A December 29, 2011 press release from Amazon states: "Throughout December, customers purchased well over 1 million Kindle
devices per week." That seems like a lot for just one month, even if it is December. Assuming the new owners prefer to read books on their Kindle, they will purchase electronic books. In many states, including California, the electronic books are not subject to sales tax. This is because the California sales tax only applies to tangible personal property. So, even though the end result is that both the buyer of an electronic book and the buyer of a tangible book, have a book to read, only the buyer of the tangible book is charged sales tax. This is not a nexus issue, it is an "eroding tax base" issue and one of growing significance.
I suspect that sales of Kindles and Nooks and iPads will continue to increase. The books downloaded onto these devices represents consumption and should be subject to sales tax. California has serious budget problems. One contributing factor is the eroding sales tax collections caused by having a 19th century sales tax in a 21st century economy.
It is way past time to broaden the sales tax to also apply to almost all personal consumption, Raising the sales tax rate fails to address the underlying problem. The problem is the base, not the rate.
What do you think?
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4 comments:
Annette,
I disagree with your position about taxing both salaries when received, and then all spending from those salaries. It seems to me that tax should be levied only once. The next thing you know, they'll be taxing any earnings not spent. Oh, they are proposing to do that.
Dave Albrecht
Hi,
Actually, I'm not talking about taxing income, but taxing consumption. California has historically taxed tangible personal property via the sales tax, but today, more consumption is of services and intangibles. There is no reason to subject one type of personal consumption to sales tax but not another.
Any purchase made over the internet creates an issue for taxing authorities. Taxes should be collected by the seller based on a Ship To address (not a Nexus) regardless of whether something is delivered electronically or not. If a state in which the account holder resides exempts books from sales tax but not periodicals, then the electronic versions of the books should be taxed at that states' rate. Sales tax cab be set up a pass through expense but setting up the collection process for businesses like Amazon can be logistically difficult. That however should not be an excuse for not collecting the tax.
Hi. I found the article informative as I did not know that e-books are not taxable. As a small business owner (a pet photographer), managing my sales tax payments can be confusing. Some items are taxable while electronically delivered items are not. Not to digress but not taxing an out of state transaction is also being exploited. I have heard of folks who buy expensive items (ex jewelry) and have it shipped to an out-of-state address to avoid sales tax. Anyway I just wanted to put my 2 cents in. I am just a pet photographer. I leave it to the tax professionals to figure out what system works best for our sales tax!
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