States historically have imposed sales tax on the sale of tangible personal property and, other than a few select services, have not imposed tax on intangibles or services. Recently, a few states have sought to impose new taxes on a category of intangible products often referred to as “digital goods” (e.g., books, movies, music, software and other services and information delivered electronically).
Download Taxes Discriminate Against In-State Companies– When a state imposes its sales tax on in-state businesses that produce or sell digital products, those businesses are put at a competitive disadvantage to companies located outside the state who are not subject to the tax. The discrimination will lead consumers to buy from out-of-state companies that can sell the same product online at a lower price, directly impacting the state’s businesses and economy.
Download Taxes Kill Local Jobs —When a state imposes its sales tax on in-state businesses that produce or sell digital products, those businesses are encouraged to relocate to more tax-friendly jurisdictions.
Download Taxes Increase Piracy– A new tax on digital goods indirectly promotes the illegal acquisition or “piracy” of downloads. The increased price of digital goods, which would result from the new tax, encourages consumers to look for lower-priced or untaxed items offered by “digital pirates.”
Download Taxes Discourage Green Practices – Digital products are environmentally friendly, taking up a fraction of the carbon footprint of their tangible counterparts as a result of the elimination of packaging and transportation. Taxing those products discourages the development and purchase of green products at a time when policymakers are focused on reducing the environmental impact of consumption.
Downloading digital goods eliminates plastics and packaging, wasteful shipping and the drive to the store. A consumer driving to a store to buy a physical CD uses almost three times the amount of natural resources as a consumer who downloads a digital copy of the same CD. According to the Recording Industry Association of America, in 2007 nearly 100 million full albums’ worth of music was digitally downloaded by Americans. In 2007 alone, more than 200 million pounds of natural resources were saved by US consumers buying music digitally instead of driving to the store for a CD. This works out to more than 380 pounds of natural resources every minute.