No New Tax: Tennessee Already Collecting Revenue From Digital Media Downloads
Posted on April 24, 2008 at 3:11 pmIt turns out that the Tennessee Republican Party and the rest of the anti tax crew were a little late to the party on this digital tax scare. Tennessee currently taxes digital downloads, such as songs from iTunes, and have been since the beginning of this calendar year.
A Waller Landsen email yesterday on the technical correction bill currently being drafted by the government started people talking when Instapundit linked to a section in the draft called the Digital Products/iPod Tax.
The Bill contains sweeping legislation that would subject downloaded sales of digital media, including music videos, motion pictures, news and entertainment programs, music, ringtones, electronic books, etc. to the retail sales tax. Under current law digitally delivered goods are not taxable unless delivered in a tangible form.
The Tennessee Republican Party, in the form of Bill Hobbs, whipped up a frenzy about this impending doom both in a press release and a blog post warning folks about the long reach of Johnnie Q. Tax in their digital library. Turns out however that tax is already being collected on your downloads as noted by Nashville Is Talking.
Department of Revenue Commissioner Reagan Farr tells Post Politics that the State of Tennessee began to collect revenue from digital media starting January 1, 2008. Companies such as Apple are currently charging taxes on downloads to consumers in the state of Tennessee and the Department of Revenue is collecting them.
The Department does not have any numbers for the amount of tax being collected on downloads because the Department keeps no records on line items, an iPod bought in the Apple Store in Green Hills is no different than a song downloaded by a Tennessean via iTunes.
Because Apple maintains property or payroll in the state they are subject to the sales tax where a company like Amazon, who does sell traditionally tangible products to Tennesseans, is not subject to tax.
Farr concedes that even though current law subjects downloads to sales tax that the code “needs cleaning up.” Right now, for instance, the Department of Revenue makes no distinction between tangible personal property and intangible personal property.
Downloads are considered tangible personal property by the State. According to Farr, under Tennessee code an ITunes song is considered “pre-written computer sofware” [T.C.A. §§ 67-1-102 (60)] that then “performs the task“[T.C.A. §§ 67-1-102 (17)] of playing on your iPod. It is thus taxable under Tennessee law.
Farr looks forward to fashioning a more modern definition of software that makes makes clear that downloaded songs, books, or movies, while intangible, are the digital equivalent of tangible personal property.
UPDATE: A statement and a linkable PDF timeline of the changes in the code that resulted the tax levy beginning this year, courtesy of the Department Of Revenue.
SEE ALSO:
Rex Hammock
The City Paper
Tom Humphrey
Terry Frank
Glen Harness
TNGOP Updates
Comments
19 Responses to “No New Tax: Tennessee Already Collecting Revenue From Digital Media Downloads”
Wow. Nice work, friend. I love disingenuous outrage getting turned on its ear.
So does TDR maintain an itemized list of qualifying “pre-written computer software”?
Also, does this mean that the iTunes Store will be participating in the sales tax holiday this weekend? Frustratingly, their one-click interface doesn’t seem to give any indication as to whether a customer will be charged sales tax.
“disingenuous outrage getting turned on its ear.”
Poor Bill Hobbs, that is the definition of his entire life….
TFO, if you read the iTunes Terms of Service (I posted them on NashvilleIsTalking) they say they do not honor any tax exemptions. So, TN might need to clarify their sales tax holiday language.
I don’t think the tax holiday applies to music or software that is not already preloaded on the PC you buy.
[…] charged sales tax on iTunes purchases. As tracked by Christian Grantham at Nashville is Talking and by A.C. Kleinheider at NashvillePost.com, sure enough, digital downloads purchased through the iTunes Store are already being treated as if […]
um, they have been doing this since it launched, I live in knoxville, and since the store opened i have had to pay tax on every transaction with itunes.
charles, I guess some of us are luckier than others. I’ve had multiple sources of anecdotal evidence of the Jan. 1st changeover regarding iTunes Store receipts in Tennessee, as well as Adam’s verbal confirmation from the TDR.
[…] Kleinheider at the new Post Politics blog and Christian Grantham at Nashville Is Talking seem to think they’ve caught the […]
Tennessee blows. Your women smell like burnt cheese.
So… how do they collect the tax?
So does that mean if I illegally download my music, that they can get me for tax evasion now?
Charles, we’ve been taxed in Indiana since iTunes launched as well.
Bon, it’s added to the sale, so you buy a song for $0.99, but you are charged tax with that (7% in Indiana, so we actually are charged $1.06), then Apple takes that 7 cents and pays the state based on the amount of sales in Indiana with it, just like any other multi-state business.
[…] rallying cry to prevent a new digital download tax and the subsequent revelation that the tax is already being collected: As for the confusion perhaps caused by the Tennessee Republican Party, spokesman Bill Hobbs said […]
[…] A.C. Kleinheider wrote yesterday about the iTunes tax and the TNGOP gaffe calling it a “new tax.” Kleinheder’s […]
Hehe. If they are tangible property, who’s property is it. (Hint: it’s not the downloader’s). You don’t own the stuff you download from iTunes, you license it, and, under the law, it is in no respect property of any form.
[…] of the interesting things that came out of yesterday’s iTunes tax revelation was that it was also revealed to a wider audience that the Department of Revenue apparently shares […]
[…] he doesn’t say that. In a post by A.C. Kleinheider over at Nashville Post, Reagan Farr makes the claim that according to TCA, “Downloads are considered tangible […]
[…] when it comes to the iTunes tax. She asserts that the Tennessee Republican Party had not jumped the gun when they asserted that the tax on digital downloads was a new tax contained in the now introduced […]