )

        We need to fund the government somehow.

        Yeah, but how much government do we really need?

        So much government that it's costs cripple people & business while killing our competitiveness in a world economy? Enough government to track everyone & everything?

        If all we paid for with our taxes was "civilization", we could do away with the Federal income tax and cut most state taxes to nearly zero.

        I think we're well past the point of "paying for civilization", and we are and have been, especially in the last several decades, paying for our own ensl

      • Maybe because the law says mail order purchases to out of state companies are tax exempt? iTunes is owned by Apple who are based out of California.

        How about instead of finding new things to tax, the government spend more responsibly? Every week I have to do more with less. Why does this all powerful entity funded by ME not have to follow the same rules?

        I seriously doubt the fire/police/road departments will be disbanded because of a lack of funds.

        • "I seriously doubt the fire/police/road departments will be disbanded because of a lack of funds."

          Precisely my point. These are all local services, taking care of the local community. If a warehouse in NY is being burgled, will the NJ police show up? No. My counterparts have sold people on the great lie that taxes are necessary to fund services, services that benefit those being taxed.

      • I'd prefer no sales tax at all, since it's a regressive tax, but if we're going to have one, it should be applied everywhere.

        If not no tax then lots of tax? That's some strange logic. Maybe you also think that uniform taxation means a lower and fairer rate, but it doesn't work that way. My state raised sales tax by 25% ("because of inflation" "because other states are doing it" "for the children") and ended up with a budget surplus to blow on vanity projects and contractor handouts, while reducing services and raising fees.

      • by Imrik ( 148191 )

        They are taxable, in fact they are already taxed, all this does is put the burden on the business to collect the tax. This means that the business has to keep track of sales taxes for every area that has them, even those areas where they have no presence. Since tax codes change along various lines (including within the same zip code) it becomes a non-trivial problem.

      • We recently got a tax on downloads in my country. Well, we already had a tax on local products, but now foreign companies are supposed to add VAT to downloads according to the usual rates in the country. One problem is that this can't be enforced, and the government admits as much. Only big companies who want to play nice even care. I suspect they still pocket the extra money.

        Apple add 25% to apps, music and books, but they really only pay 6% in Luxembourg and keep the rest. Amazon I'm not sure about; they

      • Why? Because this is about digital downloads, not physical items that happened to be purchased online. The so-called goods really are different. They aren't material. They don't suffer from the scarcity of the physical. The state is conveniently making the same mistake the MAFIAA deliberately commits.

        It does shine more light on the MAFIAA's quandary. This tax bolsters their arguments in favor of treating these products just like physical goods, so they should support it. But, they shouldn't support

      • And other Slashdotters always complain that we need to fund the government somehow. Having nonsensical laws for commerce and taxation is archaic and counter-productive. I'd prefer no sales tax at all, since it's a regressive tax, but we're going to have one, it should be charged only within the state that passed it.

        Do you see what I did there?

  • Drop the sales tax entirely and raise income taxes. Problem solved

    • Income tax makes my skin crawl.

      I vastly prefer sales tax. Although in this case it really ought to be a flat tax
      • Income taxes are a much better solution. Flat taxes are a ridiculous idea because they are regressive. Taxes should be simplified greatly, to the point of where you don't even need to file income taxes every year and you just receive a letter from the IRS stating how much you owe, or how much is owed to you. If you disagree with their calculations, then you file your taxes like today. Get rid of special rates on capital gains and treat it like anything else, income.
        • I find it pretty simple that my taxes are clearly stated, and understood before incurring them, on a receipt at the end of each transaction.

          As for the regressive nature of the tax; you do know we can buy things out of state? If the tax is so bad for any of the goods I want then I can just go order goods from someone with no sales tax. I've already saved my entire Amazon Prime membership fee in taxes

          Alright, and now looking at my taxes and doing what you said.....They're exactly the same
          • by Imrik ( 148191 )

            You know you're still required to pay taxes on those things you order from out of state.

            • Take a look at one of my latest purchases off of Amazon prime

              Item(s) Subtotal: $4.93
              Shipping & Handling: $0.00
              Total Before Tax: $4.93
              Sales Tax: $0.00

              I'm only being taxed on purchases that come from Washington based sellers
              • by Imrik ( 148191 )

                Right, but you're still legally required to pay it, it just isn't assessed at the time of sale. It's called a use tax and you're supposed to report it on your tax return.

                • I believe I speak for every Washingtonian, of those who even know about the law, when I say, "What purchase? I didn't make any purchase on the internet."

                  Yeah as far as Use Tax is concerned; we ain't ever heard of no Internets up here in Seattle
        • Flat taxes are an excellent idea, but only if implemented on gross receipts and not on a "net" or "adjusted" income. If every entity in the US paid 5% on their gross income, we could probably run the country. Poor people would get off with a nominal tax bill (a hike from the current negative rate they "pay"). People with several shell corporations to hide assets and limit liability would pay double, triple, or more. Supply chains with short distribution would pay the least tax (think local farmers, who wo

    • Net income is easy to fudge and modify. Gross receipts is whatever you receive. Without deductions, it becomes a "flat fee" for any transaction, paid by the recipient.

