Warning – Video May Not Be Safe For Work
They say in life only two things are certain, death and taxes, but since the birth of the digital revolution, the internet has been a tax haven for many businesses and consumers alike. The justification for not taxing goods ordered through the internet has been that since the technology is still relevantly young, Congress should give it every advantage to succeed so that innovation is possible. In the latest sign the internet may be coming of age, the state of New Jersey has decided to institute a tax on music and movies downloaded over the internet.
While it’s important to support your local government, I have to question the rationale behind this tax. If free municipal internet access was a reality, I could see some rationale for taxing downloads to help pay for the cost of muni wifi, but free net access is still a pipe dream for many municipalities and I don’t see New Jersey leading the nation in bringing free broadband access to their citizens.
What troubles me about this tax is that it will likely stiffle the development of downloadable movies and music and instead force companies to look towards loopholes in the law to get around the new 7% downloading penalty. In my mind, there are still many unanswered questions about how businesses will react to this latest development, but I could see downloading taxes encourging businesses to only offer streaming content or only offer ad supported content in order to get around the tax. I also think it will be problematic to police this tax. It’s easy enough to flag someone’s account if they pay with a credit card registered in New Jersey, but what about people who use paypal or gift certificates to get around the tax? Theorhetically, someone could use an anonymous proxy and New Jersey would never even know that they would be entitled to a tax for their internet activity. Would this qualify as tax evasion and could someone actually go to jail for hiding their identity online? These are important questions that New Jersey residents may be forced to look more closely at.
Movie and music downloads are becoming a big business, but it’s a business that is clearly still in flux and is definetely still in it’s infancy. To already be looking at implementing sales tax for digital files will only suppress innovation and delay the transition to a digital world.