California Lawmaker Proposes Music Download Tax

modemac writes "Sacramento, California Assemblyman Charles Calderon wants to expand a 75-year-old sales tax on 'tangible personal property' to include music downloads from iTunes and other music-download sites. The tax would specifically apply to music downloads, but the estimate used in this article for revenue generated by 'Net downloading also "includes pornography downloads." The measure, AB 1956, will be considered on Monday, April 14th."

tax deduction

[Anonymous Coward]

Does this mean we might be able to get a tax deduction for pr0n?

Re:tax deduction

[value_added (719364)]

Does this mean we might be able to get a tax deduction for pr0n?

Only if you're filing as an individual. If you're filing jointly, you have bigger problems than your tax liability.

I've been trying without success to claim deductions for blackjack and hookers for years, so my advice is to just pay up. And don't forget to leave a tip.

Re:tax deduction

[Leebert (1694)]

I've been trying without success to claim deductions for blackjack and hookers for years,

Well here's good news for you, you CAN deduct gambling losses. But only if you're claiming gambling income as well. And you can only deduct up to the amount that you have won. Or something, I'm neither a gambler nor a tax advisor.

Silicone valley

[esocid (946821)]

Since all the pr0n is from California anyway, does this mean we owe back taxes from all those free downloads?

Re:Silicone valley

[wattrlz (1162603)]

That depends: is there a pr0n lobby?

Re:Silicone valley

[oahazmatt (868057)]

That depends: is there a pr0n lobby?

Yeah, but the floors are filthy.

Tangible Personal Property?

[PolyDwarf (156355)]

Does that mean that, in California, we'd actually own the music files, and would not be able to be prosecuted for shifting those files, breaking the encryption, etc?

Also, what does "tangible" mean? To me, it means something a bit more permanent than bits on a disk. After all, if someone gets near it with a magnet, there goes your "tangible" property. The same cannot be said for a car, a bookshelf, a can of paint, etc.

Re:Tangible Personal Property?

[bbernard (930130)]

"After all, if someone gets near it with a magnet, there goes your "tangible" property. The same cannot be said for a car"

That depends on the size of your magnet.

Re:Tangible Personal Property?

[Tetsujin (103070)]

"After all, if someone gets near it with a magnet, there goes your "tangible" property. The same cannot be said for a car"

That depends on the size of your magnet.

Excellent point, Mister... Coyote, was it?

Re:Tangible Personal Property?

[ThosLives (686517)]

On a related note: If I was in California, I'd ask this congressman what benefit I as an individual and California as a whole would receive for the increased revenue. Would I get more use of my product? Would the money be used to increase pay for congressmen? Would it offset some other tax? Without knowing those things, and also having compensation in the language of the bill for what happens if those funds are not used for the approved task, the increase should be disallowed. On behalf of everyone who wishes to avoid California setting precedent, please write your representatives!

I personally don't mind taxes as long as there is a clear benefit for the additional cost. When taxes increase with no increase in benefit, there's a problem.

Re:Tangible Personal Property?

[CodeBuster (516420)]

Perhaps you haven't been keeping up with current events or maybe you don't live in California, but this state is going through a major budget crises right now within the context of much larger budgetary problems that have been building towards a day of reckoning for decades and are just now beginning to come to a head. The Democrats want to raise taxes and the Republicans want to cut spending, but they can never agree to do either and so the state sputters along on emergency spending bills while the state politicians argue about the budget. The budget hasn't actually been delivered on time in years now because both sides play brinksmanship games as the deadline approaches and passes and then point the fingers at each other when the people ask whose fault it is. Meanwhile the state bond debts are rated around CCC or something equivalent to one (1) grade above junk (state bond indebtedness has increased by 1000%+ since the late 1970s) and surrounding states are baiting California business to pack up and come to their states where taxes are lower and there are fewer "crazy" regulations.

Re:Tangible Personal Property?

[esocid (946821)]

That is the point of the bill this guy is proposing. He wants to update it from tangible to include information.

"The notion of taxing tangible, physical property is really an industrial-era construct when we made widgets and sold widgets," Calderon said Friday. "Now it's not about widgets, it's about information, and selling information and moving information."

So to sum it up, he wants to tax information.

Re:

[moderatorrater (1095745)]

So to sum it up, he wants to tax information.