  • Double Taxation (Score:3, Interesting)

    by ThatsNotPudding ( 1045640 ) on Sunday March 18, 2012 @02:56PM (#39397059)
    You are already paying a tax on the ISP servcie and the electrical power used, along with sales taxes on the equipment that will play the downloaded media. Time again for some tea-dumping.
    • Not really. You have a contract made with the power company. Another contract you've made is with your ISP. Thirdly, you've made a contract with the music service of your choice to receive digital goods.

      All three are separate contracts, and so taxed separately
  • Sales tax... (Score:5, Insightful)

    by Roogna ( 9643 ) on Sunday March 18, 2012 @03:03PM (#39397111)

    I realize the world doesn't work like this. But in my opinion if they're going to tax the purchase it should then fall under all the rules of buying from a Brick and Mortar store too, such as the First-sale doctrine. After all, if I buy a book from a brick and mortar I'm legally allowed to sell that book to someone else. On the other hand, when I download from iTunes I have no way to sell that item, because I didn't purchase it, I "licensed" it. Which the businesses love to remind us. If I'm then being taxed as if I'd purchased it, then the states should require the companies by law to treat it like any physical purchase and allow me to transfer the ownership of it.

    • I'd imagine they think of the taxation as a tax on the service of providing the licensing for the music, rather than a tax on a good taken delivery of.
      • Except that you can't apply a state tax to an out of state entity. Hey, the money's gotta come from somewhere, and the only thing they can get to is the end user.

        • Ummm, yes you can

          If you come to Washington and tell your checker, at whichever store you choose, that you are from out of state and so are to be charged no sales tax; you still have to pay the tax
          • If I sell you something (I am located in Virginia) via mail - the state of Washington cannot compel me to pay any taxes, either on my work or on your behalf. If I came to your state, I would no longer be out-of-state.

            • It's not a tax on the seller. It's a tax on the buyer. So while I would pay no sales taxes on something bought from Virginia online. You on the other hand would pay taxes on purchases made from a Washington based seller.

              Except in a few situations [wa.gov]
        • by dlgeek ( 1065796 )
          This is a common misconception - sales taxes aren't paid for by the seller, they're paid by the buyer. The seller just collects on behalf of the government.

          While it's true that out-of-state entities have no obligation to collect sales tax on behalf of a government if they don't have a physical presence in that state, the tax is still due. It's called a use tax, and it's the obligation of the consumer to report and pay it. Almost all states that have a sales tax also have a use tax, they're just extremely
    • by wanzeo ( 1800058 )

      I would love to pay taxes on digital media if it meant I actually owned it. I have an xbmc htpc, and there is not a single legal avenue for getting movies onto it.

      Just this weekend I did another periodical scouring of the internet for sane media outlets, and left more frustrated than you could imagine. Both Amazon Instant Video and Google Play will only "rent" the movies, which require streaming them through their locked down (and buggy) web players. The iTunes Store gives the illusion of purchase because t

  • Where are these stores that sell digital goods? Do you hook up a usb drive to a station, pay and download? How does this work with iTunes cards? You pay tax to buy one and then pay tax again? Double dipping aren't we?

  • If the web site is operated in CT, then of course they should pay sales tax on digital downloads. If not, then CT doesn't deserve a penny.
  • by chowdahhead ( 1618447 ) on Sunday March 18, 2012 @03:57PM (#39397475)
    In CT, we have the highest state tax on gasoline and among the highest in tax per capita. We probably have the most underfunded state pension fund in the country. The state enacted a tax credit last year that it can't afford, and is being blamed, in part, for the budget deficit we now have. CT has had a spending problem for years, and the answer isn't raising taxes.
    • In CT, we have the highest state tax on gasoline and among the highest in tax per capita. We probably have the most underfunded state pension fund in the country.

      You can't be doing worse than your neighbors to the east...

  • I'd think a better solution would be to simply eliminate sales tax all together, in all its forms. Make up the revenue with income or property taxes.

    Aside from the obvious benefit of eliminating this issue of taxing interstate (and internet) commerce and non-physical things, there are some subtle advantages. For example: part of the reason that certain services (telecommunications) are able to get away with tacking on un-advertised fees is because Americans are accustomed to paying more than the price tag
  • How is this even constitutional? Unless the vendor has a state presence, this is a matter of interstate commerce, which is the sole domain of the Federal government. Why the fuck does government have to tax every fucking thing that exists? We really need to clean house at all levels of govenment because spending is out of control, and the we're demanded to pay in taxes is absurd.

  • by ivi ( 126837 ) on Sunday March 18, 2012 @06:50PM (#39398549)

    Rather than TAXING the good guys (who preclude the need for trips to a Bricks & Morter shop), governments should -really- be REWARDING their carbon-saving efforts... at least where the products are shipped electronically, as downloads are.

    Triple Bottom Line accounting is LONG overdue, and it's crazy to support Bricks & Morter business that are -less- efficient in terms of their -customers'- carbon footprint, ie, when shopping for & buying products.

    On the other hand, I'd be -happy- to endorse such a tax, but ONLY after we're all driving 100% Electric Vehicles (EVs), which so significantly reduce our carbon footprints, that shopping trips would be easier on the environment.

  • Until of course it dawns on you that poor people breathe and use the internet too. Then it's a war crime.

Make it myself? But I'm a physical organic chemist!