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North Carolina wants a piece of digital sales

Most consumers would agree that they are taxed enough. Those who happen to live in a state that has a state income tax are taxed even higher than some consumers in America are. One of the few respites from sales tax has long been online purchases through companies who don’t have a physical presence in the state the consumer lives in.

Massive online retailers like Amazon.com and Apple, owner of iTunes, have spent a considerable amount of time and money fighting attempts by various states to tax digital sales. New York State passed a law that forced Amazon to add sales tax to orders for consumers in the state. Amazon filed suit against the state on the grounds that it had no physical presence in New York State, a concept called "nexus" which previously had protected online firms against such taxation. However, Amazon ultimately lost the suit because New York State was able to prove that by soliciting affiliates in the state it was effectively doing business there.  In losing, a legal precedent was set which promised to potentially undo nexus protections for online retailers across the country.

Apple's iTunes store has also drawn the eyes of lawmakers in various states looking to add tax revenue to their state coffers, inspired by recent successes. New York State was again at the forefront of the case when it tried in December of 2008 to force Apple to collect sales tax on digital sales from iTunes.

Other states are looking at the success New York State has had with getting money from digital sales and want a piece of the action. A legislative commission in North Carolina is looking at methods that could be used to tax digital downloads from sources like Amazon and iTunes.

The committee is attempting to "modernize" the North Carolina tax code, which was written long before the advent of digital sales.

Rep. Paul Luebke describes, "We used to think of everything in terms of being tangible. Nobody thought of how you could possibly download anything."

At this point, taxing digital downloads is still nothing more than a proposal and is far from becoming law. However, changes proposed by the general assembly could affect how tax laws in North Carolina are written in the future.

Luebke continues, "So if you buy a book in a bookstore, you're going to have to pay sales tax on it," Luebke said. "If you're downloading a book from a book seller, you should have to pay sales tax on that as well."

According to research taxing digital sales of music, books, movies, and software could add about $12 million to state tax revenues over the next fiscal year. That is a temptation that the state isn’t likely to pass up, considering that North Carolina is faced with a $2 billion shortfall in its budget.

CEO of the North Carolina Technology Association Brooks Railford disagrees with the proposed digital sales tax. Mr. Railford states, "We would be concerned about any kind of new taxes in this economy. The consumer is already very highly taxed, the economy is stretched. All we're asking is that those considerations be taken carefully and that the industry be asked for their input as the legislation is finalized."

One of Railford's major concerns is the impact on sales of digital good to the companies who sell them. The lack of sales tax online is often one of the key reasons consumers buy online rather than in a retail store. Adding sales tax could have a major detrimental effect on online retailers.



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RE: Hey, North Carolina...
By Spivonious on 1/29/2009 10:36:37 AM , Rating: 2
While I agree that spending should be cut, why should digital downloads be exempt from sales tax? Contrary to popular belief, the Internet is not a tax-free zone.


RE: Hey, North Carolina...
By mdogs444 on 1/29/2009 10:39:36 AM , Rating: 5
quote:
the Internet is not a tax-free zone

Maybe it should be.

Instead of taking the side of tax & spend federal government, try siding with the people for a change. Maybe we think there are too many taxes to begin with, and too many programs and wasteful spending anyway. The people can revolt and stop the expansion of taxation. Don't give in so easy.


RE: Hey, North Carolina...
By SocrPlyr on 1/29/2009 10:56:05 AM , Rating: 2
The federal government doesn't have a sales tax...


RE: Hey, North Carolina...
By Digimonkey on 1/29/2009 11:11:03 AM , Rating: 2
This is not really an expansion if you think about it. These goods probably would've normally been bought at a local store 5+ years ago. It's more of a means to recoup a lot of the lost revenue from sales tax that was brought on by the digital era.

I concur though, the government should always take a look at cutting spending before resorting to these tactics. Then again if we as consumers are upset about sales tax to begin with, we have the choice to curb our consumerist ways and buy less.


RE: Hey, North Carolina...
By dajeepster on 1/29/2009 12:40:53 PM , Rating: 2
quote:
These goods probably would've normally been bought at a local store 5+ years ago.


I don't buy my pron in the local store ;)


RE: Hey, North Carolina...
By killerb255 on 1/29/2009 2:26:15 PM , Rating: 2
So where did you buy your pr0n before the Internet?


