Digital downloads get state sales tax

Those 99-cent music downloads will see a bit of a price jump later this year once a state “digital products” tax goes into effect.

Gov. Jim Doyle approved imposing a 5 percent sales tax on a number of digital goods – including music, ringtone and video game downloads – Feb. 19 as part of a bill aimed at narrowing a $6 billion dollar state budget deficit. The new tax will go into effect Oct. 1.

“One of the problems we have with the tax code is that it doesn’t grow with the economy,” said state Sen. Kathleen Vinehout (D-Alma). “Right now we’re moving into a whole new world of products that are transmitted over the Internet.

“It’s part of keeping up with the times – part of modernizing our tax code.”

State Rep. Scott Suder (R-Abbotsford) disagreed and said the tax will “target those who can least afford it.”

“It’s basically taxing students to fill in the Doyle budget shortfall,” Suder said, “and I think that’s unfair.”

The digital products sales tax is expected to raise about $10.9 million for the state between 2009 and 2011, according to a summary of the budget deficit repair bill.

The summary statedthat a 5 percent sales tax would be imposed on “specified digital goods” such as digital audio works – which include ringtones – digital audiovisual works and digital books.

Other now-taxable items, if transferred electronically, include greeting cards, artwork, periodicals and video games, according to the legislation summary.

“I could see where it would be beneficial . because of the recession and everything,” said freshman James Stupka, who said he downloads more video games than music, “but I personally wouldn’t like it.”

Stupka said he also wondered how the state could enforce the new tax.

“It just doesn’t make sense to me,” he said.

State Rep. Jeff Smith (D-Eau Claire) had similar questions about the state government’s ability to monitor the new levies.

“I don’t know how we as a government are going to, at this stage anyway, audit somebody’s downloads so that we know what they owe in taxes,” Smith said.

Echoing Vinehout’s comments about the need to update the state’s taxes, a state Department of Revenue spokesperson said the new music and ringtone download taxes are meant to bring the state’s tax law up to speed with the growing technology.

“I think it’s more about the modernization of the tax law to keep up with where technology is,” said Jessica Iverson, who added the digital sales tax will “level the playing field” for businesses in the state who have to compete with other companies that don’t have to charge sales tax.