An NPD Group study says the pace of growth in online music sales and the continued crumbling of the CD market will cross path by the end of next year.
When it comes to the unit-sales volume of music sold at retail – including paid digital music downloads and CDs – Apple iTunes leads in the U.S. with 25 percent of music units sold, which is up from 21 percent in 2008 and 14 percent in 2007. Walmart (including Walmart.com) remains in second position with 14 percent of music volume sold. Best Buy ranked third.
Aug 18, 2009 11:17 AM
The Tennessee Journal reports that now that the technical corrections bill has passed the legislature we may never know if the somewhat tortured interpretation of Tennessee annotated code that the Department of Revenue has been using to collect tax on digital downloads of books, music and movies would have held up to a serious challenge:
Several other sections of the technical corrections bill were withdrawn, including one to force motels that don’t have restaurants to remit sales tax on continental breakfasts served to their guests. One that stayed in the bill — which both the House and Senate passed Thursday — clarifies that digitally downloaded music, books, and videos are subject to the sales tax. Through complicated interpretations of law, the state used to treat such products for sales tax purposes as tangible personal property. A provision of the streamlined sales tax law that took effect Jan. 1 made the matter simpler, according to the department, though a private-letter ruling it issued in March, and then rescinded, declared the products not subject to the tax. The American Electronics Association last week disputed the department’s contention the downloads are taxable. Revenue Commissioner Reagan Farr said that, absent the bill, he expected a legal challenge from Microsoft.SEE ALSO: Terry Frank
May 19, 2008 7:26 AM
Terry Frank posts this morning that "the fat lady has not sung" when it comes to the iTunes tax. She asserts that the Tennessee Republican Party had not jumped the gun when they asserted that the tax on digital downloads was a new tax contained in the now introduced technical corrections bill. At issue is a March 12 letter ruling currently circulating in anti-tax circles issued by the Revenue Department's legal counsel and approved by the Commissioner himself that would seem to contradict recent reports in the media that digital downloads are taxable in Tennessee since the start of the new year. Two weeks ago, after a Waller, Lansden, Dortch and Davis email was posted online sounding the alarm of the new tax coming down the pike, it was subsequently pointed out that Apple and other online music retailers were already collecting taxes on music downloaded online. At the time, Revenue Commissioner Reagan Farr stated to various media outlets that the Tennessee Republican Party and Waller Lansden were in error. The new technical corrections bill now before the General Assembly was not instituting a new tax but simply clarifying language in the Tennessee Annotated Code that already authorized the taxation of downloaded music. The Commissioner explained that the tax was authorized by code changes in the previous year and that an iTunes song was considered “pre-written computer software” [T.C.A. §§ 67-1-102 (60)] that then “performs the task“[T.C.A. §§ 67-1-102 (17)] of playing on your iPod. However, a March 12 letter ruling by the Revenue Commissioner [available here] would seem to tell a different story. In the letter, the Revenue Commissioner and counsel state that while songs preloaded on machine sold to consumers are taxable, songs delivered electronically are not taxable:
Tenn. Code Ann. § 67-6-102(80) (Supp. 2007) 2 defines“tangible personal property” to include property that can be “seen, weighed, measured, felt, or touched.” For example, music sold on a compact disc, or CD, is subject to the sales and use tax because the music is sold on a tangible storage medium. Music purchased on a tangible storage medium has always been subject to the sales and use tax... ...Music is non-taxable only if it is delivered electronically. Accordingly, charges for the music services and packages provided by the Taxpayer that relate to music on a tangible storage medium are taxable as sales of tangible personal property, while charges related to music delivered electronically are not.The letter, as is clearly stated on the document itself, is binding only for the specific case addressed. However, the arguments contained within and the code and definitions cited as to how digital downloads are to be taxed would seem to contradict the reasoning Commissioner Farr previously gave Post Politics as to why digital downloads have been taxable since January of this year. In a letter to legislators obtained by P-squared, the president of the Software Finance and Tax Executives Council, Mark E. Nebergall, states:
We believe any out-of-state firm collecting sales tax on such sales does so in error and is likely, in the wake of the March Revenue Ruling, to stop collecting taxes on future sales and could seek tax refunds for erroneously collecting taxes on past sales. In fact, some SoFTEC members are in the process of implementing changes to their systems to stop collecting sales taxes on sales of downloaded products to Tennessee customers. Firms erroneously collecting sales taxes risk consumer class action lawsuits.Commisioner Farr, when contacted by Post Politics explained that the March 12 letter ruling had been revoked. He could not say when the revocation had taken place but that the taxpayer in question had been notified and given ample time to adjust to the revocation.
