Facing massive budget shortfalls, states are scouring every nook and cranny for revenue sources. Wisconsin has found one in the digital realm. Following New York's lead, the cheese state will tax web downloads, according to the web site the Register. The 4 percent tax will kick in Oct. 1, 2009. Some are dubbing it the "iPod tax," but it affects all "digitally delivered entertainment services, including music, movies, e-books, greeting cards, ringtones, and many other downloadable items," according to the Register. (The state has a $600 million budget deficit.)
New York State passed a similar bill in April that taxes all downloads, including pornography. It sparked a significant backlash from consumers, conservative lawmakers who believed it legitimized pornography, and online retailer Amazon (NSDQ: AMZN), which sued the state. New York's bill applies only to retailers with affiliates located in New York. (While the download tax is levied on retailers, it typically is passed on to consumers as a new line item on their e-bills.)
We'll call the government bean counters in Wisconsin to find out how much the new tax is expected to bring in.
By Rory Maher