But we've been doing this for a long time now. DVDs, CDs, and books are nothing more than information with some packaging that cost much, much less than the information they hold.

Or, to flip it around, you could just as easily say that they're not taxing the information, they're taxing the actual, physical signals that iTunes is sending you.

Re:Tangible Personal Property?

[iminplaya (723125)]

To sum it up, he wants to tax everything. Such is the nature of the bureaucrat.

Re:

[Reziac (43301)]

"That is the point of the bill this guy is proposing. He wants to update it from tangible to include information."

That's a scary concept. It could be extended to *any* access of information. Imagine being charged a "use tax" every time you read a book.

Re:Tangible Personal Property?

[unlametheweak (1102159)]

Does that mean that, in California, we'd actually own the music files, and would not be able to be prosecuted for shifting those files, breaking the encryption, etc?

No. You don't get to own the music, and you don't get to own the license to listen to the music. You don't get to own anything. What you do get when "purchasing" a song is the right to listen to it whenever the license agreement and DRM software says you can.

You get what you pay for.
Buyer beware.

Re:

[IBBoard (1128019)]

It's a bit of a dubious definition for a collection of 1s and 0s:

1 capable of being touched; discernible by the touch; material or substantial.
2. real or actual, rather than imaginary or visionary: the tangible benefits of sunshine.
3. definite; not vague or elusive: no tangible grounds for suspicion.
4. (of an asset) having actual physical existence, as real estate or chattels, and therefore capable of being assigned a value in monetary terms.

Music files aren't tangible in the sense of the bold sec

Re:

[DannyO152 (544940)]

In California, sales taxes are paid on leased and rented equipment. So, no, ownership is not a key concept. You pay sales tax on a can of beer, so, no, permanence is not a key concept. Tangible means it takes real form. I move your sofa for $10 and there's no sales tax, because you did not gain any tangible good for my sale (of a service). You give me $10 a month and I tell you the important news of the day on demand: a service, not tangible, no sales tax. You give me $10 a month and I deliver a newspaper

Can't have it both ways...

[robinsonne (952701)]

If music, etc is "tangible property" now, does that mean we get the same kind of fair use we expect from the other kinds of "tangible property" we own?

Re:

[giafly (926567)]

If music, etc is "tangible property" now, does that mean we get the same kind of fair use we expect from the other kinds of "tangible property" we own?

And if imaginary property is now redefined as real property, do the owners of patents and copyrights have to pay property tax?

Re:

[megaditto (982598)]

Silly rabbit. State or Federal Government has no constitutional right to grant personal rights of any kind. They are limited to taking your rights and your property away from you...

Wrong title

[jav1231 (539129)]

That should read: "Idiot Lawmaker Proposes Music Download Tax" but that may be redundant. Besides the obvious fact that it would be very hard to police (esp. the pr0n) this would lead to more piracy. Only legitimate outlets would be effected.

"But his measure is being soundly criticized by Republicans, who are opposed to any tax increases to solve the deficit problem."

So if you're not FOR the tax, you don't want to lower the deficit!

" His bill, AB 1956, comes as Apple reports that its iTunes store has leap-frogged over Wal-Mart to become the top music retailer in the United States with more than 4 billion downloads sold."

Odds are this bill comes AS A RESULT of iTunes leapfrogging Wal-Mart.

Is it considered property when you don't "Own" it?

[Xanthvar (1046980)]

Is it considered property when you don't "Own" it? If I owned the music that I downloaded, I could give it away for free, and not be breaking the law. Instead, I am told that I don't own it, and am violating the IP of company X. In a way, this law could be a great thing, as, if they can tax it, then you must own it. If you own it, you can do whatever you like with it. Of course, IANAL, so this could all just be a pipe dream on my part.

Hmmmm ...

[gstoddart (321705)]

Doesn't tangible personal property imply it's a good I could re-sell?

If I buy an iTunes track, it's mine, sorta. But, I can't resell it, or give it away, or what have you. It's not tangible by any meaningful sense of that word. It's not like in a bankruptcy proceeding they could seize my music collection to help pay off my debtors.

And, porn? Really? They think people are gonna pay tax on all that free porn they're pulling off (ahem) the internet?

Seriously, yet another lawmaker who wants to monetize the internets to try to generate some cash or protect a special interest, and who doesn't actually know enough about the topic at hand to say anything reasonable. Hopefully, someone can slap some sense into him.

