[news=http://images.mercateo.com/images/products/ITD/tn_479f222.jpg]Attention all you (legal) music downloaders out there: Very soon the songs you purchase from iTunes could help pave the roads you drive on, pay for an artistic fellowship or buy books for kids in the school around the corner. Because in a number of states, budget proposals are targeting digital downloads, looking to make them taxable items, and therefore subject to state sales tax.
In New Jersey, Governor Richard J. Codey has called for an amendment to the state's sales-tax laws that makes downloads — including songs, movies and books — taxable items and subject to the Garden State's 6 percent sales tax. So in the future, every 99-cent song purchase from iTunes could now cost you $1.05.
Codey hopes the move will "level the playing field" for record stores in New Jersey that have to charge a sales tax for each CD sold, as opposed to digital music stores, which do not.
"It's an equity issue, first and foremost," Kelley Heck, Codey's spokesperson, explained. "We're attempting the first modernization of New Jersey's sales tax laws since 1966. And in that time, technologies have been developed which fall outside those laws — including digital downloads — and those are putting brick-and-mortar business at a disadvantage. I mean, if you go into a record store and buy a CD, it's taxed."
According to New Jersey's Treasury Department, the tax on downloadable items would bring in about $8-10 million in revenue for the state — really just a small chunk of overall sales tax revenues, which run in the neighborhood of $8 billion a year. The majority of those revenues then go to aid for schools, townships and grants.
Codey's budget has been approved by New Jersey's budget committee and will take effect when the state's fiscal year comes to an end on June 30. In March, Wisconsin Governor Jim Doyle added a similar provision to his proposed state budget, but the state's joint finance committee — made up of members of the Wisconsin state senate and state assembly — struck the provision from the budget earlier this month.
At least 16 states currently apply sales tax to digital downloads: Alabama, Arizona, Colorado, Connecticut, Hawaii, Idaho, Indiana, Louisiana, Maine, New Mexico, North Dakota, South Dakota, Tennessee, Texas, Utah and Washington. According to New Jersey Treasury Department spokesperson Tom Vincz, as technology continues to outpace tax laws, more and more states will soon be added to that list.
"I know that in many states, there have been discussions about updating the sales tax code for many years," Vincz said. "It's just not fair for two businesses to provide a comparable service, yet only one of them — the physical, brick-and-mortar business — has to charge tax. And I think that will definitely be changing in lots of places."