Sales Tax on Digital Downloads Still a Terrible Idea
Charles Calderon (D-City of Industry) got a lot of attention after introducing a bill that proposed digital content be subject to the sales and use tax. The label, “I-Tunes tax,” stuck, and the bill (AB 1956) was defeated in the Assembly Revenue and Taxation Committee, whose Chairman is the same Charles Calderon. What has not gotten as much attention is that Calderon has used the special session to re-introduce the same bill as a special session bill, so we need to rehash what is so brazen and wrong about the proposal, ABX3 22.
Under the State Constitution a bill to create a new tax or increase an existing tax is the prerogative of the Legislature. Calderon’s bill would bypass this restriction by mandating the Board of Equalization draft a regulation declaring that digital content is tangible personal property subject to tax. I believe Calderon’s argument is that in this bill the Legislature is not enacting a tax increase, but is ordering the BOE to take actions that will result in a tax increase. This transparent gimmick to avoid the Constitutional impediment to higher taxes caused my colleague on the Board, Betty Yee (D-San Francisco), to say at a public meeting that she is offended by Calderon’s proposal. It is a cynical hijacking of our process which exists for the benefit of the public, not legislators who cannot win in the Legislature.