Even if Congress forces more online retailers to collect sales taxes, Iowans would still be able to make many internet purchases tax-free. The change would target retailers like Amazon that don’t have a physical presence in most states.
Amy Harris, at the Iowa Department of Revenue, says it could mean millions of dollars a year in new revenue for the state, but she says digitally-delivered goods would still be exempt for Iowans.
“A lot of those goods are predominantly purchased electronically on the internet,” Harris says. “You’re downloading your book to your Kindle. If this bill passes, that’s still not taxable.” Backers say the law change would even the playing field for brick-and-mortar retailers.
Iowa legislators, years ago, passed exemptions on digitally-delivered goods to encourage the fledgling e-commerce industry. Since then, Harris says, the marketplace has exploded with all kinds of exempt products. “Books, eBooks, your Kindle, your Nooks, also music such as iTunes, computer software is another big item, also ringtones, games for your smartphones and all the smartphones apps.”
Harris told a recent meeting of the Iowa legislature’s Electronic Commerce Study Committee that while such digital goods remain tax-free, the state could receive as much as 24-million dollars in new sales taxes for other online sales.