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Fri, Nov 21, 2008 - 04:18 AM EST  —  AAPL: 80.49 (-5.80, -6.72%)  |  NASDAQ: 1316.12 (-70.30, -5.07%)

California Democrats look to tax iTunes downloads
Monday, March 17, 2008 - 11:16 AM EST

"Apple's iTunes has been nothing short of revolutionary. For just 99 cents, you can download almost any song onto your computer or iPod. For a few more dollars, you can rent a movie or buy an episode of your favorite TV show," Brian Joseph reports for The Orange County Register.

"The service has become so ubiquitous that last month iTunes was named the nation's second largest music retailer, behind only Wal-Mart," Joseph reports. "It is a money machine – and our Legislature appears to have noticed."

"You see, music and movies purchased on iTunes differs from those purchased in stores in one very significant way: it's not taxed. California law explicitly restricts sales tax to 'tangible' goods – i.e. products that can be 'seen, weighed, measured, felt or touched,'" Joseph reports. "A digital file, obviously, isn't any of those things."

"But the state faces an $8 billion deficit. The Legislature needs money. So it's looking to iTunes," Joseph reports.

"Last month, Assemblyman Charles Calderon, D-Whittier, introduced Assembly Bill 1956, which would apply sales taxes to media downloads. That would take a 99 cent song and bump it to $1.07 or more," Joseph reports.

"New taxes require a 2/3rd vote of the Legislature, meaning some anti-tax Republicans would have to sign onto the proposal, but Calderon got creative," Joseph reports. "Instead of proposing a new tax, AB 1956 simply requires the Board of Equalization to amend the definition of 'tangible personal property' to include 'digital property.' That needs only a majority vote, meaning no Republicans necessary."

Joseph reports, "Voila! A new tax – without a 2/3rds vote."

Full article here.

MacDailyNews Take: Did Apple create California's budget crisis or did California's legislature spend way, way, way more than it took in for years? Perhaps before taxing California's consumers and taking a bite out of one of the premier California-based employers, the legislature should first look to reign in their massive, wasteful spending habits? You know, get your business in order first before you look to disrupt the well-performing businesses of others. Just a logical thought. We now return you to reality and the illogical thought patterns of California legislators.

Apple ought to noisily explore Arizona real estate opportunities. That would put an end to this sort of stupidity immediately.

[Thanks to MacDailyNews Reader "Bill M." for the heads up.]


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Reader Feedback: ( = registered)

Mar 17, 08 - 10:20 am Comment from: Ray

Hey MDN, you watch your comments. Somebody has to pay for Mayor Newsom's immigration policies and he is too cool to pay himself.

Just my $0.02

P.S. 118 MB patch to Office 2008 just arrived.

Mar 17, 08 - 10:21 am Comment from: Nutcracker

Tax & spend politicians. idiots.

Mar 17, 08 - 10:21 am Comment from: Matt

How about you stop supporting drug using fatherless baby making machines. That's at least a start.. then look at your salaries. Only after you look to yourself can you start taxing me EVEN MORE..

Mar 17, 08 - 10:22 am Comment from: Tom

Every chance you get, ask any elected official how many government employees they intend to lay off during their tenure.

Mar 17, 08 - 10:23 am Comment from: Aldebaran

My iTunes Store purchases (downloads) have always been taxed here in Washington, DC. I thought that was the case everywhere that Apple has a physical presence -- they must abide by the local sales tax rate. Unlike, say Amazon, which does not have a physical presence here, and nothing is taxed when purchased from them. Californians have been getting off easy if they've had this arrangements for so long on so-called "intangible" goods!

Mar 17, 08 - 10:27 am Comment from: Back2Mac

@Aldebaran

I live in Kansas, no iTunes tax here.

Mar 17, 08 - 10:28 am Comment from: living in maryland

California might be bad, but come to the great state of Maryland. We tax everything possible and try to run companies out of state.

Before this turns into a Dem/Repub thread, all politicians suck.