Cheers

Re:Hmmmm ...

[Archangel Michael (180766)]

"Hopefully, someone can slap some sense into him."

What the hell are you thinking, man? He a freaking politician.

Re:Hmmmm ...

[JustinOpinion (1246824)]

They think people are gonna pay tax on all that free porn they're pulling off (ahem) the internet?

(emphasis added)
According to TFA, it would be a tax on the sale price:

If Calderon prevails, the 8.25 to 8.75 percent sales-tax rates in effect in most of the Bay Area would raise the cost of that 99-cent download to $1.07 or $1.08.

So, presumably, free porn wouldn't be taxed at all--but you would have to pay tax on any porn you purchase online.

This is interesting because if it's a sales tax, it won't apply to freely distributed intellectual works, like creative commons music. So if all my music downloads are free, I don't have to pay any tax. Presuming that they don't start taxing donations, this would actually make the creative commons business model (release for free, capitalize on donations, concerts, merchandise, etc.) even more compelling (for artist and consumer).

That having been said, this overall sounds like a terrible idea. We need less monetization of intellectual works, not more.

Good basis for Riaa taxes

[Maxo-Texas (864189)]

Two points

1) If it is property... then Riaa is going to start paying taxes on it. And of course property tax is value based so RIAA will have a reason to value their property lower.

2) As the value approaches zero, the tax approaches zero. If you sell 1,000 songs for $1.00-- the tax on 1,000 songs is 8 cents (or .008 cents).

Is there a credit for uploading?

[overshoot (39700)]

Of course, every page visited is a download, so in principle they could just tax all traffic.

Given that this is California, that could take quite a byte out of the deficit.

This is complete horsepuckey.

[Jane Q. Public (1010737)]

A tax on downloads is the worst possible way to handle this.

First, it does not solve any of the "problems". Any of them.

Second, everybody is being charged for a "problem" (the quotes are on purpose... I don't agree that there even is a real problem here) caused by a relative few.

Third, the money is going to the wrong people.

And so on. It's just a BAD idea.

Tough for California to say no...

[tjstork (137384)]

California is facing some enormous budget shortfalls and the Democratic controlled state legislature simply will not cut state spending. Arnold (by no means a hard right winger), tried to cut spending but met with a hailstorm of resistance in a state whose politics are dominated by powerful unions.

Democrats in California have already been arguing for a tax increase, and in that environment, saying that sales taxes have to be paid on internet items might be politically the easiest thing for them to do. After all, they could argue, somewhat disingenously - why should everyone else pay taxes, but internet businesses not?

Define "download"

[jockeys (753885)]

in the digital world, there is very little difference between "viewing" and "downloading" so where will the line be drawn?

in the case of pr0n, even if you don't download it to your hard drive, if you can see it in your browser, you have downloaded it. (duh, you got the data somehow) would this same principle apply to net radio, streaming music, youtube, etc? makes you wonder how far they will run with it.

Is this really a new issue?

[Anonymous Coward]

Interesting, I've always paid state sales taxes on my iTunes downloads here in Maine. I never realized until now that some other states [who have sales tax] weren't doing the same.

Where To Pay the Tax?

[Gallenod (84385)]

This rasies a basic question: Which state can collect a tax on an Internet-based sale, the state where the seller operates or the state where the consumer makes the purchase?

Let's say I live in Vermont and I buy a song from iTunes, which is based in California.

Vermont claims that people owe it sales tax because they're in Vermont and buying something in another state that they could be buying here. If a Vermont resident goes to another state with no or lower sales tax to buy a car, Vermont requires that they pay Vermont's sales tax equal to the difference between the two when they register it in Vermont. There's also a section on Vermont tax returns that asks state residents to estimate the sales tax we would have paid if we'd bought something locally instead of through a Web site that, at present, implies that if they buy music through iTunes they should be paying state tax on the purchase.

The California proposal seems to think consumers are going, in a virtual sense, to California to buy my music. Because the transaction happens in California, they want to collect tax.

The Vermont requirement is apparently widely ignored and impossible to enforce unless the out-of-state business collects the tax for it. The California proposal would be enforceable only as long as the iTunes music store is hosted there. It would likely be moved off-shore if this proposal passes.