RE: Hey, North Carolina...
By mmntech on 1/29/2009 10:42:40 AM , Rating: 2
Here in Ontario, Canada, digital downloads are taxed the full 5% federal and 8% provincial sales taxes. It's always been like that. Americans have been fairly lucky when it comes to their tax rates so far. You guys will just have to get used to it.


RE: Hey, North Carolina...
By InfantryRocks on 1/29/2009 10:54:17 AM , Rating: 2
quote:
You guys will just have to get used to it.


Nonsense. That's why we hold elections--to root out the idiots who aren't doing the right thing or are generally ineffective or incompetent. Taxes are too high? Vote in people who will actually cut them. I refuse to accept high taxes as an inevitability that can't ever be changed.


RE: Hey, North Carolina...
By Denithor on 1/29/2009 11:26:42 AM , Rating: 2
Riiight - we're so good at rooting out the idiots.

That's why some Senators have spent 30-40 years in office...


RE: Hey, North Carolina...
By Nfarce on 1/29/2009 11:33:09 AM , Rating: 2
Well in those cases it's the idiots in the districts that keep said idiots in office. Ted "Chappaquiddick U-boat driver" Kennedy immediately comes to mind.


RE: Hey, North Carolina...
By sweetsauce on 1/29/2009 11:43:36 AM , Rating: 2
You say that, yet our "representatives" from each state continue to make 6 figure salaries while the the economy of some states are in the red. I'll never understand why we even pay people in office anything. Its a service right? If we have to pay them something, why does it have to be such a high salary? I'm sure there are plenty of people who would be wiling to represent our state for 50-70k a year. People who are way more intelligent and more qualified to run a government even.


RE: Hey, North Carolina...
By Oregonian2 on 1/29/2009 11:10:21 AM , Rating: 2
No way! We've no federal sales tax, and my state has no state sales tax!

Sales tax stay away!!!!


RE: Hey, North Carolina...
By afkrotch on 1/29/2009 11:23:17 AM , Rating: 2
Instead, these states recoup lost sales tax through increased state taxes.


RE: Hey, North Carolina...
By InfantryRocks on 1/29/2009 10:44:05 AM , Rating: 3
Because government doesn't create wealth, it saps it. Government doesn't produce, it confiscates.

Your budget is $2 billion in the red? Here's an idea: cut $2 billion from your damn budget.

Let businesses make money, hire people, invest in infrastructure, and expand to do more of the same. Taxes in NC (especially Wake County) are ridiculous as it is. This is just another money grab by politicians in Raleigh who think they know more than anyone else (the same folks who banned garbage disposals).


RE: Hey, North Carolina...
By Oregonian2 on 1/29/2009 11:16:18 AM , Rating: 2
25 years ago I used to live in North Carolina (Raleigh -- Wake County). Shoot, they even taxed me for the amount of money I had in my bank account as well as my personal possessions. I didn't have much and the tax wasn't a lot of money but it was an uncomfortable environment. Tax level where I am now likely is higher (income and real-estate tax is high) but I don't feel like they're putting me on the operating table every year to cut out 5% of my internal organs (every one) each year so that they don't "miss something" -- how I felt there.


RE: Hey, North Carolina...
By afkrotch on 1/29/09, Rating: 0
RE: Hey, North Carolina...
By RandallMoore on 1/29/2009 11:33:52 AM , Rating: 2
He's talking about obvious excess taxation you idiot. People like YOU are the reason that this government is getting so much power over the people. When we stand divided over everything guess what happens.... The gov. wins. Say whatever you want, but we are definitely taxed WAY too much.


RE: Hey, North Carolina...
By afkrotch on 1/29/09, Rating: 0
RE: Hey, North Carolina...
By RandallMoore on 1/29/2009 12:27:43 PM , Rating: 1
quote:
Okay, tell me how we are excessively taxed?


You have to be just trying to stir in shit... Here goes, everyone else help me out with this list.

Taxed when you...

Spend it.
Make it.
Save it.
Have too much of it.

Do you have a cell phone? They tax that service! FOR WHAT?
TV? that too.

Guess what?... they tax college loans as income. How fucked up is that.


RE: Hey, North Carolina...
By afkrotch on 1/29/2009 1:31:37 PM , Rating: 2
Cellphone - They sell you a cellphone. Taxed on the sale. They sell you a service. Taxed on the sale. Same as TV service.

College loans (the interest at least) are tax deductible and there are tax credits. I'd like to see who got taxed on a college loan.

Now a scholarship or grant can be taxed as it is a form of income. You are getting free money to pay for your college. The tuition and related expenses portion is non-taxable.


