22/02/2009, 03:57 AM
Quote:Wisconsin will collect sales taxes on Internet downloads of music, games, books, ring tones and other video entertainment - a decision that angers some who will find the 5% tax added to their credit-card bills after Oct. 1.- Source: [JSOnline]
On Thursday, Gov. Jim Doyle signed into law a package of tax-law changes that included extending the sales tax to so-called digital downloads.
The District of Columbia and 15 states have similar laws, although none of those states borders Wisconsin.
The change will require vendors to add the tax when the product is sold and remit it to the state treasury. One of the most popular sellers of songs, CDs and other digital products, iTunes, already collects sales taxes on those sales for states that charge it, said Susan Lundgren, a spokeswoman for Apple.
It is expected to cost Wisconsin consumers about $6.7 million a year - a number that suggests it's a $134 million annual industry here. Also, national experts estimate that downloads are growing by as much as 20% a year, which means the amount of sales tax in that area will grow substantially.
Doyle has been fighting for the change for years. He and other state officials say it is a matter of fairness: Internet vendors shouldn't have a tax-exempt advantage over Wisconsin's brick-and-mortar retail stores.
"This is applying the sales tax in the same way to the same products," said Doyle spokesman Lee Sensenbrenner. "This change protects Main Street businesses."
Some digital downloaders don't see it that way, however.
"I don't feel very good about it," said Cyntha Hammerel, 40, of South Milwaukee, who downloads songs and CDs several times a week. "I'm not buying the product in Wisconsin."
"I am being taxed to death," said David Vogt, 46, of Milwaukee. "Where in the world does it stop?"
Once a week, Vogt downloads a movie from a large chain, which gives him the right to watch it on his computer or his big-screen TV. Each movie download costs him about $4.
A smoker, Vogt is also upset about Doyle's proposal to raise the state tax on a pack of cigarettes from $1.77 to $2.52. "Now, I'm thinking about quitting," Vogt said.
'Complex, but necessary'
Milwaukee lawyer Andrew Franklin, who studies Internet taxation issues, backed Doyle.
Charging the sales tax on downloads "is tricky and complex, but necessary," Franklin said.
"The statistics are staggering. Billions of dollars in revenue are being lost, a number that is growing exponentially every year," he said. "It's a revenue gap that will certainly grow in such harsh economic times where only the best retailers with the lowest overhead will survive, and the rest will be left struggling.
"This is not a shift in taxation. It does not rob consumers of a benefit otherwise available to them. Rather, it merely collects a tax that in every way mirrors the tax that would be collected if one were to leave a house, go to a store and make a purchase in person."
More than entertainment
But Republican Rep. Jeff Fitzgerald of Horicon said the tax on digital products will be charged on many non-entertainment products.
"This new tax affects far more than kids downloading songs; it raises costs on all types of digital media from photos to clip art to computer games," said Fitzgerald, who voted against the tax-increase package. "Graphic artists, photographers, printers and Web designers just saw their costs go up for producing content."
Jamie Armata, 32, of Wauwatosa, who downloads music about twice a month, wondered how he'll end up paying the sales tax on his downloads. If the company selling the product adds the sales tax every time he makes a purchase, Armata said, "I have absolutely no problem with that."
But Armata and others said they don't want to self-report what they owe in sales taxes on downloads or get a notice from state tax collectors saying they owe a specific amount in unpaid sales taxes.
State Department of Revenue officials say they can't talk about specific tactics they might use to collect the sales tax on digital downloads.
But they will launch an extensive educational campaign before Oct. 1 to make sure vendors are aware of the change and their requirement to add sales taxes when a digital product is downloaded.
"As with any change to the sales tax law, the Department of Revenue will work with sellers to ensure they are correctly collecting and remitting sales tax on digital goods," said department spokeswoman Jessica Iverson.
Iverson said the sales tax compliance rate is high, and state officials expect Wisconsin residents to pay it on digital products.
"Effective October 1, consumers will pay sales tax on digital goods as part of the total purchase price, just as they would with any taxable goods and services," she said.
Personally not too sure how it would work. On the internet, for downloads, the physical location of the seller means rather little to most buyers. If prices are higher because of the tax in one place, a cheaper alternative is usually 5 seconds away...