TIMELY > TOPIC


Are you ready for ‘digital goods’ taxation?


By Jeff Arnold NACo Deputy Legislative Director


program on your smart phone or downloaded an “app” to your iPhone? If you have, you have been dealing with digital goods. Tere is little doubt that in this century how goods and services are received is changing. Education is being delivered over the Internet. One of the largest universities in the country doesn’t even have a campus. Devices such as Amazon’s Kindle have changed the way people read books, newspa- pers and other reading material. Smart phones, regardless of brand or operating system, have made digital content, goods and services avail- able 24/7 and in a mobile environment. One of the new battles facing Congress — probably in the next session — will be over


A


The Pew Research Center reports these in- teresting facts about cell phone ownership and use:


►82% of American adults own a cell phone, Blackberry, iPhone or other device that is also a cell phone. ►Texting by adults has increased over the past 9 months from 65% of adults sending and receiv- ing texts in September 2009 to 72% texting in May 2010. Still, adults do not send nearly the same number of texts per day as teens ages 12-17, who send and receive, on average, 5 times more texts per day than adult texters. ►Adults who text typically send and receive a


median of 10 texts a day; teens who text send and receive a median of 50 texts per day.


COUNTY LINES, FALL 2010


s you are reading this are you think- ing, “What in the heck are digital goods?” Have you ever download- ed an audio book, watched a TV


legislation that would preempt new taxes on in- tangible products and services, known as digi- tal goods. In this session, Reps. Rick Boucher (D-Va.) and Lamar Smith (R-Texas) have intro- duced H.R. 5649, a bill to promote neutrality, simplicity and fairness in the taxation of digital goods and digital services. Neutrality,


simplicity and fairness are in


the eyes of the beholder. Te bill would effec- tively limit local governments from taxing any of these digital goods and services differently than the taxation of tangible products, such as books, records and videos. Tere are currently 23 states that have some form of taxation of digital goods, by statute, department of revenue decree, or case law. Tey vary from state to state. Although the actual revenue impacts have yet to be calculated, congressional intervention in local taxing decisions could create a “slippery slope” for other industries looking for similar congressional action to limit local authority. NACo has not taken a specific policy position on this legislation to date, but has always op-


►5% of all adult texters send more than 200 text messages a day or more than 6,000 texts a month. Fully 15% of teens 12-17, and 18% of adults 18 to 24 text message more than 200 messages a day, while just 3% of adults 25 to 29 do the same. ►Heavy adult texters – those who send and receive more than 50 texts day -- also tend to be heavy users of voice calling. Light texters, who ex- change 1 to 10 texts a day, do not make up for less texting by calling more. Instead, they are light users of both calling and texting.


According to the International Federation of the Phonographic Industry (IFPI): ►Even though 95 per cent of music downloads are illegal and unpaid for, the digital music busi-


posed preemption of local authority. Counties must begin to look at their tax


structures as they relate to communications services and content. Most tax laws are based on antiquated regulatory structures that existed in a monopoly environment of a single phone company. Tat is not today’s world. Without changing the tax structure and rates based on the new competitive environment, local reve- nues will shrink, competition will be stifled and small businesses could bear a larger tax burden. Tis legislation is a work in progress. It is not


a panacea. But local officials need to be aware that this is but a first shot in a protracted battle over whether counties retain local taxing au- thority, or allow Congress to dictate counties’ revenue sources and subsequently reduce their ability to serve constituents with the programs they need and want. Jeff Arnold writes and speaks on behalf of county


government. He is the chief lobbyist on telecommu- nications and technology policy for the National Association of Counties in Washington, D.C.


ness internationally saw a sixth year of expansion in 2008, growing by an estimated 25 percent to US $3.7 billion in trade value. Digital platforms now account for around 20 percent of recorded music sales, up from 15 percent in 2007. Recorded music is at the forefront of the online and mobile revolu- tion, generating more revenue in percentage terms through digital platforms than the newspaper (4%), magazine (1%) and film industries (4%) combined. ►Single track downloads, up 24 percent in 2008 to 1.4 billion units globally, continue to drive the online market, but digital albums are also grow- ing healthily (up 36%). The top-selling digital single of 2008 was Lil Wayne’s Lollipop with sales of 9.1 million units - 1.8 million more than the 2007 best selling digital single.


35


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52  |  Page 53  |  Page 54  |  Page 55  |  Page 56  |  Page 57  |  Page 58  |  Page 59  |  Page 60