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.

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?

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

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.

California is so broke (runaway extremist, anti profit, tree huggers prohibiting growth and taxing everyone to death) that they have to find new and creative ways to tax it's residence to the point of total socialism because everyone there is to dumb to th think for themselves and eliminate this government nonsense.

There, I had my say!

You already pay tax on the utility bill.

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

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.

Let also mention the fact that the telecom industry has already been taking extra money (in addition to the taxes) from you to pay for "upgrades" to the system. So far the only upgrades I have seen since then is that the CEOs of these companies are now driving '08 BMWs and not '02 BMWs.

There is not a large black market for these items.

Are you sure about that? [washingtonpost.com]

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.

Governor Arnold Schwartzenegger is a Republican who ran on a campaign of no new taxes, so he will most likely veto it.

But then again President Bush (Sr.) also ran on the same promise and broke it.