RE: Hey, North Carolina...
By justsomeone on 1/29/2009 3:31:02 PM , Rating: 2
College loan interest is NOT tax deductible if you make more than 65K (single) and only partially deductible between 50-65K. Yeah, that ticks me off!


RE: Hey, North Carolina...
By RandallMoore on 1/30/2009 1:52:19 PM , Rating: 2
Is that why I received a letter in the mail from the NC College board informing me that I have to claim my Stafford sub. and un-sub. loans as taxable income?? Yea, you are wrong... I don't get tax credits, and I damn sure don't get any kind of financial aid. Evidently my parents have Swiss bank accounts that I don't know of.


RE: Hey, North Carolina...
By Nfarce on 1/29/2009 11:45:01 AM , Rating: 3
Figures. It was only a matter of time before someone has a knee-jerk reaction and just retaliates with juvenile retort like "move the hell out of the US."

Not one mention of cutting spending. People need to read some of the highlights of the nearly $1 TRILLION economic "stimulus" package and what brilliance it bestows on us with our taxpayer dollars. How about $335,000,000 for STD prevention for starters?

It is an abomination that this amount of TAXPAYER MONEY be spent on such ludicrous things that in no way, shape, or form have a thing to do with stimulating our economy and actually creating jobs. It is, in essence, nothing more than a green light for a full Democrat-controlled congress to do as they wish and spend as they wish and further their agendas.


RE: Hey, North Carolina...
By sweetsauce on 1/29/2009 12:00:58 PM , Rating: 5
After watching the republicans brilliantly play that same game to get what they want passed from 2001-2006sh, you don't think the idiot democrats would eventually figure out how to do the same thing? Slap a catchy, promising name on a bill, stuff it with all the bullshit you can think of, and no one will question what you just passed. "Hey, it said stimulus package, so i assumed it would help the economy."


RE: Hey, North Carolina...
By afkrotch on 1/29/2009 12:26:35 PM , Rating: 2
Why should I mention cutting spending, when there's already tons of that in other posts.

Yes, they shouldn't have tried to sneak STD money into the stimulus package, but it'll end up in something else. Now to say it has no way, shape, or form with stimulating our economy is something else. So you're going to sit there and tell me that $335 million for STD prevention will not create new jobs for the Americans out there? How many new STD Prevention Programs will pop up? How many more companies will higher workers to make however many condoms for these programs?

My problem with it is the sheer amount of money. Sneak in $35m, sure, why not let it slide. $335 is a huge stretch. Course hey, not much different than the $10 billion a year used for combating AIDS in Africa.


RE: Hey, North Carolina...
By MrBungle123 on 1/29/2009 10:54:12 AM , Rating: 2
quote:
While I agree that spending should be cut, why should digital downloads be exempt from sales tax? Contrary to popular belief, the Internet is not a tax-free zone.


It's already taxed.

They charge me taxes on my monthly bill from my ISP.
They charge me taxes for the power I use to keep the necessary equipment running.
They charge me taxes on my house which provides me with the address I needed to get an internet connection.
They charge me taxes on the gas I used to go purchase the equpment.
They charge me taxes for working at the job that makes paying the other taxes possible.

The government can take their tax and shove it up their ass, I pay enough taxes already!


RE: Hey, North Carolina...
By afkrotch on 1/29/2009 12:08:50 PM , Rating: 3
This just feels like the dumbest arguement around. They already tax your gas that you use to drive to a grocery store to buy a candy bar. So why tax your candy bar?

There's already an income tax, so your whole income has already been tax, why should there be any other taxes after that?


RE: Hey, North Carolina...
By InfantryRocks on 1/29/2009 12:14:43 PM , Rating: 2
I don't think production should be taxed at all.

Consumption, sure, but production should be encouraged.


RE: Hey, North Carolina...
By afkrotch on 1/29/2009 1:19:19 PM , Rating: 2
The digital sales tax is for the consumption. You buy the download and you pay a sales tax on it. I'm not seeing any real big deal here.

If you buy it in a BM store, you're paying a sales tax. If you download it, why shouldn't you be paying a sales tax? As products are shifting to downloads, the state is losing it's income and has resorted to producing new taxes or raising taxes.


RE: Hey, North Carolina...
By InfantryRocks on 1/29/2009 1:47:12 PM , Rating: 2
quote:
The digital sales tax is for the consumption. You buy the download and you pay a sales tax on it. I'm not seeing any real big deal here.

