State wants to tax iTunes downloads

The state of California wants to start taxing music and video downloads from the Internet. We're already taxed on the music CDs and DVDs we buy, but some legislators are seeing a missed opportunity for tax revenue from the downloads. A new consumer study finds that Apple's iTunes is now the number one music retailer in the country. It's surpassed Wal-Mart for the first time.

There's a reason Apple's iTunes has become the number one retailer for music.

"The iTunes music store -- it's the most successful and easiest place to buy music," says iTunes customer Robert Caffese.

"iTunes because I don't have to pay for, like, the taxes and stuff," says iTunes customer Erica Quini.

But that tax-free status could change soon. An east Los Angeles lawmaker wants to make anything downloadable, from music to videos, subject to a sales tax. He's asking the state Board of Equalization to redefine what a tangible item is, so that i-products are included.

Right now, only things you can touch or feel are taxed.

"Everything has moved to the information age, and the question is, should we ignore products that would otherwise be taxed if they were in a tangible form?" asks Democratic Assemblyman Charles Calderon of Los Angeles.

Critics question if he's trying to circumvent the process. The controversy is over whether this is really a tax proposal. Assemblyman Calderon says he's just asking for a definition change.

The distinction is important because tax hikes are more difficult to pass through the Legislature, needing a two-thirds vote. Everything else, like a definition change, needs only a simple majority.

"If he thinks this is really a right tax and this is for California, he should go through the regular route and get two-thirds of the vote," says Michelle Steel, member of the California Board of Equalization.

Whatever elected leaders want to call it, most iTunes customers don't like the idea of paying an i-tax.

"It's kind of smart to try and target something that everybody is using. However, I feel that going after music and charging for downloads is pushing it," says iTunes customer Vernon Bennett.

The first committee hearing is mid-April.

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