State Legislature Proposes Tax on Downloaded Files

by Josh Conrad
2.22.08

graphic by Braden Boex

Ninety-nine cents has become the norm for the purchase of songs from download services such as iTunes, but for downloaders in Nebraska this price may see a change. 

A recent sales tax proposed by Nebraska legislators would raise the cost of media bought through download services. Nebraska is one of the few states that have considered applying this tax.

There is a precedent for the taxation of downloaded goods already in Nebraska. Currently, the Turbo Tax software that is often downloaded rather than bought at retail has a state tax on it, but the monetary impact of this new tax would be much greater.

According to a 2002 Nebraska Supreme Court ruling, the state is allowed to place a tax on virtual goods if the company selling them has a physical presence in the state.  Therefore this tax would apply to iTunes and the Wal-Mart music stores, because of the brick and mortar Apple and Wal-Mart stores, but not to businesses like Amazon who also have media download services.

Because the tax may only apply to certain stores, it could have a strong negative effect on iTunes.
Sophomore David Stotts is one example of a possible lost customer.

“Songs and albums would cost more and the appeal of iTunes wouldn’t be as great,” Stotts said.

With the loss of interest in iTunes, Stotts said he would follow the most logical course of action when finding a replacement.

“I would try to find a store that doesn’t have the new tax,” he said.

Companies that sell digital media are opposed to this tax because they believe that this increase will turn more consumers to illegally downloading instead of using their services. While online stores are becoming increasingly user friendly, the amount of music and movies being pirated is staying steady.

Senior Glenn McCoy used to illegally download several songs a week but recently stopped his habit.

“I didn’t feel like I was doing any harm because the songs I downloaded were songs I would never have actually paid for,” McCoy said.

He also had resentment against iTunes that would only be increased if the proposed tax was applied.

“I was mad at iTunes because I thought their prices were too expensive,” he said.

Both sides of this tax argument have a viable case for their cause, but an increase in price could cost download outlets customers.