Yes, You Have To Pay Taxes On Downloaded Songs

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For all my bloggy, techie, gadget-loving friends… many of whom have downloaded a song or two via iTunes (and other music download sites)…

Did you know you have to pay taxes on all those songs ?!?!?

Yep, 15 states and Washington D.C. require their residents to pay taxes on downloads of music, movies and electronic books.

Those states are…

States Which Tax Media Downloads:

  • Alabama
  • Arizona
  • Colorado
  • Hawaii
  • Idaho
  • Indiana
  • Kentucky
  • Louisiana
  • Maine
  • New Mexico
  • South Dakota
  • Texas
  • Utah
  • Washington
  • West Virginia

So, if you’re one of the millions who’ve been downloading songs via iTunes — tax free — and you live in one of the above states, come Tax Day, you are supposed to claim those downloads under something called a use tax, which is applied to out-of-state purchases.

Your State’s Not Currently Taxing For Downloads?

Before you go thinking you’re safe because you don’t live in one of those 15 states, think again.

“More states are beginning to tax downloaded products.”

Steve Krantz, Council on State Taxation


Turns out, this “use tax” was never really enforced in the past, because until recently, digital sales were barely a blip on the radar in terms of retail sales.

However, in the most recent tax year (2005), online music downloads generated about $1 billion, and states are now looking for ways to increase revenue by taxing services like those provided by iTunes, Yahoo Music, and more.