New Taxes on Digital Downloads and Internet Purchases Took Effect October 1 by Mike Huebsch
In February, Governor Doyle and Democrat lawmakers joined forces to raise state taxes and fees $1.9 billion. Four months later, they praised one another for the efficiency with which they enacted another $2.1 billion of hikes.
With each passing month, more bills for their handiwork come due. Last month, it was a new phone tax. This month, it’s a new 5% sales tax on digital downloads and internet purchases.
Long ago dubbed the iPod Tax (Governor Doyle first proposed it in 2005, but the Republican legislature rejected it), the tax on digital downloads doesn’t end with iTunes. In addition to music downloads, you will pay the state sales tax (and applicable county sales taxes) on:
- eBooks for your Kindle or new Sony eReader
- Audio books
- Clip art
- Greeting cards
- Video games
A nickel for every iTune, a dime for each ringtone and still more for books, video games and the rest adds up to nearly $11 million for Wisconsin families according to the non-partisan Legislative Fiscal Bureau.
Taxes on the rest of your internet purchases result from the so-called Streamlined Sales Tax which conforms Wisconsin’s sales tax code to other states’. Part one of Streamlined Sales is taxing Wisconsin shoppers who buy products on-line from out-of-state companies (e.g, Amazon.com). Supporters say it’s only fair since Main Street merchants must collect taxes. Real fairness would have meant a corresponding tax cut to offset the cost to Wisconsin families.
Part two is conforming Wisconsin’s sales tax code to the rules of the Streamlined Sales Tax Governing Board. Like the other 21 states that have joined the Streamlined Sales Tax Project, Wisconsin will begin taxing some products and services sold by brick and mortar retailers for the first time, while possibly exempting others.
Streamlined Sales is a $4.7 million tax increase for Wisconsin families over the next two years and has the potential to balloon in the future. For anyone who isn’t a tax attorney, the 197 page emergency rule released by the Doyle Administration last week doesn’t shed much light on what to expect in the short term. However, several months ago, I learned that Streamlined Sales means taxing emergency response notification systems for seniors for the first time. I doubt that the unwelcome surprises will end there.
Nearly every Wisconsinite is paying the price for the failure of Governor Doyle and Democrats who run the legislature to trim state spending and set priorities. Their decisions have simultaneously drained bank accounts and killed jobs, leaving families with less money, fewer opportunities for a paycheck and fewer options for paying their bills.
Governor Doyle and Democrat lawmakers promised that none of the approximately 75 tax and fee uppers enacted this year would affect middle class families. It wasn’t true in February or June, and it’s not true today.