Coffee Talk #129: Should Digital Downloads Be Taxed?

RPadholic tokz_21 sent me this interesting article on digital downloads being taxed. The article focused primarily on movies and music, but it could easily apply to games as well. I don’t know what the deals are in the states you live in, but in California downloadable goods aren’t taxed. On one hand, I save some money. On the other hand, I do feel like I’m cheating (just a little bit).

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RPadholic tokz_21 sent me this interesting article on digital downloads being taxed. The article focused primarily on movies and music, but it could easily apply to games as well. I don’t know what the deals are in the states you live in, but in California downloadable goods aren’t taxed. On one hand, I save some money. On the other hand, I do feel like I’m cheating (just a little bit).

Obviously nobody wants to pay more money, but I wanted to see if you think digital downloads should be taxed. Be honest! Should downloads be treated like other goods you buy? Or should the state be hands-off? Do you feel like you’re depriving your state of funds by purchasing digitally or through online retailers that don’t charge tax? Leave a comment and let me know (please)!

Author: RPadTV

150 thoughts on “Coffee Talk #129: Should Digital Downloads Be Taxed?”

  1. @Ray

    Do you pay tax on Itunes purchases? XBL points?

    I think the law is good on this one. Unless the entity has a presence in the state, it is exempt from collecting a state sales tax.

  2. @smartguy I don't pay tax on iTunes purchases, but last time I checked Apple was still at One Infinite Loop. XBL points, it depends on how I buy them.

  3. On one hand, I think it would be too complicated. Let's say you have a phone registered in NY and you're on vacation in Oregon where there is no sales tax on anything. Who do you or don't you pay when you download whatever App your downloading on your phone?

    Ultimately, I'd say no because there is nothing physical in the transaction.

  4. @ Smartguy

    Some places tax the cards, others don't. I complain when they add the tax every time, and then don't buy them there anymore.

  5. @N8R

    Correct, it's similar to a service transaction.


    Odd. Are you using an itunes card?

  6. @rpad

    Thank you for the mention.

    I don't like the tax, the state of Illinois doesn't do anything to provide the service. Apple for this example does all the work. They've setup the itunes store, figured out how to get into our computers, ipods, iphones, and ipads. The state of illinois shouldn't have any authority to tax on something that is not physically sold to or shipped to someone in Illinois. At my job we only tax two states IL and CA but if the company doesn't ship their order to these states then they are not charged for sales tax. It's bad enough we get charged entertainment tax in Chicago for any sports games, plays, shows, movies, and even for watching tv via cable or any other telecomm service. We also get charged for buying bottled water too. *end rant*

  7. @Ray

    I had to take a whole semester long class on VAT. It was an international class. I have conflicted views on VAT. I think it works well for business, but the end user consumer seems to take the hose on that one. (much like now granted).

  8. people pay for the stuff they download?

    im such a pirate i was featured on "deadliest warrior" where i was able to defeat an english knight

    seriously, that deadliest warrior is a badass show, its not completely accurate, but still completely awesome

  9. @thundercracker

    Who did they have vs the Navy Seal? Also was the Seal's primary weapon a carbine rifle?

  10. @thundercracker

    Well sometimes i pay for things i can't find. Oh yeah thanks for that. If the state of Illinois passes this law, i can see more people pirating the hell out of music and movies in Illinois.

  11. I'd like to see Deadliest Warrior do the Justice League vs the X-Men.

    Yeah, I'm a nerd, I know… but I vote JLA.

  12. i wanna see kiper vs mcshay


    i dont know dude, i work nights, didnt get to see it


    give me an example of "something you cant find"…also, im not knocking people for paying for things, thats the right thing to do actually, i buy a crap ton of blu rays, but for everything else, its demonoid

  13. When the PSN cards first came out stores here in Texas were charging tax on them so a $50 card was costing me $54.13. Then one day it just stopped. I am still taxed on all of my PSN purchases. $0.99 downloads cost $1.07. So I am so used to paying sales tax on stuff I just automatically figure its more than it says from the get go and I am more surprised when I don't get charged tax than when I do.

  14. @n8r

    that wouldnt even be a fight

    superman himself could take the xmen…he may need to stay away from rogue though..maybe laser vision from a distance?

  15. @ tokz

    I still suggest that the only fictional character that could pose a threat to Superman would be Darth Vader. That would be a good fight.

    So, Deadliest Warrior… Superman vs Darth Vader… discuss.

