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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 JasonMick on 1/29/2009 10:44:31 AM , Rating: 3
This will probably get me blasted, but I wanted to play devil's advocate and mention that in a "socialist utopia" theoretically you would need little taxation as the government would own businesses and assuming that they were well managed and prosperous they would yield profits that would fund government programs rather than going to the pockets of investors. So they in theory could LOWER taxes.

Of course socialism in Europe and elsewhere hasn't been so successful at this and generally the products of government owned businesses and the management quality are both poorer than the free market offerings. Taxes in these regions, further, are in fact higher, typically, than before such policies were adopted. And the same could be said of "hard socialism" like Cuba, the former USSR, China, North Korea, or Vietnam.

I guess we'll wait and see about the U.S. now that Bush has brought socialism to our country in his waning days with the government takeover and Fannie May and Freddie May and bank/investment firm/auto bailouts and loans. President Obama seems likely to continue the advance towards mild socialism, which seems to be generally quietly supported by both parties. I'm not ruling on whether it will succeed in the U.S. yet, despite it not succeeding elsewhere, merely adopting a wait and see approach because I really don't know if it will work.

The sad fact about governing systems is that they all come up short of their potential. Mildly regulated capitalism w. a democratic republic form of government sounds great, but it comes up a bit short due to greed and bureaucratic efficiency. Socialism sounds even better, but comes up even shorter, largely for the same reasons. Sadly, no government system will be that good until someone invents a cure for greed, egos, and sloth.

RE: Hey, North Carolina...
By mdogs444 on 1/29/2009 10:47:41 AM , Rating: 1
the government would own businesses and assuming that they were well managed and prosperous they would yield profits that would fund government programs rather than going to the pockets of investors

I know Jason isn't actually saying that our current forms of partial socialism work in the US, but before someone does...

Lets just point out Fannie May/Freddie Mac. Everything the government touches turns to shit. They can't even balance their own checkbook, yet some people want them to be responsible for all of our daily lives? Give me a break. I think I'll turn to myself instead. Personal responsibility.

RE: Hey, North Carolina...
By superflex on 1/29/2009 1:41:13 PM , Rating: 2
Personal responsibility in a liberal sense: YOU are responsible for making sure the dickhead on the street corner who's too busy drinking and smoking his life away has access to free healthcare, food, shelter and digital TV.

RE: Hey, North Carolina...
By crafty on 1/29/2009 3:36:27 PM , Rating: 1
That dickhead on the corner is in pretty close proximity to you. He might go ahead and kill you and take all your shit. That is certainly the rightwing approach to things.

RE: Hey, North Carolina...
By InfantryRocks on 1/29/2009 10:51:23 AM , Rating: 2
I was being very facetious in my use of "utopia." Raleigh, in particular, and Wake County, in general, has a huge population of folks from New York and New Jersey. I lived in Raleigh for 15 years and saw the steady rise of taxes on everything under the sun, strong regulations that stifled business' abilities to accomplish much without bureaucrat's blessing, very little in the way of payoff for all of the above, and, despite the negative effects, more and more leftist pols being elected to office.

They ruined their areas, then they escaped to ruin ours. Sad, really. Raleigh used to be a very nice place to live.

RE: Hey, North Carolina...
By Denithor on 1/29/2009 1:45:24 PM , Rating: 2
So that's why NC voted Democratic this time around.

RE: Hey, North Carolina...
By InfantryRocks on 1/29/2009 1:54:46 PM , Rating: 2
You have NO idea.... :o)

RE: Hey, North Carolina...
By RandallMoore on 1/29/2009 11:13:06 AM , Rating: 1
Did you seriously just write the fucking sentence "Bush has brought socialism to our country" ? Are you serious? I guess Bush is the evil man with the pitchfork that makes all of the countries decisions while congress sits back and drinks tea... If you want to add something intelligent to the topic, do something like blame the entire cause of the problem rather than jump on the Bush Bash ban wagon at every chance. The last 6 years He was in office, he had no power over anything. Period. Everything he tried to do was shot down by congress, so you can start blaming them for our downward spiral, not him alone. Damn I'm tired of the Bush hating game.

RE: Hey, North Carolina...
By superflex on 1/29/2009 1:43:38 PM , Rating: 2
Without Bush bashing, Mick would have noting to write about.

RE: Hey, North Carolina...
By Denithor on 1/29/2009 2:25:07 PM , Rating: 2

RE: Hey, North Carolina...
By crafty on 1/29/2009 4:02:40 PM , Rating: 2
Norway has a massive budget surplus, healthcare and housing for all of its people. Their government's problem right now is that they have too much money and they don't know what to do with it.

The northern European countries come out on top on most major indexes of livability and they are all socialist economies. I'm not saying that socialism is the way to go, but capitalism is probably the most overrated and destructive economic ideology in human history. That doesn't mean some achievements that came out of it weren't objectively good, though their cost was very high in lives and human misery.

Through deregulation and a dismantling of the New Deal, Republicans ca. 1980-present have been attempting to turn back the clock to America as it existed economically in the late 19th century. I am telling you now that people are not willing to live in those conditions again with homeless orphaned children wandering the streets of our cities and open sewage in the tenements. Go to the slums of some third world country and see how Americans used to live. Go to the factories in China and see how Americans used to work.

We are not going to turn back into slaves that live in slums. Sorry, but if rich people try to force that down our throats their heads are going to end up on pikes. All the so-called libertarians on this board, whose association with liberty ends with their endorsement of corporate power, should wake up and find their self-interest isn't in allowing the rich and the wealthy to control our destiny.

RE: Hey, North Carolina...
By supergarr on 2/2/2009 5:43:54 AM , Rating: 2
Norway... the bottom bracket of income taxes is at 28%. They have a wealth tax (a tax on all of your assets) as well as this income tax, which goes up percentage wise as you go up the brackets. There is also an addtional 7% in social security tax. The wealth tax is anywhere from 0 to 1% and their sales tax is a whopping 25% tacked on all goods and services including imports!

These reason they have a surplus, is because they rape the wallets of their people.

And china is communist, what do you expect.

"A lot of people pay zero for the cellphone ... That's what it's worth." -- Apple Chief Operating Officer Timothy Cook
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