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New York considers taxing iTunes downloads

The state has $15 billion budget gap and proposes finding some relief--as other states have done--in taxing digital downloads.

New York wants a share of iTunes' money.

The state is staring at a $15.4 billion deficit so Gov. David Paterson is proposing an "iPod tax" as part of his state budget. Under the plan, New York would charge state and local sales tax for "digitally delivered entertainment services," according to a story in The New York Daily News.

That includes e-books downloaded to Amazon's Kindle as well as for the digital songs obtained from Apple's iTunes. If the state legislature passes the governor's plan, the price of digital content for New Yorkers is sure to go up. The tax would also apply to sporting events, movie tickets, taxis, and satellite TV and radio.

Wow. To some Manhattan residents, Hoboken, N.J., may be looking better all the time. But wait, New Jersey is among the 17 states that already tax downloads, according to my colleague Stephanie Condon. She wrote back in August that states taxing digital entertainment include Alabama, Arizona, Colorado, Hawaii, New Mexico, Texas, and Washington.

California and Wisconsin considered similar proposals, but they were defeated. Tech industry groups like NetChoice, which counts eBay, AOL, and Yahoo as members, have been lobbying against the rise in so-called iTaxes.