Fair enough. Then they should abolish all income taxes (for starters).


RE: Hey, North Carolina...
By afkrotch on 1/29/2009 3:14:37 PM , Rating: 2
Problem with that would be lose of money for the Fed.

What they should do is have more stringent requirements for welfare handouts. Also take away more niceties from prisons. Tax gas more. Lower income tax.

It was nice to see less and less SUVs on the road during the high gas prices. Apparently some Americans didn't learn and went right back to them when gas prices dropped. Back to seeing your single person in an SUV driving to the mall to buy a single shirt.


RE: Hey, North Carolina...
By InfantryRocks on 1/29/2009 8:50:13 PM , Rating: 2
quote:
It was nice to see less and less SUVs on the road during the high gas prices. Apparently some Americans didn't learn and went right back to them when gas prices dropped. Back to seeing your single person in an SUV driving to the mall to buy a single shirt.
Please tell me your denigration of how other people go about their daily lives is just a joke. Please tell me you don't claim to be an expert on how others should spend their time and money. That would be presumptuous, judgmental, and, well, stupid.

But I'm sure that's not what you were saying.


RE: Hey, North Carolina...
By afkrotch on 1/30/2009 8:20:25 AM , Rating: 2
I never said ppl have to stop doing stupid things, but doesn't mean I won't continue calling it stupid.


RE: Hey, North Carolina...
By MadMan007 on 1/30/2009 1:46:29 AM , Rating: 2
Unfortunately the US Constitution disagrees with you.


RE: Hey, North Carolina...
By Oregonian2 on 1/29/2009 11:09:01 AM , Rating: 2
The download should be taxed if it is downloaded from a company with a physical presence in the same state (and there is a sales tax in that state -- my state has no sales tax so this is all moot for me).

Problem has to do with states taxing interstate commerce which at least in the past was illegal for them to do. Not their jurisdiction.


RE: Hey, North Carolina...
By theapparition on 1/29/2009 12:35:20 PM , Rating: 2
***PLEASE CORRECT THE ARTICLE***
I have to say this is shoddy reporting at it's best, along with most other media outlets. Despite what everyone believes, internet purchases are not tax free. That is completely false and tax is almost always due on purchases.

quote:
Problem has to do with states taxing interstate commerce which at least in the past was illegal for them to do. Not their jurisdiction.

Part of this statement is incorrect. States that charge a sales tax cannot legally force companies with no physical presence to collect the sales tax. However, most states require residents to then pay that tax. Some states require this during state income tax returns, others have mechanisms based on the "honor system" for paying tax. So in effect, states do tax interstate commerce.

In other words, the tax is still owed to the state, but that the state cannot legally force out-of-state companies to collect it like they do local merchants.

An excerpt from wikipedia: (<-I know, but it's still correct)

Tax-free shopping is a privilege enjoyed by all residents of United States jurisdictions without sales taxes, but through so-called "remote" sales -- including sales to visiting out-of-state residents, sales via catalog, and sales via Internet -- customers in a sales taxed jurisdiction may also make purchases in sales tax-free jurisdictions, notwithstanding the legal requirement to pay the equivalent (compensatory) use tax in their home state. Delaware is free of all sales taxes, including homes and cars (providing you can prove residency). For example, merchants in tax-free New Hampshire regularly advertise to residents of adjacent Massachusetts, Vermont and Maine the benefits of purchasing goods without sales tax, ignoring the fact that there is no general exemption from the use taxes when the goods are taken back home. Many purchasers are unaware of the obligation to pay the tax, or file the necessary return, or of the fact that it is not the duty of a merchant to collect it from them and pay it indirectly. However, it is the purchaser's obligation to pay it directly to the state, often in connection with filing their annual income tax return.

It just bugs me that everyone talks about tax free internet shopping, but that is just a fantasy. I know I pay my fair share of "tax due for out-of-state purchases". Does anyone else?


RE: Hey, North Carolina...
By Denithor on 1/29/2009 2:22:57 PM , Rating: 2
I've often wondered why they don't treat online sales as a sale within the state where the seller is located. Take Newegg, for example: located in California, when you make your purchase they would collect CA sales tax on the transaction.

This would be just like when I travel out-of-state and make a purchase in another state - the tax is collected at the point of sale and goes to the local governing body. This would also make it possible to collect appropriate taxes from international buyers, they would simply pay the local taxes like anyone else on the purchase.

To me this model makes a lot more sense than trying to collect sales tax based on where you live, where the package will be delivered, etc.


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