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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 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 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
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.

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