Not as Clear as Black and White
Evolving tax regimes for digital books, newspapers, and periodicals
In the past, states moved slowly to enact legislation dealing with new operating models for business. However, in today's economic environment, where state tax coffers are badly depleted, it seems that the state legislatures and tax administrators are trying to get in front of the curve when it comes to the taxation of the digital publishing industry. Key marketplace trends are already in place: Amazon's Kindle e-book reader has become its best selling product, and Apple's popular new iPad is emerging as another mainstream device on which consumers can purchase and read e-books. U.S. e-book content revenue is expected to reach $3.19 billion by 2015 and states will want their share of any related tax revenue.
The following summarizes the related issues that will likely arise, namely, the permissibility of state imposition of sales and use tax obligations on out-of-state sellers, and then discusses some of the tax provisions that state legislatures are enacting to require publishers to register and collect sales and use taxes on remote sales of digital content. By understanding the various states' approaches, digital publishers may better position themselves for success in the emerging e-publishing age.