How long til your state taxes computer downloads, internet sales, and music downloads?
Is it fair to tax downloads?
www.philly.com/mld/inquirer/business/13668295.htmPa. begins taxing downloads
The sales tax hadn't been applied to software bought online.
By Bob FernandezInquirer Staff Writer
With a court case going unchallenged, Pennsylvania has begun collecting the 6 percent state sales tax on downloaded software.
A key exception is songs grabbed from the Internet for iPods and personal computers, Steve Kniley, Revenue Department spokesman, said this week.
The new policy amounts to a tax hike and is expected to generate revenue of $55 million to $60 million a year for Pennsylvania from businesses and individuals.
Companies update large software packages electronically, and these updates will be taxed under the new policy. Consumers also will pay the sales tax when they download software such as tax packages or virus-protection programs.
The new policy on taxing downloads was not something the Revenue Department "asked for," and the state agency was just following a court ruling, Kniley said.
A three-judge panel ruled in September in a run-of-the-mill tax case that the Revenue Department's long-standing policy of distinguishing between software on CD and software delivered electronically was silly. The software on CDs was considered tangible property and taxed.
Software delivered electronically was considered intangible and was not.
Tax experts, including state officials, expected the September ruling to be appealed by Graham Packaging. The York company filed the original case, but it did not appeal, and the Revenue Department implemented the changes.
Kyle Sollie, a tax lawyer in the Philadelphia firm Dechert L.L.P., said the new tax would make Pennsylvania a less competitive place for businesses in the region. Delaware doesn't have a sales tax at all, and New Jersey does not tax electronically delivered software.