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Digital Goods are non-taxable in my state, but iTunes collected anyway...

I just purchased non-free items in iTunes for the first time. I was very surprised to be charged 6% sales tax on my digital items.

I did some checking - there are several states where Digital Goods can be taxed, but my state, currently, is NOT one of them. Unless I have been misinformed by the various collections of digital goods law I've been able to find, in Pennsylvania, Digital Goods are currently non-taxable. I take that to mean that Apple is breaking Pennsylvania Law by charging me this sales tax, since Apple will apparently not be forwarding what it collected to my State.

How do I get this 6% back from Apple?

Windows XP Pro

Posted on Aug 25, 2010 5:35 PM

Reply
15 replies

Aug 25, 2010 6:35 PM in response to ed2345

Gee, thanks. Could you be less helpful?

We really need a non-helpful button here - I'd like to penalize people who only answer just to get a higher post count.

I didn't ask whether Apple's legal department was huge and infallible, I asked how to get my 6% non-sales tax back when the law as described by more than one tax authority site online currently claims it's not legal for Apple to take it for my State.

I'm assuming it was taken by mistake and am giving Apple the benefit of the doubt. Telling me that I'm wrong would've answered the question, if you can back it up with a reference that proves that Digital Goods are, as of August 25th, 2010, currently taxable in Pennsylvania.

In fact, anything confirming or denying whether Digital Goods are taxable in Pennsylvania would be relevant to this question. Pointing out how large and smart their lawyers are, does nothing towards this confirmation. Ask yourself whether Microsoft's equally sizable and astute legal department ever did anything illegal, knowingly or unknowingly.

If I'm wrong, then I'm wrong, and I'll walk away having paid the 6% already. But if I'm right, I want to know how to get it back, and how to stop it from happening in the future. If you don't have anything relevant to say regarding the question asked, kindly go elsewhere. You're not needed here.

Aug 26, 2010 8:17 AM in response to nutrock69

I don't see anything in the Pennsylvania state sales tax code that exempts the sale of media content from sales tax, regardless of distribution format, when the seller company has a physical presence in the state. I see references on other sites that make that claim, but I can find no authority for those claims, certainly none that would remain valid when the seller has presence in the state. The Penn sales tax laws explicitly state the computer software is taxable regardless of delivery method and Apple may well have decided, or confirmed with the state, that digital media downloads constitute "software" for the purposes of sales taxes, and hence since Apple has a physical presence in the state the purchases from the iTunes Store are taxable there.

But you can contact the Pennsylvania Department of Revenue for clarification, if you wish. I would take no other entity, other than the Pennsylvania state courts, as authoritative. And/or you can contact iTunes Store Customer Service using the form on their Support page (select the category and subcategory closest to the issue you're reporting and you'll find an "Email Us" button) as Ed suggested.

Aug 26, 2010 9:34 AM in response to nutrock69

I just purchased non-free items in iTunes for the first time. I was very surprised to be charged 6% sales tax on my digital items.

Sounds like iTunes store has finally caught up with the times.
See -> Quill Corp. v. North Dakota (91-0194), 504 U.S. 298 (1992).
Also, see
-> 72 P.S. § 7201(k), (m); 72 P.S. § 7202; 61 Pa. Code § 31.1; § 31.7; § 60.19; Pennsylvania Department of Revenue, Pennsylvania Sales and Use Tax, SUT08005Software (February 11, 2008)
-> Pennsylvania Department of Revenue, Pennsylvania Sales and Use Tax, SUT07007Telecommunication Services (October 16, 2007)
-> Pennsylvania Department of Revenue, Pennsylvania Sales and Use Tax, SUT05033WebBased Services (December 19, 2005)
-> Pennsylvania Department of Revenue, Pennsylvania Sales and Use Tax, SUT04008Magazine on CDs (February 2, 2004)
-> Graham Packing Company v. Commonwealth, 882 A.2d 1076 (Pa. Cmwlth. 2005)

Regardless, you need to discuss wtih Apple, Pennsylvania tax department and you local representatives.
Don't try to argue with anyone has we can't do anything about it.

Aug 26, 2010 1:05 PM in response to ErnieD1

Ernie, my state had tax-free itunes music downloads until they opened an Apple store in a city I don't even live in. Like PA, once a retailer has a brick & mortar store in the state, they start collecting tax, state-wide.



nutrock, apparently you don't understand how the post ratings work. Helpful points have to be applied.
ed2345 wasn't posting just to raise his post count!

Sep 8, 2010 1:53 PM in response to ErnieD1

I understand the helpful concept quite well, thank you. I ALSO understand that a snarky response talking down to me is very UNhelpful and does not deserve to be marked as helpful. I think it would be nice to be able to punish responses such as this in such a way that it hurts the poster's rating - maybe they won't be inclined to make such unhelpful answers in the future.

That said, they eventually did post a helpful response, among others. From what I've found so far, PA (supposedly) has a distinction between purchases of a physical item (games/music with disc) and purchases that do not have a physical item (ie: digital, no media), where only the physical items can be taxed if the store has a physical presence in the state. I don't remember where I saw that, though, so I will probably have to check with my state.

Sep 8, 2010 6:36 PM in response to ErnieD1

You weren't the one I was talking about. That honor belongs to the first person who replied to this topic, and as I mentioned previously, that person proceeded to actually make a potentially useful comment after being called on it.

As for my not understanding physical presence meant sales tax: I was (and still am) aware of that concept, however, it was also my understanding after researching the issue that these laws only covered physical items, such as discs containing programs and/or music. Non-physical items (meant by the phrase "digital goods") require changes in the law to allow them to be taxed. Several states in the US have made that leap already and have explicitly made digital goods (ie: non-physical items) taxable under these laws, but as far as I've been able to find Pennsylvania is not one of them, nor does it seem inclined to do so. Yet.

Obviously we are understanding two different things. If my understanding on this is incorrect, then please feel free to point out to me where I can confirm the correct information.

Sep 8, 2010 6:37 PM in response to nutrock69

nutrock69 wrote:
.... does not deserve to be marked as helpful.


You are correct! By the terms of this forum, only the original poster has the ability to decide what is helpful.

Many of us answer-ers perceive that posters sometimes confuse "not helpful" with "didn't say what I wanted to hear." But tough beans for us, as the forum rules say it is up to the poster.

In most states, stores without bricks-and-mortar presence do not collect sales tax on downloads. Where I live, the iTunes Store collects but the amazon.com MP3 Download Store does not. That is what several of the responses were hinting at.

Digital Goods are non-taxable in my state, but iTunes collected anyway...

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