"We have a six to eight month turn around on letter rulings and this specific ruling was drafted before the new changes took effect in January. It was modified shortly thereafter [but before revocation] to reflect the new law but before we had really taken a good look at the changes. It is unfortunate that the ruling was ever released."Any companies ceasing collection of tax based on this revocated letter ruling would be in error according to Farr. Farr went on to emphasize, revocation aside, that letter rulings are, in fact, not broadly applied documents to be used to interpret tax law by any party other than the taxpayer addressed. The Department of Revenue releases two different types of rulings, Letter and Revenue. A Revenue ruling is the type of document that can be interpreted as Revenue department policy, a letter ruling cannot and should not be Farr explains. Farr said there has been no Revenue ruling on the specific case of iTunes downloads but maintained that he feels "very comfortable" with his position that iTunes songs are prewritten computer software that performs a task and thus taxable. SEE ALSO: Bill Hobbs
May 6, 2008 11:05 AM
One of the interesting things that came out of yesterday's iTunes tax revelation was that it was also revealed to a wider audience that the Department of Revenue apparently shares drafts of the "technical corrections bill" with a few good tax attorneys before sending it on to the legislature. Bill Hobbs, for one, is not depending on one of those lawyers springing a leak again next year like it did this year:
A simple open-records request for copies of the draft should suffice next year to short-circuit the Revenue Department's plan to craft new tax policy under the watchful eye of only a few hand-picked tax attorneys. Tax policy proposals should be crafted in out in the open, where the public - who, after all, pay the taxes - can see what is happening.
Apr 25, 2008 6:23 PM
Both the City Paper and the Knoxville News Sentinel write up the TNGOP's rallying cry to prevent a new digital download tax and the subsequent revelation that the tax is already being collected:
As for the confusion perhaps caused by the Tennessee Republican Party, spokesman Bill Hobbs said he doesn’t now “dispute” that iTunes sales are taxed. Hobbs said he based his description on a memo from the law firm of Waller Lansden Dortch & Davis, which called the section of the technical corrections bill the “Digital Products/iPod tax.” “It’s probably an unfortunate choice of a headline, but Waller Lansden called it that, and I just keyed off of what they wrote,” Hobbs said.Click here for yesterday's Post Politics report on the issue.
Apr 25, 2008 7:56 AM
It turns out that the Tennessee Republican Party and the rest of the anti tax crew were a little late to the party on this digital tax scare. Tennessee currently taxes digital downloads, such as songs from iTunes, and have been since the beginning of this calendar year. A Waller Landsen email yesterday on the technical correction bill currently being drafted by the government started people talking when Instapundit linked to a section in the draft called the Digital Products/iPod Tax.
The Bill contains sweeping legislation that would subject downloaded sales of digital media, including music videos, motion pictures, news and entertainment programs, music, ringtones, electronic books, etc. to the retail sales tax. Under current law digitally delivered goods are not taxable unless delivered in a tangible form.The Tennessee Republican Party, in the form of Bill Hobbs, whipped up a frenzy about this impending doom both in a press release and a blog post warning folks about the long reach of Johnnie Q. Tax in their digital library. Turns out however that tax is already being collected on your downloads as noted by Nashville Is Talking. Department of Revenue Commissioner Reagan Farr tells Post Politics that the State of Tennessee began to collect revenue from digital media starting January 1, 2008. Companies such as Apple are currently charging taxes on downloads to consumers in the state of Tennessee and the Department of Revenue is collecting them. The Department does not have any numbers for the amount of tax being collected on downloads because the Department keeps no records on line items, an iPod bought in the Apple Store in Green Hills is no different than a song downloaded by a Tennessean via iTunes. Because Apple maintains property or payroll in the state they are subject to the sales tax where a company like Amazon, who does sell traditionally tangible products to Tennesseans, is not subject to tax. Farr concedes that even though current law subjects downloads to sales tax that the code "needs cleaning up." Right now, for instance, the Department of Revenue makes no distinction between tangible personal property and intangible personal property. Downloads are considered tangible personal property by the State. According to Farr, under Tennessee code an ITunes song is considered "pre-written computer sofware" [T.C.A. §§ 67-1-102 (60)] that then "performs the task"[T.C.A. §§ 67-1-102 (17)] of playing on your iPod. It is thus taxable under Tennessee law. Farr looks forward to fashioning a more modern definition of software that makes makes clear that downloaded songs, books, or movies, while intangible, are the digital equivalent of tangible personal property. UPDATE: A statement and a linkable PDF timeline of the changes in the code that resulted the tax levy beginning this year, courtesy of the Department Of Revenue. SEE ALSO: Rex Hammock The City Paper Tom Humphrey Terry Frank Glen Harness TNGOP Updates
Apr 24, 2008 3:11 PM
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