More States Mull Taxing iTunes, Other Digital Downloads

August 12, 2008 at 7:24 am PT

State legislators look at Apple’s (AAPL) iTunes and other digital download services stealing away business from offline retailers and you know what they see? A piggybank.

News.com reports today that at least nine states this year have considered enacting “download taxes” on digital goods–and five of those states have adopted them, including Nebraska, Tennessee, Indiana and Utah. Similar laws are already on the books in Alabama, Arizona, Colorado, Hawaii, Idaho, Indiana, Kentucky, Louisiana, Maine, New Jersey, New Mexico, South Dakota, Texas, Utah, and Washington.

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Tagged with: Alabama, Apple, Arizona, Barrons, Colorado, digital download services, digital downloads, digital goods, download taxes, Eric Savitz, frontpage, Hawaii, Idaho, Indiana, iTunes, Kentucky, legislators, Louisiana, Maine, Nebraska, New Jersey, New Mexico, News.com, piggybank, South Dakota, Tech Trader Daily, Tennessee, Texas, Utah, Washington

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Tom Marhoefer Marhoefer

It’ll be interesting to see if the Kindle “project” is Amazon’s “no CA tax” downfall.

Given that the Kindle was designed in California, by Californians, and bought and used in California, by Californians, it will be hard for Amazon to argue against having to collect overall state sales tax based on Lab126′s “subsidiary” status:

“The CNET piece notes that current law only allows states to tax company’s with a physical presence with the state’s borders; ergo, California can only tax Amazon.com purchases is they can show that Amazon has facilities in the state.”

Lab126, an Amazon.com company, is an innovative consumer-focused startup company located in Cupertino, CA.

We design and develop easy-to-use, highly integrated consumer products to serve Amazon customers.

Our latest innovation is Amazon Kindle, a revolutionary portable reader that wirelessly downloads books, blogs, magazines and newspapers to a crisp, high-resolution electronic paper display that looks and reads like real paper, even in bright sunlight.

Read all about it at http://www.amazon.com/kindle.

http://lab126.com/
Tom Marhoefer

TechCrunch notes that Amazon’s Lab126 has been “in business” since at least 2004, so Amazon’s California Tax Liability could be massive:

“A search for Lab126 on LinkedIn brings up a bunch of employees, including president Gregg Zehr (who previously did stints as a VP of engineering at PalmOne, VA Linux, and Apple). According to his profile, Lab126 started way back in 2004…”

http://www.techcrunch.com/2008.....-going-up/

As a note, yesterday TechCrunch corrected their earlier report that stated Amazon had sold 240,000 Kindles.

TechCrunch is now backpedaling that report to state that Amazon has received 240,000 Kindles into inventory.

Units accepted into inventory, verses units sold to customers.

Two far different things, indeed, even though Citigroup analyst Mark Mahaney used this thin data point to take his unit forecasts into the year 2010.

Which took the stock up near 10%

WTF?

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More States Mull Taxing iTunes, Other Digital Downloads

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