Forbes reports that the state of Iowa is considering a tax on digital content sold online. They are far from the first to do so.
Iowa is the latest state considering the introduction of a sales tax on digital products such as e-books and software. Today, state legislators and Iowa Department of Revenue officials met to discuss the proposal, which would result in a tax on digital products sold by companies with a nexus, or significant physical presence, in the state. It would affect retailers such as Barnes & Noble and Apple, which both sell e-books online in addition to making sales of physical products from brick-and-mortar stores.
Downloadable digital content is still exempt from taxes in some states (Virginia, for example), but even so this is not exactly a new idea.
Pennsylvania has reportedly been assessing a sales tax on online digital content since August 2016, and the state of Washington changed its tax laws in 2009 to specifically cover downloaded music, movies, ebooks, and apps, as did Kentucky, Wisconsin, and Vermont. Other states including Texas, Arizona, Indiana, and Maine rely on existing laws by defining digital goods as “tangible personal property.”
That tax issue has come up in ebook circles every so often over the years, but it is still relatively unknown. Few may know this, but Amazon has in fact been collecting sales tax on some ebook sales since some time in 2010.
As you may know, under the agency pricing model ebook retailers are regarded as agents for publishers. When the Price Fix Six adopted agency in 2010, Amazon started collecting sale sax on any agency-priced ebook sold to a consumer in a state where its publisher had a nexus.
That collection policy changed as publishers lost and regained agency, but during all that time some readers have been paying sales tax on their ebook downloads.
B&N should already be collecting sales tax on ebooks in a number of states, and the same goes for Amazon. The latter is currently collecting sales tax in 24 states and the District of Columbia.
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So tell me, have you paid sales tax on ebooks yet?
image by Dave Dugdale