New York Wants to Tax iTunes Downloads

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The white earbuds of Apple iPod are ubiquitous in the streets of New York, and now the city wants a piece of Apple’s pie. New York Gov. David Patterson, as part of his state budget, is proposing that the state levy a tax on all “digitally delivered entertainment services,” which would include music and video purchased via iTunes, along with ebooks bought for Amazon’s Kindle. If the proposal passes New York’s state legislature, New Yorkers will most certainly pay more than the traditional $0.99 for music downloads.

This may sounds outrageous, but 17 other states already tax digital downloads, among them New Jersey, Texas and Washington.

This is not the first instance of New York state going after revenue from online businesses that typically, due to a technicality in the tax law, don’t typically collect taxes on purchases made outside of their operating state. Earlier in 2008, New York cracked down on Amazon.com, forcing them to collect sales tax from independent retailers selling products through Amazon.com, even though Amazon had no physical present in New York state.