Posted 08/12/08 at 10:07:35 PM by Paul Lilly

Purchasing software and other digital content online is not only be convenient, it can also make fiscal sense when there's no sales tax involved. That's been the case for some time now, but according to DailyTech, the free ride may be rapidly coming to an end.

With a $130 billion digital market going untaxed, the temptation for some states to cash in may be too great to pass up, even if the idea of taxing downloads doesn't pass muster at the national level. Indiana, South Dakota, and Utah are the most recent states to sign digital download taxes into law, bringing the count up to 9 states altogether in 2008, and 17 in all. But are taxes the answer?

Several online entities have begun lobbying against the taxes, claiming that this differentiation is vital to their business. As Steve Delbiano from NetChoice - which is composed of Ebay, AOL, Yahoo, and others - explains it, "With global warming and a world that's running out of oil, the last thing governments should do is add taxes on something that uses no oil and produces no carbon. A digital download is the greenest way to buy music, movies, and software, since it requires no driving to the store, no delivery vans, and no plastics or packaging."

What's your stance? Do states have a moral and legal right to tax digital downloads, or should the internet tax moratorium trump individual state desires?

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