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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 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.

"A politician stumbles over himself... Then they pick it out. They edit it. He runs the clip, and then he makes a funny face, and the whole audience has a Pavlovian response." -- Joe Scarborough on John Stewart over Jim Cramer
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