This will likely take Federal legislation or a Supreme Court decision defining the basis for where a tax is levied: on the location of the consumer or the location of the business. If the former, every business with a Web presence will have to incorporate 50+ different tax rules based on customer location, possibly more if they serve international customers.

It would be simpler would be to tax where the business is located, but then most states would object to the revenue loss and businesses would move their Web operations to states with low or no sales tax or off-shore (which would then likely cause Congress to pass legislation allowing states to tax their residents for out-of-state purchases anyway).

As always, it's about money which is of course is the root of all evil, which makes us a really evil society.

It is for the children

[Shivetya (243324)]

only the rich have computers anyway
they need to pay their fair share those dirty rotten music down loaders
we are taxing perverts, you want to tax them, right?
it is for the children.
the revenue will go towards reducing our impact on the environment!

which statements can we queue up to support this? I expect the bulk of them to show up at one time or the other

Sorry, it never ceases to amaze me that when facing a spending problem their first reaction is to increase taxes.

Super Latino Grandstander

[Simonetta (207550)]

So looking at this guy's legislative website, he claims to be a 'first Latino to do this and that'. He's most proud of getting legislation passed to 'force drug dealers pay for the damage that they cause their community'. So it would appear that he specializes in vague undefined pseudo-laws primarily designed to shake down anyone without the resources to prevent this from happening (lawyers in the USA, private armies in Mexico). Basically another fine-and-upstanding slimeball politician. Wasn't Ahnaald going crunch up all this little schmucks into little balls and turn them into shiny new barbells?

    Check out the shape of his legislative district (California #58). It's a true octopus. Precisely gerrymandered (an American term meaning the drawing of political boundaries to ensure permanent re-election of the people drawing the boundaries) down to the household to ensure that this bozo can never be voted away.

    In the not-too-distant future, bozos like this will avoid tangling with the technicians in order to avoid having their slimy little scams and fiefdoms exposed on the web like this.

Common everywhere else

[ebcdic (39948)]

There seems to be a view in America that for some reason online sale of non-physical products can't be taxed in the same way as other sales, either because it's wrong in some way or impossible to police. And yet in the rest of the world it's common - in Europe you have to pay VAT on iTunes purchases just as you do on everything else.

Re:Seems to encourage piracy...

[SirGarlon (845873)]

Or, it encourages digital publishers to re-locate out of state.

Re:Seems to encourage piracy...

[djasbestos (1035410)]

Well, unlike tea, music downloads can't be dumped into the harbor...so much for "tangible"...I guess the closest thing would be filling up this asshat's hard drive with Rick Astley.

Re:Will only encourage "illegal" downloading

[Psmylie (169236)]

"The government has no authority to take a cut of anything they wish."

No kidding... I thought the whole point of sales tax was SUPPOSED to be that it supported the infrastructure (roads, etc.) needed to actually sell the product, which is why sales tax makes sense as far as ordering off of, for example, Amazon.com goes (stuff still needs shipping). As far as I am aware, the government doesn't actually have an infrastructure to support regarding just downloads. The entire cost is borne by ISPs and the site you download from (thus, by extension, the consumers themselves).

I see no need for a sales tax on downloads other than padding pockets and paying for totally unrelated projects.

Re:Will only encourage "illegal" downloading

[jesterpilot (906386)]

The entire cost is borne by ISPs and the site you download from How about

• Education of the people working at the company;
• The juridical and monetary systems that make doing any business possible;
• Scientific research which forms the base of any modern technology;
• Basic health care, environmental protection, police, fire protection and many other generic systems that give people the possibility to be a customer instead of a hunter-gatherer?

It's ridiculous to exempt an entire economic sector from taxes. It is stealing from people in other businesses.

Re:

[boris111 (837756)]

So what you're saying is CA plans to subsidize our internet connections... sweet!

Re:Will only encourage "illegal" downloading

[Psmylie (169236)]

Not to mention, everyone who draws power pays the utility companies. So, that's paid for already.

Re:

[element-o.p. (939033)]

Dang it -- you just placed the tin foil hat on my head (and I was doing soooo well today!).

FBI Agent to P2P file sharer: "You know, when you illegally download, you avoid paying your taxes. When you avoid paying your taxes, the government can't fight terrorists. You want the government to fight terrorists, don't you?"

