Tennessee already taxing digital downloads

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One treasure trove for money-hungry politicians who haven't found a tax they didn't like, is digital downloads. There has been a constant argument over internet sales for years, as consumers have found many of their online sales haven't had sales tax applied. Governments wouldn't want to waste such a lovely opportunity, would they?

Instead of managing budgets and cutting the outrageous levels of spending, politicians seem to always be looking for a new tax to levy. So taxing digital downloads seem to be the next frontier. After all, the states should be getting a cut of every penny we spend anywhere, right?

Tennessee has apparently already been taxing digital downloads, and no one even noticed. State laws currently say that only "tangible goods" had sales tax applied, and politicians wanted to change the law so that digital downloads fall under the definition of "tangible" (and are therefore required to be taxed).

But a consumer has informed the world that digital downloads have already been subject to sales tax in Tennessee since the beginning of 2008. Sure enough, consumers took a look at their iTunes purchases, and found that Tennessee sales tax had been added to their bills. This is a slippery slope. Governments expand their ability to tax each year, leaving consumers in the position of turning over more and more of their hard-earned money to politicians. When will it stop?

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.
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