Wisconsin Imposing 5 Percent Tax On Digital Downloads

Andy Chalk

One Flag, One Fleet, One Cat
Nov 12, 2002
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Wisconsin Imposing 5 Percent Tax On Digital Downloads


Gamers in Wisconsin [http://www.wisconsin.gov/] are going to have to cough up some extra cheese for their DLC following a decision by the state to impose a five percent tax on all digital download purchases.

The new tax will cover a range of "digital products" including music, ring tones, videogames, digital books, electronic greeting cards, digital art and more. The roughly $10.9 million the new tax is expected to raise between 2009 and 2011 will go toward trimming the state's $6 billion budget deficit. Yes, billion; the impact of this new tax will obviously be neither immediate nor statistically relevant.

Nonetheless, State Senator Kathleen Vinehout said the new tax was necessary to bring Wisconsin into the modern age. "One of the problems we have with the tax code is that it doesn't grow with the economy," she said. "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."

Jessica Iverson of the Department of Revenue [http://www.revenue.wi.gov/] concurred. "I think it's more about the modernization of the tax law to keep up with where technology is," she said, adding that the new tax will "level the playing field" for companies who have to compete with other business that don't charge sales tax.

But State Representative Scott Suder claimed the tax would be an unfair burden on "those who can least afford it," saying, "It's basically taxing students to fill in the Doyle budget shortfall, and I think that's unfair." Fellow Rep. Jeff Smith also questioned how the government would collect the taxes, saying, "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."

I don't think it's as complicated as he suggests; simplistically, the tax could simply be charged to the seller based on the state of residence of the purchaser, much as is done with online purchases of "real" products. Specifics points regarding the implementation of the tax do need to be addressed but of greater concern in my eyes is the potential impact it could have on the digital marketplace. The last thing needed by content providers struggling with rampant piracy and file sharing is yet another disincentive to buy their products legally. It's only fair to render unto Wisconsin that which is Wisconsin's but it would be nice to see some concern given to a segment of industry that in many ways is still fledgling.

The new tax is set to take effect on October 1.

Source: Joystiq [http://media.www.spectatornews.com/media/storage/paper218/news/2009/02/26/CampusNews/Digital.Downloads.Get.State.Sales.Tax-3649167.shtml]

(photo [http://www.flickr.com/photos/31333486@N00/1731744159/])


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Cousin_IT

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Feb 6, 2008
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6billion dollar defecit? I hope they got some better ideas lined up then this digital tax (which while perhaps a slight annoyance is an unsurprising inevitability)
 

Ago Iterum

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Dec 31, 2007
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Every single person in the world could pay you a dollar, and you'd be fine.

Unfortunately, half the world hate the US... Digital downloads, even with the added 5% will still be cheaper than things in stores. We won't lose too much money.
 

Yog Sothoth

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Dec 6, 2008
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It's only a matter of time until this is ubiquitous...

I do, however, foresee a lot of Xbox Live and PSN users changing the state of their residence claimed in their account details....
 

the captain

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Nov 20, 2008
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Well, I guess it's a good thing that noboby legally downloads shit anymore. Kinda hard for the gov to keep track of limewire.
 

Sigenrecht

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Mar 17, 2008
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I can't even imagine how a state like Wisconsin has a $6,000,000,000 budget deficit. This country runs on money that either doesn't exist, or doesn't belong to us.
 

KaZZaP

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Aug 7, 2008
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That picture of the cat with cheese on its face rocks, I didn't even read the post I just had to comment on the pic.
 

Royas

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Apr 25, 2008
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I'm really wondering how they plan to collect this. If the seller is out of state, Wisconsin can't really force them to collect it (otherwise, online retailers would already be collecting sales tax for every state in the Union). And I don't see any way to force the buyer to pay either, most are just not going to tell the state they are downloading anything. It's a law that can't be enforced as it stands, and that makes it a bad law.
 

Playbahnosh

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Dec 12, 2007
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No wonder piracy runs rampant, when they are taxing the fucking digital downloads!! The only service that was reasonable enough to give up piracy for, now they've done it... congrats Wisconsin...
 

Bruiser80

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Feb 27, 2009
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We've got a Governor that thinks raising taxes on business is the way to get more business in our state. He's completely sold out to special interests. Taxes go up, but spending goes up faster.

But I digress. Wisconsin for years has been deferring money into the next fiscal year (paying schools the second half of their operating budget after the end of the fiscal year), and this might be a sign that things are finally catching up to that policy.

We have built up a 6 Billion shortfall. That's about $1000 per person in the state. If I wasn't born and raised here and all my family lived here, I'd probably look for greener pastures.

It is pretty amazing that our state is in the top 1/3 of composite taxes of all states (sales, income, property, fees, etc), and we still manage to burn through all that money and can build up that big of a deficit. It's not like we were hit with the housing collapse nearly as hard as other states. Sigh.

As for the digital tax, what keeps a user from falsely stating their home state? Will this tax be on the honor system? Will your credit card or paypal account send info to the state? There seems to be work-arounds for any approach they try. I doubt they'll go after people for tax evasion for $20 :)
 

luckshot

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Jul 18, 2008
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senator a:we have a huge deficit!! what do we do?

senator b: stop spending more than we currently take in from current taxes?

senator a&c: HAHAHA! good one b, lets just tax the hell out of everything, lets start with internet downloads, then we can talk about putting parking meters inside the parks