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New York's proposed 'iTunes tax'

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Jacob Turcotte

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New York State is pressed for cash, and its governor is eyeing iTunes hungrily.

With the Dow having lost one-third of its value this year, New York expects taxes from Wall Street to fall short. Gov. David Paterson (D), the recent victim of a Saturday Night Live lampooning, wants to head off the expected $15.4 billion budget gap with a laundry list of new taxes and fees.

The 88 proposed hikes include expanded levies on clothing, taxis, movie tickets, and "digitally delivered entertainment services."

That last item, if passed, would make New York the newest state to impose a so-called "iTunes tax." Currently, 17 states and the District of Columbia have similar laws in place, according to CNET. Politicians in Massachusetts, Wyoming, and Washington are weighing their own bills.

Governor Paterson's plan calls for a 4 percent tax on music or movies downloaded within New York. The fee would hit at the time of purchase, much like sales taxes in brick-and-mortar stores.

The proposal doesn't target iTunes specifically, but Apple is America's largest music retailer – online or otherwise – and therefore will probably be the company sending the most cash into New York's coffers. Ebooks from Amazon and downloadable games from Valve could also generate revenue for New York, depending on the final wording of the law.

Apple did not respond to requests for a comment.

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