Saturday, December 20, 2008

New York Governor plans sales tax on digital downloads

New York State - New Yorkers may very soon have to pay more money to download music and other digital content than much of the rest of the country. The state’s governor David Patterson proposed a sales tax on entertainment that covers all downloaded digital content.

This proposal has been dubbed “iTax” or “iPod tax” by many, and is one of the 137 new taxes Patterson unveiled Wednesday as part of his 2009-2010 budget. He hopes to close a $15.4 billion shortcoming for the state, which is the largest New York, has ever seen.

New York’s budget website indicates the tax would impose both state and local sales taxes on the purchase of any sort of digital content in an attempt to close a gap and “achieve tax parity” with other sources, like sales tax on CDs and DVDs. The tax would be applied to any entertainment service that is delivered electronically including photos, games, software, movies, and downloaded music.

New York would apply this tax to everything purchased online- whether the sale originated from a store, or was downloaded.

If the bill is passed, the tax would aid in the generation of an additional $15 million in tax revenues for the 2009-2010 budget period, and $20 million for the 2010-2011 budget. Currently the New York State sales tax is 4%. Many cities charge an additional local sales tax.

If New York chooses to add sales tax to downloads it would make it the 21st state to adopt this kind of tax.

Since 1998, continued moratoriums against a related form of general “Internet Tax” have been passed, preventing additional taxes levied by purchases made online. The Internet Tax Freedom Extension Act of 2007 (or download PDF) currently extends the moratorium until 2014. Many advocates are calling for an end to Internet sales taxes completely, and not just continuing moratoriums.

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