  16. @ Thundercracker

    I think if Rouge and Colossus tag teamed Superman, they could at least render him ineffective for a little bit… but then there's Batman and Green Lantern to worry about while Aquaman is off talking to fish.

  17. @thundercracker

    a lot of Spanish artists, like mago de Oz, los de abajo and los tigeres del norte. I've found most of the english artists i'm looking for but spanish ones are hard.

  18. @ tokz

    Vader could also have the Death Star take out the sun… and then where would Superman be?

  19. @ Ray

    I was mainly thinking Vader vs Superman… but Avengers vs JLA works too… but I don't think it's as debatable either.

  20. However…

    It's plausible that Superman could take down the Death Star by himself before it had thae chance to take out the sun.

  21. @n8r

    that would make a great poll! the Jedi Council vs. JLA! I want a Deadliest Warrior on that!

  22. @topic

    My stance on all tax is that you should be able to choose what the tax money goes into. If they are going to take my money, I want to make sure it goes where it is needed. Living in Memphis has taught me to question every dime the government gets.

  23. Dude the Jedi Council would destroy all if they were such pussies. Ok they don't hit first but get the last hit kind of thing.


  24. I think Batman would bust out some bat-force repelling armor to help fight off the Jedi.

  25. @rpad

    hahaha! What about Kit Fisto!

    @Big Blak

    Sith Lords would lose! There can only be two. A master and an apprentice. The JLA would wipe the floor with them. As a matter of fact I think the Super Buddies would win that one too. Maybe even the Teen Titans.

  26. @ Big Blak

    The problem is… there's not enough Sith Lords to make an even competition.

  27. @Sith

    Not true. The Sith can have as many apprentices they want. Palpatine (sp?) had 4 apprentices alone. If you count Darth Raven, the Sith would easily out number and out power any member of the Jedi order and JL.

  28. @ Sandrock

    That's the point… it's kind of Batman's M.O. First, he tries the tried and true methods that work on your average Gotham thugs. When someone stronger comes along, he takes a beating, retreats to the Batcave, comes back with everything he needs, and then fights a good and usually winning fight.

    So, I suggest he would go for the batarang/tie them up combo, fail, retreat to the Batcave, and come back with the Bat-saber and force repelling Bat-armor (which he already had made just in case).

  29. @n8r

    Hahaha. How long of a story arc do you see that happening in? I say that's a 6 issue arc.

  30. @N8R

    Batman would leave on a journey for a few months, train under a Sith, and come back on equal ground with the Jedi. Force Bat Powers FTW.

  31. @ tokz

    I say 6 or 7 full graphic novels. Maybe 40 issues all in all.

    @ Sandrock

    Training under the Darkside would violate his Bat-ethics. He'd have to go to Dagobah and fool Yoda into thinking he's just Bruce Wayne and not Batman.

    Also… the design for the Bat-saber I see in my head is SICK!

  32. @thundercracker



    hahaha. I don't think Yoda would fall for it. Wow you're saying it would take Batman 40 issues to help beat the Jedi council.

  33. @ tokz

    No… I meant the whole JLA vs Jedi council saga. But force training does take a while.

  34. @n8r

    i see. Ha! Aquaman rallying the Gungans with the help of Jar-Jar for comedic relief.

  35. I can't believe Comedy Central censored Southpark. All because that muslim website threatened death. They are way too touchy about their prophet. Hell, they make fun of JC all the time. Ridiculous.

  36. @ Smartguy

    Damn dude, you're praying like a girl locked in a bathroom with Ben Roethlisberger, aren't you?

  37. @N8R

    Fans picked it, not EA. He's safe. Besides, Fitz had a good year last year. It's over.

  38. @BigBlak

    It's ridiculous. These guys say some crude crap and people rush to do their bidding to avoid some conflict. In a way, I hope christians ask that JC be censored and not mentioned by name. Hell, it would only be fair.

  39. No Fitz didn't get injured last year but I think his numbers took a nose dive*

    *tentative post until further research is done by me.

  40. @Topic

    I already pay taxes on itunes downloads, so that is nothing new to me. I don't always like it, but I would be taxed for buying the hard copies of any of that media I don't think about it too much. I could understand paying taxes on game downloads, I don't like it, but I could understand if it happened.

