Illinois considers taxing iTunes downloads

You can be sure this isn't going to be very popular among Millennials; Governor Quinn of Illinois is proposing legislation to subject iTunes downloads (including music, movies and e-books) to the state's 6.25% sales tax.  The proposal is one of many ideas being floated as a way to address the $13 billion budget deficit faced by the state.  But since the projected revenue on taxing $.99 downloads is only about $10 million at present, the governor's proposal seems more likely to put a dent in his political base than the budget since most Americans have come to view tax-free internet purchases as a birthright.  

From the Chicago Sun-Times:

[D]igital downloads are not taxed by state government, depriving Springfield of up to $10 million in revenues annually. But that figure could grow over time as more people download entertainment from Internet sites such as iTunes and Amazon.

'We think that’s an area where we’ve not kept up with technological change,' said David Vaught, director of Quinn’s Office of Management and Budget.

There was a time when shoppers paid the state sales tax when they bought record albums, compact discs or cassette tapes from stores, but that taxation never migrated to the Internet, Vaught said.

Under Quinn’s proposed download levy, the state would get 50 cents on the sale of a $9.99 album and 75 cents on the sale of a $14.99 movie.

But that wouldn’t happen without a fight from Republicans, who criticized the plan.

'It will be an interesting education for younger voters about the reach of the state’s treasury into their pockets,' said Sen. Matt Murphy (R-Palatine). 'I don’t suspect it’ll be well-received at all.'

A leading technology trade group also sounded off against the download tax, saying it would fuel music and video piracy and drive tech companies out of the state.

'We believe the last thing the state of Illinois wants are unintended consequences for an industry that drives growth, innovation, and leads in new job creation for our country and economy,' said Ed Longanecker, executive director of TechAmerica Midwest

Since 2007, 19 states have imposed similar download taxes, including Indiana, Wisconsin, Kentucky, Mississippi, Nebraska, New Jersey, South Dakota, Tennessee, Utah and Washington, according to the National Conference of State Legislatures.

You can read more here as well as an editorial from NBC.com-Chicago here.

Hat tip to my student Corey Friedman.

(jbl)