North Carolina Considers New Online Taxes


The state of North Carolina is examining the practicality of imposing a sales tax on digital downloads in order to help tackle its $2 billion budget deficit.

It’s not about to happen anytime soon, but a legislative committee is considering how to modernize the state’s tax code in order to bring them into the online era. “We used to think of everything in terms of being tangible,” said Democrat Representative Paul Luebke of the North Carolina General Assembly. “Nobody thought of how you could possibly download anything.”

“If you buy a book in a bookstore, you’re going to have to pay sales tax on it,” he added. “If you’re downloading a book from a book seller, you should have to pay sales tax on that as well.”

Researchers have said that taxing downloads of music, movies, books and software could generate about $12 million over the next fiscal year, a tiny portion of the $2 billion shortfall the state is currently looking at. North Carolina Technology Association CEO Brooks Raiford also expressed “concern” about the idea, saying, “The consumer is already very highly taxed, the economy is stretched.”

Numerous questions surround any possible implementation of such a plan. Would it apply only to retailers in North Carolina, or would sellers in other states be expected to collect – and pay – the sales tax when selling to customers in the state? Similarly, would out-of-state customers of N.C.-based businesses be expected to pay? And how will tech-savvy consumers, many with access to “alternate methods of acquisition,” react to the idea of paying tax on an intangible product like DLC?

The evolution of digital life has largely outpaced both criminal and civil legislation, and while laws – tax laws included – do need to be updated and brought in line with contemporary society, a ham-handed cash grab is the wrong approach to take, a point touched on by Raiford. “All we’re asking is that those considerations be taken carefully and that the industry be asked for their input as the legislation is finalized,” he said.

About the author