    The way that I would really be against it is if it changed something with buying XBL points. I think I am ok with paying taxes on itunes because it is just straight cash, and I don't have to think about having the correct amount of points before or after a purchase like I do when I buy something on XBL. I still have not really bought anything on XBL that was not in an increment of 400 MS points. If taxes would mess that up on XBL then I'd be against it. They would have to change the prices a little bit to make the price+tax= any price that is an increment of 400 MS points.

  41. @BB

    97 receptions, 1,092 yards, 13 TD, Pro Bowl. Not a bad year at all man. I'd say he was unaffected.

  42. @bsukenyan

    They could just tax you on the front end. If they tax your points purchase, they shouldn't be allowed to tax it again. That and I think there is a law against taxing non federal money.

  43. @Sandrock

    As long as my points balance is not thrown off. I know that probably sounds a lot like I'm just agreeing to it for my own convenience with my points balance. But I wouldn't be agreeing to it if I didn't think that it was fair for digital downloads to be taxed. If taxes jump drastically then I would probably be a little more against this.


    I don't know if the statewide tax rate is 10% for Illinois, or if that is just a Chicago thing…but do you know which rate you would have to pay on digital downloads if they become taxed?

  44. @bsu

    the tax percentage in chicago is 10.25% yet we're still in a deficit in the billions. Daley has sold off our skyway, parking spaces, and meigs field but chicago is still short. Something is happening to our money and i want answers! The download tax would be 6.25% but im tired of getting taxed for everything. Theres a liquor, cigarette, bottled water and entertainment tax. What else is next after digital downloads? Air?

  45. @ Smartguy

    How sure are you that the curse is over? Would you be willing to rock the Rainbow Brite avatar for the rest of the season if he DOES get injured?

  46. @N8R

    An injury doesn't mean the year is a bust. Eddie George supposedly succumbed to Madden curse because he fumbled….VY missed 1 game and took his team to the playoffs. The episode of him going a bit crazy was the curse….the following year. Sanders retired.

    @BB and N8R

    So a receiver who catches 13tds, has over 1k yds receiving and almost 100 grabs is so so for you two? His numbers were the same as Moss and Ward pretty much. Ward has considerably less visits to the endzone and Moss had 3 or 4 tds in that one game against Titans. Speaking of 2009 stats. You can argue that his production would have been a lot better if Boldin wasn't injured.

  47. @smartguy

    I agree but i love it here, there are probably a few places i would move to permanently that is Boston, the L.A. area or S.F. but everywhere else is kinda meh to me.

  48. And… for as much of a Steeler fan that I am… I don't think there should be a season that Hines Ward has better stats than Larry Fitzgerald.

  49. Ward total = 1561 6td 95 catches

    Fitz = 1387 13td 97 catches

    Good season for both.

  50. @ Speaking of the Cardinals… They apparently contacted the Steelers today about a QB.

  51. @ Smartguy

    Honestly (as in truly honest)…. I have more faith in our front office than any one single player on the team. The Rooneys have led us to be the the most dominate franchise in the history of the league… I can't knock that the way I could piss on Bob Nutting (owner of the Pirates). Whatever they decode to do I'm sure is best for the franchise.

    We struggled with QB issues throughout the 90's and still made the playoffs just about every year. I doubt Dixon is as bad as Kordell or Bubby Brister was… and the team still made the post-season most of those years. Neil O'Donnell wasn't that great either. Ben's first 2 years were amazing… after that, he started slipping off. I think he still has some good games in him, but if we part ways, it will be for a good value. Whatever that is, I'm sure will be worth it because… the Rooneys aren't idiots.

  52. This year is looking even better for the Falcons. We play the Steelers week 1 when Ben is suspended and Drew Brees is on the Madden cover. Fitz didn't get hurt but look at Troy.

  53. @tokz_21

    Microsoft removed the processor that calculates the info gathered from the cams/mic. The 360 will have to do the calculations for it. That is why Microsoft isn't promising backwards compatibility with Natal. Also, Natal won't know what game is on the TV. It can't see the TV. The only way for it to know is for the game to air through the 360.

  54. @sandrock

    Yeah i could see that happening since PS3 just announced the MLBtv deal. So the 360 should get the NFL deal sometime soon and then the apocalypse will be happening when Natal launches.

  55. @ RROD

    Week 1

    @ Smartguy

    Week 8

    @ Big Blak

    Week 10

    @ Iceman

    Week 7

    @ Thundercracker

    Week 12

    Nightshade and Shockwave

    You guys are in the clear.

