Sales Tax on iTunes downloads....

Article on 'Applematters', I believe indicated alot of States are jumping on music downloads for taxes. iTunes is now over 1 billion songs and they want piece of the pie. It's interesting in my State because downloaded software is not taxable but the same software purchased on CD-ROM and delivered to you is taxable.

I'm wondering if this would apply to an iTune song - after all, it is Apple's argument in their court case with the Beatles that downloaded music files are actually "digital content". I guess it could be argued that this is 'software' on that basis and therefore non-taxable for State sales tax purposes.

Any opinions?

You can't avoid death or taxes.

Many states (and provinces) tax sales of goods delivered from out of its territory. For them, a download is just another form of merchandise. If they can find a practical way of assessing and collecting the $$ they'll do it. On the other hand, rumors/stories of states planning to tax e-mail have been around for years with no implementation.

The government loses Billions of dollars a year to the black market. It has gotten even worse since the boom in internet commerce. Legally, if I purchase something from lets say, California, and have it shipped to me in Kentucky, I should go down the the sales tax office and fill out a form on my purchase, then write a check to the state government paying them the rightful taxes. Now how many times have I done that? You also see places like Dell only charging sales tax to certain states because they have physical retail locations in place already.

you have to look at your particular state's sales tax to see whether "intangibles" are taxable. Downloaded sound recordings or software are almost certainly an "intangible" under the law -- the CD you buy at store is a tangible item. For many states, trying to tax downloaded music or software is going to open up a big can of worms because of this notion of "intangibles" tax (which introduces the concept of taxing stock and other goodies).

There was a US Supreme Court case addressing an aspect of this in North Carolina: Intangibles Tax Case