Mar 17, 08 - 10:28 am Comment from: ericdano

Oh, but we can't CUT anything in California........we just need MORE money. That will fix everything. Fix the educational system, it will fix health care, hell, it even fixes erectile dysfunction.

With Gas prices here in California well over $3.50 a gallon, there is NO WAY I'd support raising ANY taxes at all.

Mar 17, 08 - 10:29 am Comment from: ElderNorm

The key here is exactlly how the law would be written. If some one in CA bought software from a company in Texas and had to pay Texas sales tax, would they have to pay CA sales tax too??

That is one of the problems now with internet sales. Its a matter of who gets the money. Every state wants your money, and they do not care if they deserve it or now.

Greedy govt. :-(

Mar 17, 08 - 10:32 am Comment from: ron

Typical left wing "Tax & Spend" libs. Feed at the public trough and tax everyone else. We're doomed.

Mar 17, 08 - 10:33 am Comment from: G Spank

Poor California.

First Reagan has the Contra's infect it with cocaine (which propagates and spreads gang culture throughout the entire country) in order to fund the Contra's.

Then Bush's buddies suck billions from them in an energy scam called ENRON.

It's clear that republicans are willing to sacrifice California in a way that fits their agenda, even if the agenda is completely illegal.

Mar 17, 08 - 10:34 am Comment from: Christopher

I live in Arizona and am taxed on iTunes purchases. It's dumb but if CA would appoint all the iTunes taxes to the educational budget maybe the state wouldn't be laying of 16k+ teachers next fall.

Mar 17, 08 - 10:35 am Comment from: move

maybe more companies should move out of california -- let the brain drain speak volumes to the legislature of california

Mar 17, 08 - 10:35 am Comment from: rob559

We have to pay tax on itunes purchases here in NJ. The corrupt politicians (mostly Dems) have ruined this state. I dont purchase as many songs since the tax.

Mar 17, 08 - 10:36 am Comment from: @g spank

I guess Gray-Out Davis had nothing to do with California's fiscal problems, huh? Blame everything on the feds and take no personal responsibility.

Mar 17, 08 - 10:40 am Comment from: Hano

And Democrats wonder why so many people vote Republican/Independent. It's because people get sick of working into late April and even May just to pay their taxes:

http://money.cnn.com/2007/03/27/pf/taxes/tax_freedom_statelist/index.htm

Californians have it worse than most US States... And it's trending worse:

http://www.taxfoundation.org/taxfreedomday/

Folks simply shouldn't have to work 1/3 of the year simple for taxes.

Instead of raising taxes when confronted with a budget shortfall they should be looking at ways of eliminating the burrocracy [spelling intentional]. When I have a shortfall of money, I cut back until such time that I have more money or look for a better paying job! Perhaps the California Legislature should consider doing the same [either one would do].

Not at all surprising to see Democrats are up to their usual tricks to get around a law designed to make it more difficult to pass taxes too. Were I a Republican or Independent in the California Legislature, I'd propose a bill that makes proposals to amending the definition of 'tangible personal property' to require a 2/3rd's vote too.

Not that I am a big user of iTunes [I still prefer physical media when I have a choice] but I'm glad I don't live there.

-- Hano

Mar 17, 08 - 10:42 am Comment from: Lurker_PC

Sshhh... Will you please keep it down??? New York may hear you. New York is a vacuum cleaner when it comes to taxes. 8% sales taxes, high personal properity taxes, AND such thing as a school tax. Not to mention high gasoline prices - one of the worst on the East coast. You would think with all this income somebody in Albany could balance a state budget.

(Okay, I now need to walk away, go take a deep breath, and count to X.)

Peace.

Mar 17, 08 - 10:43 am Comment from: Richard M. Nixon

Take a good look at what will happen should we give the White House back to the Dems. Barack Hussein Obama and his VP Jeremiah Wright will jack up taxes and kill the economy at a time when we're already struggling. No amount of ad space on this site will change that.