  56. All this talk about football and it's only April! I'm ready for it now! Hey we should get a fantasy league going.

  57. @tokz_21

    Consoles can revitalize the film industry. I would honestly like to see cable/satellite go away. These services complain about not enough bandwidth, when they refuse to transfer data in an efficient manner. Why most they stream 200+ channels to millions of houses at the same time? If they stream one channel at a time, like how PSN/Live do, then they could cut their bandwidth usage down more than 200%. They could then offer better speeds to the channels themselves (improving image quality) and to the customers.

  58. @sandrock

    I totally agree. They give us this shyte about not being able to order individual channels but i know it's some bs. I know they can just feed me sports channels if that's the only thing i want to see. they just want to be able to justify their price by saying you get all of these too, not just the ones you want. If they would stream movies out in theatres directly to me in via a console i would watch a movie at home rather than go out to the theatres.

  59. @Tokz

    Yeah those are some pretty harsh tax rates!! I'm with smartguy, time to move out of the city. I can understand not wanting the taxes on everything, but I do also see how it is a product which is taxable. So I'm not surprised that they are trying to tax everything now.

  60. @bsu

    i dont see how a digital download can be taxed. Its not a physical medium, apple or any other company doesnt have a store physically in the state of illinois. Theyre just trying to tax something thats popular but it will lead to more piracy and will set a precedent for other taxes.

  61. @Tokz

    (For the sake of argument) If the digital download is not a physical medium, than neither is any other intellectual property, therefore it could be argued that there should be no rights on intellectual property. However, technically speaking the media does take up physical space on your hard drive (in my opinion). The code written to create those pieces of media takes up physical space I think, which validates having taxes that would normally constitute physical property…But you are absolutely right that it will set a [possibly dangerous] precedent for other taxes.

  62. @Tokz

    Oh I completely understand…I already don't like when I have to pay 7-8% tax instead of the 6.5% that I'm used to. So I am sure that 10.25% is a tough pill to swallow for everything.

  63. @ Body Slam

    You already paid the sales tax on the HDD space when you bought the HDD. As for say… a song on a CD, you don't pay tax on the song itself, you pay taxes on the physical CD. A movie on a DVD plays the same role. A story in a physical book… same deal.

    If they make you pay for downloading the song, movie, or story, they are kind of taking you twice since you already paid the tax when you bought the HDD.

  64. ^^^That's a shocker. Jimmy Clausen was there. Tim Tebow will be another Reggie Bush, you'll have to add his Passing yards, rushing yards, and special teams yards to get only half of what real QBs simply pass for.

  65. If I'm not mistaking, Denver gave up a 2nd, 3rd, and 4th round pick to jump up to get Tebow. FOOLISH!!!

  66. @N8R
    As a big steelers fan, how would you feel about getting rid of him and going with either Dixon (who I think has talent) or drafting a rookie?

  67. @tokz_21
    Natal doesn’t even have enough computing power to handle itself. Plus, how is Natal going to know what team you are routing for if you aren’t watching the game on your 360. (not possible at this time)

  68. @sandrock
    I think you missed the last part of this article.
    Natal could know which team you’re for because it sees your jersey, or knows you thought a bad call was made when you yell ‘boo.’ It learns about you and gets smarter to create a more tailored entertainment experience.”

  69. @tokz

    So true. If it wasn't for McDaniels, Jay Cutler and Brandon Marshall would still be there.

  70. my draft predictions so far are spot on….now when we get claussen tommorow, imma seem like a genius

  71. @N8R

    I understand your point, but you are buying separate physical objects. Like I stated in my post to Tokz, the example of a song can be applied to this same situation. The song may not be physical in the sense that we can hold it like we can with a CD, but it takes up space on your hard drive. The hard drive is also (not as debatable) a physical object. You are paying for both objects.

    You are still paying for a benefit, with the hard drive you are purchasing the benefit of having free storage space for whatever you would like to put on it from your computer, and then with the CD or digitally downloaded song you are purchasing the benefit of having a constant copy of a song or clip of audio that you can play at any time.

    Either one of those things are benefits that the consumer desires to have, and I would argue that both are physical products, therefore while in many cases I can understand how it feels like you are paying twice for something. Those payments are both going to different places in many cases, because they are for two different objects from two different companies, for two different and separate physical products.

  72. @Tokz
    We need at least 10 teams. Be fun though

    Halloween night man. Poor steelers.

