ebooks and sales tax from the WSJ

[jbcohen]

http://www.teleread.com/paul-biba/sa...is-heating-up/

I simply could not find a link to the WSJ article, what appears above is another article from a different site called teletread, and it is not clear that even if I gave one forum members would be able to see it so I am providing my own summary of the article in the Wall Street Journal.

For many years shoppers have been able to go online and buy anything sales tax free, well that is changing due to states imposing sales taxes on good purchased over the internet and brought into their state. Some states remain exempt from sales taxes including New York, Florida and Washingtion DC. May customers of electronic books can look foward to paying sales taxes on the boks that we read and buy over the internet.

[Prepper]

I pay sales tax on every ebook I buy for my Nook from B&N. I don't on things I buy from Amazon that I have shipped. I seriously hope this doesn't go anywhere.

[shalym]

Originally Posted by jbcohen

By Quentin Fottrell
...Digital content remains exempt from sales tax in major states including New York, Florida, Connecticut, and California, and Washington D.C. But earlier this year, Connecticut’s state legislature proposed a 6.35% sales tax on digital downloads to level the playing field with brick-and-mortar retailers.

Hmmm...It's news to me that digital content is exempt in Connecticut. I live here, and I am definitely getting charged sales tax on Kindle books.

Shari

[Kali Yuga]

It's all but certain that US retailers will have to start charging sales taxes. States are way too strapped for cash, and Internet sales are taking a bigger slice of the pie.

Amazon is no longer fighting it, and they were the biggest opposition for years. The question now is whether the feds will do something to make it easier for Internet retailers to collect and pay sales taxes.

[tomsem]

Link to Quentin's article (originally on SmartMoney):

http://www.huffingtonpost.com/2012/0...n_1679513.html

I'm okay with paying sales tax on 'tangible goods', but I would draw the line with most digital content. After all, we don't actually enjoy rights and privileges of ownership in most cases. For example you cannot give your ebooks to someone else, legally.

[tomsem]

Originally Posted by Prepper

I pay sales tax on every ebook I buy for my Nook from B&N. I don't on things I buy from Amazon that I have shipped. I seriously hope this doesn't go anywhere.

That is a slightly different issue: it sounds like CO doesn't make a distinction between physical and digital sales, and decides whether a sale is taxable based on whether the retailer has bricks and mortar presence in CO (as B&N does and Amazon I take it does not). Would you get taxed on Kindle ebooks?

But in many other states digital goods are not taxed at all, regardless. So in CA, you can buy ebooks (or MP3s or videos) from anybody and not pay sales tax. CA residents are under legal obligation to pay sales tax on 'tangible' goods, even if the (out of state, online) retailer does not collect it. CA wants Amazon to collect sales tax for 'tangible' goods (which the latter has agreed to start doing next year) but under current law, digital sales are still excluded.

So the issue here is whether those states are going to start collecting sales tax for the digital sales as well. I think it would be a very bad policy, but certainly this would not be the first of those. Actually, I'd be in favor of extending tax free status to physical books and media as well, for the same reason that newspapers and magazines generally are: democracies can only thrive with informed populace.

[Kumabjorn]

Not being in the know, would you pay sales tax on the work a painter did on your house, or the repair work of a plumber? In Sweden we do, but if you don't in the US, that would imply that you only pay sales tax on actual physical goods. In that case wouldn't it be requied by law to define eBooks and Mp3 as physical goods?

[tomsem]

Originally Posted by Kumabjorn

Not being in the know, would you pay sales tax on the work a painter did on your house, or the repair work of a plumber? In Sweden we do, but if you don't in the US, that would imply that you only pay sales tax on actual physical goods. In that case wouldn't it be requied by law to define eBooks and Mp3 as physical goods?

Services generally are not taxed in the US. But we have a federal system, meaning states get to define their own tax policies for the most part. Some (e.g. Oregon) have no sales tax. Yes, it is totally crazy.

[Andrew H.]