Mar 17, 08 - 10:43 am Comment from: shen

"Tax & spend politicians. idiots."

unlike the brilliant "don't tax, but go ahead and spend money you don't have" right wing, right?

lets be fair. the right wing got the entire nation of the USofA in economic trouble. now when the left tries to save the budget they are the bad guys?

look, i don't like the idea of taxing iTMS either, but to "amend the definition of 'tangible personal property' to include 'digital property'" is pretty reasonable.

unless you want to claim that what you download is not tangible, and cannot be used, listened to or watched, this is pretty reasonable.

also, important rule, if you are from a "red state" where the money your state gets back in aid for things like gov jobs and road projects is higher than the total taxes your state pays, you are NOT allowed to complain about taxes. i hear one more moronic "anti-gobrment" tirade from some putz in south carolina or wyoming or some other "red-state" that would be a third world nation without the US government supporting its infrastructure, i am gonna puke.

so yeah ron, "Feed at the public trough and tax everyone else." i agree, no more blue-state money to ignorant hicks. that would clear things up for me fine, how about you?

Mar 17, 08 - 10:43 am Comment from: Sum Jung Gai

Yeah, blame the "tax and spend" Democrats. They're so much more irresponsible than the "borrow and spend" Republicans.

I say blow it all on war and contributions to our cronies, and let our grandchildren sort it out.

Mar 17, 08 - 10:44 am Comment from: ChrissyOne

There is still no sales tax on Limewire.

Mar 17, 08 - 10:46 am Comment from: TV less

Obama the Messiah will save us all from taxes.

Mar 17, 08 - 10:46 am Comment from: shen

http://www.fuckthesouth.com/ says it better than i can....

Mar 17, 08 - 10:54 am Comment from: @shen

Yes, let's be fair. I don't guess Bill Clinton had anything to do with floating the dotCom bubble which popped, or feel-good liberals telling banks they should loan money to unqualified people so they could buy a house or, probably more like it, buy too much of a house and now face the possibly of foreclosure because they can't afford their adjusted mortgages.

Bush is no conservative. But Obama and Hillary and McCain all want to steal more of my paycheck. They all want the tax cuts to expire, which means they all want to raise taxes. And some want to raise gasoline taxes. Where's the love the liberals all espouse?

Who is going to complain about the pork in the budget? Nobody, it seems.

Who would rather have oil money stay in the USA from drilling, pumping and refining our own? Or would they rather keep sending $100+ per barrel to Saudi Arabia and the rest? Why do they want to keep funding the middle east? Why do they hate American companies and Americans so much?

I'd better stop here before my rant gets out of hand.

Mar 17, 08 - 10:55 am Comment from: MadMik95

We have always had tax on iTunes in Alabama. Just thought it was the norm kinda like going out and buying the CD or DVD.

Mar 17, 08 - 10:56 am Comment from: NavyTim

As soon as Cadillac Deval sees this - Massachusetts will be next in line. The Dems here never met a tax they didn't like...

Mar 17, 08 - 10:57 am Comment from: Just a Thought!

How about cutting services to ILLEGALS from any country!!

Use those billions to pay the difference. Why tax us when they make bone headed decisions.

Hey-got another, take away their (Legislature) money by 25 percent to pay for their mistakes. Between the two we will have a surplus!


Here is a thought for the table- are you listening Mayor Antonio Villaraigosa and the Legislature?

Bet idea one or two will not even be considered- tax trash, tax music, coming-tax e-mail, tax, tax, tax until the no one can afford a loaf of bread- unless you are on the social system.

Mar 17, 08 - 11:02 am Comment from: ChrissyOne

"...or feel-good liberals telling banks they should loan money to unqualified people so they could buy a house..."

BWAHAHAHAHAHA!!! Yeah, the feel-good liberals took all that debt to Wall Street and sold it off as securities, too. Sure, that was Ted Kennedy doing that, I saw him.

Mar 17, 08 - 11:05 am Comment from: OZZ

The only thing politicians in general and liberal in particular are good at: taxing and spending!!!!

