California Assemblyman Charles Calderon (D-City of Industry) wants to impose a sales tax on music and movies downloaded from the Internet in order to ease the states budget shortfall.
Calderon’s proposal would raise the cost of an iTunes download from 99 cents to $1.07. He believes the Board of Equalization should update a 75-year-old law that authorizes sales-tax collections on tangible personal property. Music and movies downloaded off the Internet are not considered tangible goods.
“The notion of taxing tangible, physical property is really an industrial-era construct when we made widgets and sold widgets,” Calderon said Friday. “Now it’s not about widgets, it’s about information, and selling information and moving information.”
His proposal is being criticized by Republicans who are against any tax increases to solve the states $8 billion shortfall. “One of the growing parts of our economy, tech online and Internet, is something we should encourage without having these types of taxes,” Assemblyman Guy Houston, R-Livermore told the Mercury News.
The Board of Equalization says state and local revenues would increase by about $114 million a year, while Calderon’s estimate, which would include pornography downloads, is around $500 million.
His bill, AB 1956, goes before a tax and revenue committee hearing April 14, but some members of the Board of Equalization, the regional commission that administers the state’s tax programs, have said they are opposed to the bill.
If the board were to redefine downloads as tangible property, transactions would be subjected to an automatic tax not authorized by the Legislature, which could lead to a legal challenge according to board member Michelle Steel.
“When you charge these taxes, all these e-commerces are going to move outside of California,” predicted Steel, a Republican from Orange County. “California is the high-tech state; why would you want to kick them out?”