Originally Posted by Kumabjorn

Not being in the know, would you pay sales tax on the work a painter did on your house, or the repair work of a plumber? In Sweden we do, but if you don't in the US, that would imply that you only pay sales tax on actual physical goods. In that case wouldn't it be requied by law to define eBooks and Mp3 as physical goods?

As mentioned below, we typically don't pay sales tax on services. If you get work done by a plumber, there will be no tax on the labor, but you will have to pay tax on any parts he provides. Same is true at a car repair shop.

Most states that charge sales taxes specify that it applies to tangible and intangible goods...but some states only apply it to tangible goods.

I think the most confusing area is groceries. Most states (I think) don't charge sales tax for groceries, but what counts as "groceries" varies widely, with ready-to-eat food typically being charged tax...although what ready-to-eat food is can be complicated, too. In my state, toilet paper is taxed, but I've been to states where it isn't.

[Kumabjorn]

So if I understand this correctly, in most states goods are charged a sales tax (provided the state has a tax) and now they want to charge that on online shopping, including eBooks and music files. However, other legislation (mainly federal, perhaps?) treats eBooks and Mp3s as a service or rental, since it is a licens for usage?
In my mind this doesn't add up. Either it is a goods, and has to be treated like one, including the ability to re-sell it and loan it to someone, and in return the consumer has to accept getting to pay sales tax on it, or it is treated as a service, you can't resell it or loan it to someone, on the other hand you don't have to pay sales tax on it. I suppose my confusion is the basis for the pervalent litigation in the US.

[HarryT]

Originally Posted by Kumabjorn

So if I understand this correctly, in most states goods are charged a sales tax (provided the state has a tax) and now they want to charge that on online shopping, including eBooks and music files. However, other legislation (mainly federal, perhaps?) treats eBooks and Mp3s as a service or rental, since it is a licens for usage?
In my mind this doesn't add up. Either it is a goods, and has to be treated like one, including the ability to re-sell it and loan it to someone, and in return the consumer has to accept getting to pay sales tax on it, or it is treated as a service, you can't resell it or loan it to someone, on the other hand you don't have to pay sales tax on it. I suppose my confusion is the basis for the pervalent litigation in the US.

In the EU, ebooks are classified for VAT purposes as a service, but services are most assuredly liable for VAT.

[taustin]

Originally Posted by Kumabjorn

So if I understand this correctly, in most states goods are charged a sales tax (provided the state has a tax) and now they want to charge that on online shopping, including eBooks and music files. However, other legislation (mainly federal, perhaps?) treats eBooks and Mp3s as a service or rental, since it is a licens for usage?
In my mind this doesn't add up. Either it is a goods, and has to be treated like one, including the ability to re-sell it and loan it to someone, and in return the consumer has to accept getting to pay sales tax on it, or it is treated as a service, you can't resell it or loan it to someone, on the other hand you don't have to pay sales tax on it. I suppose my confusion is the basis for the pervalent litigation in the US.

Now you know how merchants feel. And, in some states, the government employees who collect the tax. It gets very, very complicated, especially for food. In some cases, the exact same food it taxable if you buy one package at a convenience store, but not if you buy a case from a grocery store. At one point, in California, the Board of Equalization (who collect sales tax) put out a press release saying "We don't know what's taxable any more either."

[taustin]

Originally Posted by HarryT

In the EU, ebooks are classified for VAT purposes as a service, but services are most assuredly liable for VAT.

I recall when I had my web site, which sold roleplaying stuff, mostly books, that customers in certain countries in Europe (UK, IIRC, but it's been a few years) would ask me specifically to list their purchase on the customs forms as "books" rather than "games," because books were at a (much) lower percentage, and either would get through their customs people without a problem.

[HarryT]

Yes, (paper) books are zero-rated for VAT in the UK; VAT is payable on games.

[Kumabjorn]

Land of the Free, Home of the Brave, Heaven for Tax Lawyers.