I'm Italian, I know what I'm talking about...

Mar 17, 08 - 11:10 am Comment from: oh, i forgot

I forgot that only RepubliKKKans work on Wall Street. Warren Buffet must be the most staunch conservative.

Mar 17, 08 - 11:11 am Comment from: mr_matalino

Oh how I'm glad I'm not living in CA anymore. The US should exile CA out of the union. They can tax themselves to death and whine when the military isn't there to save them from the invasion of Mexico.

Mar 17, 08 - 11:11 am Comment from: Restraint

Commenting on anonymous forums is easy.

Running a country whilst your every breath is analyzed by knee-jerk media boneheads is not easy.

Hey '@shen' - What are you supposed to do when people scream bloody murder at things like taxes or gas prices, and then go and buy 13mpg SUVs?

Those 'unqualified people' you mentioned bought there own house without being forced to by any government policy.

You make your own economy. So go and make it.

I'm with Lurker PC up there, take a deep breath.

Mar 17, 08 - 11:15 am Comment from: disconnect

So what if people buy a 13mpg SUV. What does that have to do with gas prices and taxes? I guess you're saying people who buy something that gets lower gas mileage should pay not only more tax (since they're buying more gasoline) but should pay a higher tax rate so as to discourage people from buying a 13mpg SUV.

Interesting.

Mar 17, 08 - 11:18 am Comment from: Immigrant

Right on 'Just a Thought'

I came here the hard way - legally.
As a resident alien I keep the law, pay my taxes and I pay attention to politics.
It's galling enough to watch the economy I have to function in get drained by illegals, but it's far more galling to hear politicians tell me it's not a big deal.

Mar 17, 08 - 11:18 am Comment from: banks

You are correct in that those "unqualified people" bought their own house without being forced to by any government policy. But Congress was urging banks to offer loans to people who wouldn't have qualified for loans. When legislators with legal responsibility over your industry tell you to do something what else do you do?

Mar 17, 08 - 11:20 am Comment from: @immigrant

Welcome. Glad you're here. (no kidding)

Mar 17, 08 - 11:21 am Comment from: Restraint

No, I'm not saying that, but could you clarify your objection, I'm not sure what you mean.

Peace.

Mar 17, 08 - 11:28 am Comment from: silverwarloc

@G Spank:

Please, provide some corroborated proof of your allegations.

Mar 17, 08 - 11:28 am Comment from: Restraint

Mr. Banks:

•••You make your own economy•••

You're not obliged to financial folly merely because the government permits it.
You don't have to shoot yourself in the head because someone hands you a gun.

Quite why Congress did that I have no earthy clue.

Mar 17, 08 - 11:29 am Comment from: Immigrant

I'm glad I'm here.

Mar 17, 08 - 11:29 am Comment from: Steve Jobs

I'd like to move us north into Oregon, but that State is one step shy of California, and a ton of my talent wouldn't move...

Mar 17, 08 - 11:30 am Comment from: Steveeee

Just wonder whether you Americians need to pay tax if the iTunes servers move overseas.

Mar 17, 08 - 11:32 am Comment from: Steveeee

We in Hong Kong don't have any sales tax, but no iTunes Store either.

Mar 17, 08 - 11:32 am Comment from: Predrag

US gas prices are still less than half what the rest of the developed world pays (in EU, it averages at about $7 per gallon, at today's exchange rate). Either way, they are where they are because of reckless spending of the current US government. At not time in the history of US had any single US government spent so much money in such short period of time. And solid chunks of that (government tax) money ended up in the pockets of companies tied to the current government leaders (Halliburton, anyone?). In other words, your tax money and high gas prices are financing the massive profits of companies that belong to the privileged circle. Not to mention that the oil companies are, with all the high crude oil prices, showing the record profits, all on the back of those minivan-driving soccer moms, paying $3+ per gallon.

