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Colorado Department of Revenue hopes to start taxing digital movies, music and books

DENVER —The Colorado Department of Revenue will be meeting to gather input before considering changes to the tax code that would make a movie streamed or downloaded from Amazon — among other digital items — taxable in Colorado, a move that has some questioning if this circumvents the state constitution’s requirement that new or increased taxes get voter approval first.

The “stakeholder workgroup” is scheduled for 10 a.m. Wednesday, March 4 at 1313 Sherman St. Room 220 in Denver to “discuss the promulgation of a sales tax rule to clarify the department’s treatment of digital goods as tangible property.”

The department defines “stakeholder workgroup” as a forum for the department to gather information from stakeholders. It occurs before the actual rulemaking hearing. Stakeholders are defined as “individuals who have particular knowledge of the issues being discussed … to provide relevant information, opinions, and constructive feedback and suggestions.”

The public is invited to give input. Anyone who cannot attend in person can request a conference number to call in at dor_taxrules@state.co.us or by submitting comments via email to the same address.

According to a draft of the proposed change to rule 39-26-102(15) “Tangible Personal Property,” “the purpose of this rule is to provide clarification on the definition of tangible personal property.”

Laura Carno, founder of SpringsTaxpayers.com, said regardless of what they choose to call it, when they take more money from the people, they need to ask permission. She called this process a violation of the Taxpayer’s Bill of Rights (TABOR).

“The fact that they are doing this through rulemaking instead of doing it properly by asking the voters shows the contempt they have for taxpayers.,” Carno said. “They just look at us as their ATM.”

The draft makes two key changes to the law, adding the following:

“The method of delivery does not impact the taxability of a sale of tangible personal property. Examples of methods used to deliver tangible personal property under current technology include, but are not limited to, the following: compact disc, electronic download, and internet streaming.”

Examples of what would be taxed under “method of delivery” include:

  • Purchaser buys a movie on a VHS tape. Sales tax is due on the purchase price of the movie.
  • Purchaser buys a movie on a compact disc. Sales tax is due on the purchase price of the movie.
  • Purchaser buys a movie through the internet and then downloads the movie to the purchaser’s computer. Sales tax is due on the purchase price of the movie.
  • Purchaser buys a movie, which purchaser accesses through an internet browser. Purchaser does not save a copy of the movie to purchaser’s computer. Sales tax is due on the purchase price of the movie.

Additionally, subscriptions to such services as Apple Music, Netflix, Hulu, etc. would be taxed.

“The purchase of a subscription that provides the purchaser with access to any tangible personal property that can be streamed, downloaded, or delivered by any other method constitutes a sale of tangible personal property. The purchase price paid for a periodic subscription is subject to tax if the property accessed or received via the subscription is subject to tax. Each periodic payment is a separate sale.”

The example given in this case included:

  • Purchaser pays a monthly fee, which allows purchaser to stream movies and television shows from a library of available titles. Sales tax is due on the monthly fee.

Carno said the people went to the ballot last year and confirmed their belief in TABOR by voting down Proposition CC.

“We said no because we don’t trust them,” Carno said. “So now they are looking to trick us.  It’s a lot like mom said no, so ask dad. No means no. Don’t form the question differently and expect that we are going to be OK with it.”

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