$8 billion dollar state budget deficit has made a legislator call for consumers to pay a sales tax when purchasing music and movies online.
Here in California – aka “The Left Coast” – we seem to have penchant for nutty and outlandish ideas. Sometimes we have good ones, medical marijuana and a ban on smoking in bars being but a few of the examples. We also are capable of bad ideas, and the recent proposal by Assemblyman Charles Calderon, D-City of Industry, to begin charging a sales tax on digital music purchases is just such a case.
Assembly Member Calderon introduced California Assembly Bill 1956 (“AB 1956”) on February 13, 2008, requiring the State Board of Equalization to draft a sales tax regulation that would include digital property in California’s definition of taxable tangible personal property. The proposed legislation defines “digital property” so as to include downloadable equivalents to tangible personal property, such as “music, movies and books, which, if delivered in a tangible storage media, would be subject to sales and use tax.”
The state is mired in a $8 billion USD budget deficit that has sent legislators scrambling for options, the least discussed it seems being to actually CUT A BLOATED STATE GOVERNMENT.
California currently imposes a tax on the retail sale or use of “tangible” personal property. However, California does not impose tax on the retail sale or use of electronically transferred “intangible” property (e.g., downloadable music, movies, or books), because these transactions do not involve the sale or use of tangible personal property or taxable services.
AB 1956 recognizes that digital property is not currently subject to tax in California, but requires the SBE to promulgate a regulation that includes “digital property” in the definition of tangible personal property for tax purposes. It defines “digital property” as “products like music, movies, and books, which, if delivered in a tangible storage media, would be subject to sales and use tax in [California].”
Assembly Member Calderon’s proposed legislation adopts the “digital equivalent” approach to imposing sales and use tax on electronically delivered items. This means that digital property would be subject to a tax if the tangible equivalent would be subject to tax.
If the bill prevails, the 8.25 to 8.75% sales-tax rates in effect in most of the Bay Area would raise the cost of an Apple’s iTunes 99-cent download to $1.07 or $1.08. This is sure to make people worried about killing the proverbial goose that’s laying a golden egg for a music industry long battered by piracy and file-sharing. If the magic 99cent price point is to go up it may just very well cost it vital customers that many have worked so hard to obtain.
“I think he’s wrong – he should go find money somewhere else,” said Fabiola Rojas, a 27-year-old graphic designer in Mountain View. “What iTunes charges now is enough.”
Republicans, the seemingly lone anti-tax stalwarts in a Democrat-controlled Capitol, are so far among the few to speak out against the proposal. “One of the growing parts of our economy, tech online and Internet, is something we should encourage without having these types of taxes,” said Assemblyman Guy Houston, R-Livermore.
The State Board of Equalization predicts an annual increase of $114 million to state and local coffers. But, Calderon’s estimates $500 million.if the tax were also to include porn downloads.
The whole discussion is rather a silly debate though for the simple reason that another Republican assemblyman points out.
“When you charge these taxes, all these e-commerces are going to move outside of California,” predicted Steel, a Republican from Orange County. “California is the high-tech state; why would you want to kick them out?”