Re:Will only encourage "illegal" downloading

[NiceGeek (126629)]

"runaway extremist, anti profit, tree huggers prohibiting growth and taxing everyone to death"
I suppose you'd rather have air so thick you could chew it eh? L.A. has 4 times the number of automobiles that it had in the 1970's but only half the air pollution. Thanks to those "extremist tree-huggers"

Re:Will only encourage "illegal" downloading

[MindKata (957167)]

"The government has no authority to take a cut of anything they wish" and "0% of zero & all that"

They make the rules. They choose what to tax and they choose what rules to change. But this is a far bigger issue that just music downloading. They are saying they want to add a tax on downloading specific data. That would create a hell of a precedent. It opens a situation that in the long term, is far wider than just music downloads.

Up until now, countries already have tax on downloading arbitrary data, as that's effectively part of the cost of using an ISP etc... But taxing specific data, thats very different. For a start, its going to need literally a Big Brother system to monitor it all. As they need to log and then workout a charge for each and every form of data.

Also who then works out how much to charge for each form of data? ... Plus over time, they can then add new forms of data to the taxable list. Plus once its taxed, they can then choose to change the taxes over time.

Also what competitive disadvantage does that create for Californians against other countries not using such a system? ... As they will then be leaking money away in more taxes, which other countries don't need to pay for the same information.

In a global economy, such short sighted state imposed profiteering for extra tax money, is going to create a competitive disadvantage for even being based in California.

Then to appear to counter this competitive disadvantage, they can then waste millions more setting up schemes where small businesses and students get some of their data at reduced tax rates etc.. But it will fail to cover all costs incurred, as they cannot create tax breaks of sufficient detail, to cover every new startup or student situation. Plus at the same time, other government departments undermine them, as they are working on dreaming up new forms of data tax, they want to add to the list of taxable forms of data.

While some countries most likely will follow America into this new hole they are trying to dig for themselves, they will open up yet another competitive advantage for other countries who don't adopt such a system.

It shows incredible shortsightedness. They are focused on short term profits from taxes with ignorance of the wider extra costs and implications and disadvantages and on top of that, will need to spend a fortune on building a Big Brother system to manage it all.

And if they choose to build Big Brother, so much for Land Of The Free?

The more I hear, the more I am sadly convinced that Big Brother is becoming inevitable, given the kinds of personalities involved in corporations and some positions of power.

For example ... http://news.slashdot.org/comments.pl?sid=465072&cid=22544268 [slashdot.org]

Re:What is this guy smoking

[LunaticTippy (872397)]

Alcohol and tobacco are two examples of legal products that are taxed to hell. There is not a large black market for these items. I would expect Cannabis to behave similarly. It would cost maybe 50 cents to manufacture a pack of joints and you could retail it around the same price as cigarettes. Plenty of room for insane taxes but the retail price is just too low to have organized crime rings fighting over the market.

Re:What is this guy smoking

[geekoid (135745)]

"There is not a large black market for these items."
Not true, there is a very large market for tobacco. In fact In some states there is a limit on how much you can buy to help curb moving tobacco around from cheaper to more expensive states.

However, it is no where near the blackmarket rate for Cannabis.

Logically, it should be legal. There is exatly no reason why someoen would be ok with tonacco and alcohol but not cannabis.

It's funny to hear people talk about peoples rights to smoke and drink, and those very same people say cannabis should be banned but give no reason that doesn't apply to the others.
really just goose stepping along to the party rhetoric without thinking.

Not surprisingly all these people are also told how to think by an old book and some guy talking about a magic sky faerie.

Re:

[photomonkey (987563)]

There is a HUGE black market for booze and tobacco.

Organized crime still heavily relies on running stolen trucks of cigarettes and booze.

The biggest demand is for packs of cigarettes with quality forgeries of tax stamps on them.

Re:

[ari_j (90255)]

They understand it fine. That's why they have to "expand" the tax, to include sales of intangibles.

Re:

[tjstork (137384)]

Publish "expert" testimonies from many professors from major universities detailing how such a tax would cause a major recession in the state and also snatch money from schools and education and send it to wall street

Let's look at reality here. Taxation and fiscal policy plays a huge role in where businesses live, consumers shop, and people live. Taxes do make a determination as to whether or not to engage in a business. If your gross profit margin is ten percent, and taxes are fifty percent on that acti