iTunes Tax Technically Corrected
Posted on May 19, 2008 at 7:26 amThe Tennessee Journal reports that now that the technical corrections bill has passed the legislature we may never know if the somewhat tortured interpretation of Tennessee annotated code that the Department of Revenue has been using to collect tax on digital downloads of books, music and movies would have held up to a serious challenge:
Several other sections of the technical corrections bill were withdrawn, including one to force motels that don’t have restaurants to remit sales tax on continental breakfasts served to their guests.
One that stayed in the bill — which both the House and Senate passed Thursday — clarifies that digitally downloaded music, books, and videos are subject to the sales tax. Through complicated interpretations of law, the state used to treat such products for sales tax purposes as tangible personal property. A provision of the streamlined sales tax law that took effect Jan. 1 made the matter simpler, according to the department, though a private-letter ruling it issued in March, and then rescinded, declared the products not subject to the tax. The American Electronics Association last week disputed the department’s contention the downloads are taxable. Revenue Commissioner Reagan Farr said that, absent the bill, he expected a legal challenge from Microsoft.
SEE ALSO: Terry Frank
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Fool Me Once…
Posted on April 25, 2008 at 6:23 pmOne 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 drafts of the “technical corrections bill” with a few good tax attorneys before sending it on to the legislature.
Bill Hobbs, for one, is not depending on one of those lawyers springing a leak again next year like it did this year:
A simple open-records request for copies of the draft should suffice next year to short-circuit the Revenue Department’s plan to craft new tax policy under the watchful eye of only a few hand-picked tax attorneys.
Tax policy proposals should be crafted in out in the open, where the public - who, after all, pay the taxes - can see what is happening.
Keyed Off On Tennessee’s Digital Download Tax
Posted on at 7:56 amBoth the City Paper and the Knoxville News Sentinel write up the TNGOP’s 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 he doesn’t now “dispute” that iTunes sales are taxed.
Hobbs said he based his description on a memo from the law firm of Waller Lansden Dortch & Davis, which called the section of the technical corrections bill the “Digital Products/iPod tax.”
“It’s probably an unfortunate choice of a headline, but Waller Lansden called it that, and I just keyed off of what they wrote,” Hobbs said.
Click here for yesterday’s Post Politics report on the issue.
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
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