California Representative Charles Calderon introduced Assembly Bill 1956 to the Board of Equalization on Feb. 13. This tentative bill may implement a sales tax on all digital property, including media, books and movies in California.
“Sales tax is generally not charged on products purchased over the internet,” said Daniel Simmons, professor at UC Davis School of Law. “[The bill] is trying to eliminate the unfairness, but of course, consumers won’t like it because it finds a way to enforce sales tax on downloaded products.”
Although this may make consumers upset, it will make online transactions fair, he added.
“Buying the same property online is not subject to tax, and that creates an unfair situation for the person who sells the tangible property,” Simmons said. “You’re buying the same thing whether you buy the song on the CD from the retailer from the store or buy the song electronically and downloading it. Equity tax level will require treating the two transactions the same.”
To use iTunes as an example, the usual 99 cent songs would be bumped up to around $1.07.
Despite the price increase, there is a low possibility of an increase in procurement of music and media by illegal means, said Anupam Chander, professor at UC Davis Law School.
“It may have a small impact on [illegal downloads], since it raises the costs slightly,” he said.
The bill is not enacting the tax, but is instead requesting the Board of Equalization to clarify and interpret the existing tax law, Simmons said.
“All this asks is the Board of Equalization to do a study and draft regulations,” Simmons said. “It’s a strange piece of legislation because it doesn’t really do anything.”
Other states have already implemented a tax on music downloads in the past, said Jesse Drew, professor and director of the technocultural studies department.
“There are other states who have charged taxes, like Texas and New Mexico,” he said. “It’s California trying to get in on the action.”
Ethical issues are also put in question due to the proposed bill.
“I think it’s moral and ethical,” Chander said. “Just because a product is delivered in an electronic form, it shouldn’t be tax-free.”
On the other hand, there may be some consequences for Internet use.
“The big companies argue that having a tax will inhibit the growth of the Internet,” Drew said. “It’s going to make people not come here for commerce.”
Consumers may try to avoid the tax by obtaining digital music from sources outside of California, Chander said.
“The problem for California is that Apple [for example] isn’t the only retail of digital music online,” he said. “[There are other sources], such as in Seattle and across the world, who are providing such services, and they may not be particularly happy to collect the tax. It would cause the consequence of making Apple’s downloads more expensive than outside of the states. This will potentially move their businesses to other companies.”
Arguments have been made as to whether or not the revenue accumulated from the tax will address California’s budget issues.
“Any new tax revenue will help, but there is always a risk that can lose revenue if it harms Apple’s income,” Chander said. “I’m skeptical that it’s a wise way to pop up our finances.”
Drew said he urges everyone to become more involved on the legislation that involves the Internet.
“It’s really wise for consumers to keep an eye on legislation that involves the Internet because far too many consumers don’t pay attention,” Drew said. “It’s time for people to really notice and put their voices into it.”
JANET HUNG can be reached at firstname.lastname@example.org.