iTunes Tax Technically Corrected

By Kleinheider Posted on May 19, 2008 at 7:26 am

The 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Several other sections of the technical corrections bill were withdrawn, including one to force motels that don’t have restaurants to remit sales tax on continental breakfasts served to their guests.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1 made the matter simpler, according to the department, though a private-letter ruling it issued in March, and then rescinded, declared the products not subject to the tax.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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Tags: Apple, Department of Revenue, Digital Downloads, Itunes, Microsoft, Reagan Farr, Technical Corrections Bill