  73. @ Bsu

    The song is not an object… it's 1's and 0's. Think about the sticky situation we'd be in if they start taxing 1's and 0's.

    The money you pay for the song and the HDD go to 2 separate places… but the tax for both go to the same place/places.

  74. @RROD

    Jamarcus Russell and Tebow are leagues apart and you know it. What is the problem with me hoping a good college player, whom I like, has a good career? If at any case he'll be just as good as Vick was with Atlanta. I'm pretty sure you were a big Vick fan.


    Looks like Sharper has been replaced by last year's pick since we took a new nickel corner. Good vet free safety on the market for you now. I hope you guys get some O line help for Spiller.

  75. @tokz

    trade him


    screw the line, i want a qb and then another reciever…offensive line is overrated lol

  76. @Smartguy

    Sure, say that now but Jamarcus looked miles better than Tebow in college. Mick Vick got us to the playoffs his first year and the NFC championship game two years later with no help on offense. Do you honestly think Tebow can do that? Say what you want about Vick's character but his play on the field can't be matched by Tebow. Tebow has trouble even taking snaps from center. Are you kidding me? There's nothing wrong with hoping but when it's not there it's just not there.

  77. @RROD

    you and everyone else who thought highly if Russell were flat wrong. I knew the guy was lazy. Well known in these parts.

    The Vick comparison was simply because if you compare QB skills then Vick is pretty poor. Low completion %. Spin it like I do with Bush if you wish but I'm going to throw your arguments back at you. Not comparing Tebow and Vick in contrast but Vick compared to the position. Like you do Reggie with the RB position.

    Point: I think he will be good. McCoy will be better. Clausen isn't grown up enough.

    I left out Vicks character simply because it doesn't match Tebow's.

  78. If anyone can turn Tebow in to a competitor I think McDaniels is up to the job. Look what he did with Brady. McDaniels liked what he saw last week so he must see something that others were missing. Quite frankly I don't know why they felt they needed to trade back down to get him but the QB position in Denver is uncertain right now, I'd like to see some stiff competition out there.

    Like the new WR Demaryius Thomas too. although he wasn't the number one WR choice he also doesn't come with the Marshall-like drama of Dez Bryant.

  79. @shockwave

    McDaniels didn't need to trade up to get Tebow. He would've been available in the late second or 3 round.

  80. @tokz – that much I definitely agree about, it was weird but I think the kid will make a good backup and clearly McD wants to turn him in to a franchise QB. I doubt Quinn or Orton could ever fill that role but we've yet to see how Tebow will be in the NFL. kid does have talent though.

  81. The best thing about Tebow is his personality, you want a guy like that in your circle. The dude is a leader and hes tough as hell.

  82. @smartguy – I'm glad we got him but I think he would have been just as available during our second round 11th pick. Especially with Claussen still up for grabs.

  83. @smartguy

    I think he would've besides Buffalo i don't see anyone else needed a QB within the top 12 of the 2nd round. They reached early and it's going to cost them. I think McCoy and Clausen have better arm strength than Tebow.

  84. @Tokz

    No way McCoy has better arm strength. McCoy needs an NFL weightroom. I think Clausen has slid and will slide a bit more because of his attitude. Can't have a childish QB.

    You also have to realize that when there is a rush on a small list like the qbs, then teams tend to trade up and get them in fear of not being able to get one.

    I don't think Tebow was a reach. The guy has a lot of intangibles you want in a qb. Will he be a HoF? Who knows. Best ever? Nope. A winner? Yep. McDaniels has a good eye for these things.


    Yeah, he could have been there but rumor is that Carolina is going to trade up for McCoy and the Vikes might take Clausen. (This could happen, TJ got them a division crown and I'll go ahead and say Clausen is better than TJ). That would mean someone might have traded up for him.

  85. @N8R and BSU
    You two are missing one big thing about intellectual property and digital downloads. Digital downloads for some reason are damn near labeled a service. That means you do not have rights in perpetuity to the service. A song in and of itself while a product of someones studio work is actually a service performed. You didn’t create anything. (i know you create music, but you can’t build some music and sell just the music).

    Services are taxed differently than tangible products simply because it is easier to gauge a tangible product’s taxable basis.

  86. @smartguy

    I knew you would say that. This is the reason why i chose the Eagles out of all the scouting reports i found. Their report would be the most honest one since they are not looking for a QB.

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