Sales taxing downloads in Tennessee. Apple does it, Amazon doesn’t

The last thing I want to blog about is sales tax, however, there’s a lot of confusion being twittered and blogged around the Nashvilleosphere today about a “technical correction” measure that is working its way through the Tennessee state legislature. According to the Nashville law firm Waller Lansden, the measure would “subject downloaded sales of digital media, including music videos, motion pictures, news and entertainment programs, music, ringtones, electronic books, etc. to the retail sales tax.” In an advisory issued yesterday, the law firm claimed that, “under current law digitally delivered goods are not taxable unless delivered in a tangible form.” (I’m curious about the caveat as I’m perplexed with the “brain-teaser” about how something could be delivered in bits but be received in atoms. But that’s more a physics than a legal question. Perhaps that refers to ordering a print-on-demand book that is printed and then shipped, but that falls outside my understanding of what a “download” is or, for that matter, the meaning of the term “digitally delivered.”)

That “new tax” interpretation was quickly pounced upon by the state GOP’s Bill Hobbs and echo-chambered by Instapundit.

Wait a minute, some bloggers said — we’re already being charged sales tax on iTunes purchases. As tracked by Christian Grantham at Nashville is Talking and by A.C. Kleinheider at, sure enough, digital downloads purchased through the iTunes Store are already being treated as if they are subject to the state’s sales tax — thus placing in doubt the claim that the “tax” being legislated is new.

Here’s where I could wear my small business owner hat and launch into some history of my first-hand education on the concept of “nexus” but I’ll skip that one and say, simply, because there’s an Apple Store in Nashville and Memphis, the iTunes Store is collecting sales tax on purchases made through that channel. On the other hand, does not charge for sales tax on physical or digital products purchased via because it doesn’t have any direct operations here. (Yet another reason to purchase MP3 downloads via

I’m not a lawyer, and for that I’m quite thankful. However, I think the bloggers who are suggesting this is not a new tax may be confused. I know I am.

Who knows? Maybe it’s Apple that’s confused.

  • And in another fun tax twist, when Tennesseans purchase things via internet channels like Amazon — or even catalog retailers with no nexus in the state, which therefore don’t need to charge us sales tax, as Tennesseans we are responsible for paying use tax to the state.

  • Rex Hammock

    Oh, yeah, Laura. I forgot to mention that. We’re supposed to pay a “usage” tax. So, indeed, this wouldn’t be a “new” tax as I’m sure Tennesseans who purchase music online via downloads are already subject to a usage tax on those purchases — which they gladly pay voluntarily. (He said with a smirk.)

  • Laura made the point I was going to make except to say that I would think it better to purchase from an operation such as iTunes who charges the tax because it’s easier to pay as you go rather than to fill out the forms that you’re supposed to fill out and send in with your tax funds to the state each time you purchase an item online from a company who does not charge the tax. It’s illegal not to pay the tax and eventually, Tennessee will get around to collecting tax from people. And they may go back a while. Other states have already started doing so though I believe that big-ticket items are the first they target.

  • Rex Hammock

    Okay. You’re supposed to pay tax on stuff you purchase and use. Even if the merchant doesn’t collect it. Wesley Snipes told me.