Those who bought houses and couldn't pay for them did that when the economy was strong. Had there not been so much government spending on a war (driving the economy and the US dollar down), many of the defaults wouldn't have happened. Nor would have US real estate market gone down so rapidly and so low.

As for taxing iTunes, California went ahead through all those propositions during the dot-com years, financing all kinds of social programmes from the state budget (after-school meals, special programmes, etc, etc, etc). Whenever there was some kind of an election, there would be a vote on some proposition. It is now time to begin paying for those programmes, and dot-com is no more, so no more hefty taxes to pay for all that. ITunes ironically seems quite reasonable, since many other states already have it. The way it is being introduced, though is typical politics, though.

Mar 17, 08 - 11:35 am Comment from: seedavenkc

Listen to yourselves! Some of you want to make me think the way you do, and others of you want to deny me the ability to think for myself, with both sides wanting to kick some teeth in just to prove their point. Mama would say go to your room and cool off!

Mar 17, 08 - 11:36 am Comment from: Hilldog

Typical liberals. They love to tax and spend and then tax some more. The best part is that they consider anyone that makes over 30K a year to be "rich" as that's who will get their taxes increased if they get elected in November.

Mar 17, 08 - 11:36 am Comment from: ChrissyOne

@ disconnect

Uh, no, I think what he's saying is that if things are so bad with the economy and money in general, isn't it funny how people can't seem to give up their love of conspicuous consumption.
Personally, in January of 2003, when I figured out the GWB was going to war in the middle east, I saw the writing on the wall and bought a 45mpg VW Jetta diesel. Of course my friends were all buying giant cars at that time. Funny how that all worked out.

Mar 17, 08 - 11:37 am Comment from: OpJ

Couple of comments:

1) When I used to buy 99 cent cassette singles at the record store they were taxed. If I buy a CD now it is taxed. Is there a single logical, consistent reason why the same song should be subject to sales tax if bought on CD but shouldn't be subject to sales tax if bought as a digital file? Let's extrapolate further -- if I buy Microsoft office for $299 at the store it is taxed; should I pay if I could buy it as a download for the same $299? This is particularly apropos as more people buy music online--digital purchases are replacing physical purchases, so all the whining about greedy polititicians doesn't quote pan out.

2) The pols don't have any real reason to save money because the degree of whining citizens produce about taxes doesn't have any real relationship with the amount of actual taxes collected. California, for example, is not first in state taxes per capital, but rather is tenth. In my original home state of Florida the complaints about high state taxes are always high, no one in Florida considers their legislature as anything but a bunch of money-wasting, crooked, charge everything to the taxpayers spendthrift crooks. Florida is 37th in per capita taxes. My present home state of Pennsylvania has its own angry taxpayer groups, reducing taxes is a constant political platform, and most Pennsylvanians think that they are the most-taxed people out of New York State. Pennsylvania is right at the middle -- 23rd out of 50 states, with per capita taxes only $35 a person more than Nebraska.

3) Historically, conservatives have always favored sales taxes more than any other kind of tax. Sales taxes tax consumption rather than saving and investment, and are the taxes the most under the control of the taxpayer--spend less money, pay less sales taxes unlike income taxes which grab a percentage from you whether you personally choose to conserve or not.

If I lived in California I would want to see the tax law changed because as a cheap motherfsker I like saving a buck as much as anyone else. On the other hand, as a taxpayer I would have trouble understanding why the sales of the largest music retailer are taxed, the sales of the third largest music retailer are taxed, but the sales of the second largest retailer are tax free.

Mar 17, 08 - 11:37 am Comment from: Rick from Sacramento

When I purchased my CD's from Tower Records (may they rest in peace), I paid sales tax. Now that sales tax revenue for CD's is declining due to digital downloads, it makes sense to me to move the taxes to them. I'm happy to pay a few more bucks a year to help keep our public schools staffed and community parks maintained.

Mar 17, 08 - 11:38 am Comment from: DJ

Cheating swine.

And they want our votes in the coming election?

Stuff 'em.


ps. I don't think the emoticon box works anymore...

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