The Connecticut State Senate will hold a public hearing today in Hartford to discuss Senate Bill 400, which looks to impose the state’s sales tax on “the electronic transfer, for a consideration, of any digital product… that grants to a purchaser a right or license to use, retain or make a copy of such digital product”. Unlike similar measures elsewhere, this is a universal tax that would affect all digital downloads from Steam, the PlayStation Network, iTunes, Amazon, and other digital avenues.
A request for comment from Senator Joe Crisco was directed to the office of Eileen Daily, the co-chairwoman of the Finance, Revenue, and Bonding Committee.
As of press time, Senator Daily has not responded to Gaming Bus’s request for comment. She did, however, tell the Hartford Courant that they “want to see if there is still a reason and a will to pursue this legislation.”
Connecticut’s state sales tax is 6.35%, which was moved up from 6% as part of sweeping reforms put in by first term Democratic governor Dannel Malloy. Governor Malloy’s spokesperson told the Courant that his office is not supporting new taxes at this time. Democrats hold a 22-14 edge in Connecticut’s Senate. Voting will not occur tomorrow; it’s just a public hearing to determine if the bill goes past committee.
The Entertainment Consumers Association, a consumer advocacy group that represents digital consumers in the United States and Canada and which is based out of Danbury, issued a strong statement condemning the proposed legislation, as well as an action page for Connecticut residents to contact their Senator.
“Connecticut Senate Bill 400’s proposed tax on digitally downloaded content is onerous and counterproductive,” said Jennifer Mercurio, Vice President & General Counsel of the Entertainment Consumers Association, which is based in Connecticut. “It would raise prices, suppress consumption, and cause layoffs. We urge all Connecticut voters to ask their State Senators to vote NO on SB 400.”
Digital taxation laws differ from state to state, though Kelley Miller, an attorney with Reed Smith LLP in Philadelphia, estimates that about half of America’s fifty states have enacted legislation that taxes digital goods. Only North Dakota has a law specifically exempting digital goods from taxation.
Senate Bill 400 can be read here.
Disclosure: The author is a resident of Derby, CT. Democratic Senator Joe Crisco is his senator, and Democrat Linda Gentile is his Representative. Neither is on the Finance, Revenue, and Bonding Committee.
Analysis: This has been on the burner for awhile, and if the Democrats decide to go through with the legislation, there’s going to be no stopping it. Simply put, they own the House, the Senate, and the Governor’s mansion, and though Dannel Malloy’s office put out a statement stating that they didn’t support new tax legislation, I don’t see them stopping this should it pass. In short, if this survives tomorrow, Connecticut will be another state that adds digital downloads to the list of items that must be taxed. If sites or businesses don’t choose to apply the tax (Amazon has fought efforts to do this for years), it will be up to consumers to keep receipts and factor them into their taxes. Good luck with that.
As for effects, what is there to say? Connecticut is one of the most hostile environments for businesses in the country, and that was the case even under former Republican governor Jodi Rell. Governor Malloy has not helped the perception despite his attempts to push back on employee unions. Democrats would do wise here to try to avoid a sweeping consumer backlash, considering the fact that Malloy is a highly unpopular governor and was only elected due to exceptional support in the state’s three largest cities (Hartford, New Haven, Bridgeport). That unpopularity, combined with President Obama’s own middling numbers, could affect local elections. Still, Connecticut has always been a heavily tax-and-spend state, and I see this bill eventually passing, especially with further reforms to pay for.