Daily Deduction

from the Tax Policy Center

Online Taxes: Searches, Storage, and Sales

By :: August 4th, 2014

Congress is in recess. The Daily Deduction will return to its regular schedule on Monday, September 8. Until then: We’ll see you every Monday morning.

Abroad and online: One country brings a knife to a gunfight. Spain has passed a new law: Websites that link to Spanish newspaper association stories will pay a tax for a story link and a “meaningful description” of the story. It’s not clear yet how much the tax would be or what “meaningful description” means. If  Spain hopes to collect some revenue from Google, it is taking on quite a challenge. When Germany tried to tax Google’s links to smaller German outlets, the firm stopped offering  those “meaningful descriptions,” and links where taxes are due. Note to Spanish tax authorities: buena suerte.

Meanwhile, Australian citizens may pay extra in order for the federal government to have access to their online data. The federal government may require telecommunications companies to store customer data for over two years in order to combat terrorism. It could cost the telecommunications industry AU$500 million to AU$700 million a year. That cost would be passed on to consumers in what the telecomm industry calls a “surveillance tax” of up to AU$100 a year, though the government would receive not revenue, but access to the data. Stored “metadata” could include land line and online telephone records, internet access, the time, location, sender and receiver of communications, and perhaps URLs and IP addresses. Privacy concerns abound, though social media may know more about users. Of course, social media are free.

Here at home: The Internet Tax Freedom Act is on deck after the August recess. Congress is still trying to combine this measure to extend the ban on state and local internet access taxes with the Marketplace Fairness Act, which would allow states to collect sales taxes from online retailers with no brick-and-mortar locations in their state. Senate Finance Committee Chair Ron Wyden will continue his effort to keep the bills separate.

Also on the Hill in September: Protecting taxpayer refunds and identities. The Tax Refund Theft Prevention Act will be on the Senate Finance Committee’s agenda. The bill would provide enhanced protection for taxpayers against fraudulent refund claims made under stolen taxpayer identities. Victims of this identity theft would receive new assistance and the IRS would be required to establish a new security feature to help individuals protect their tax filings.

And for taxpayers planning for a long life after retirement: There’s a new way to invest for old age, though  TPC’s Howard Gleckman wonders how many consumers will do it. The Treasury now allows people to shift up to 25 percent  of their 401(k)s or IRAs into a tax-deferred annuity. The  annuities would provide a guaranteed stream of income starting when  many retirees really need it, say at age 80. Until now, retirement funds must make mandatory annual distributions starting at age 70 1/2. The annuity feature makes it less likely that retirees will outlive their assets and will make money available in very old age for long-term care and other costs. The rules allow consumers to buy riders that permit a refund of money that has not yet been paid out, and designate a beneficiary to receive payments after the buyer’s death.

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  1. Michael Bindner  ::  4:42 am on August 5th, 2014:

    Unless the Spanish newspaper association is the only site publishing the stories of its membrs and puts in an effective password system – allowing a certain number of free visits – like the New York Times, it can’t possibly pull off restricting content viewing.

    The Australians seem to be joining the surveillance state, with taxes. I’m not exactly sure, however, who is targeting the Aussies from within or without. Seems like the NSA is bullying them to get on board, for what reason, I do not know.

    The Internet Tax Freedom Act is all public relations. Anyone with either DSL, dial-up or cable pays taxes to get on, and presuming the cost of the service relates to overall average usage, the taxes charged would seem to be in direct relation to actually being online. Further, if you buy something online, even if you pay no sales tax, the people you buy it from pay income taxes on what they earn. The concept is simply whacko and is an attempt to close the barn door after the horse has fled. As for the other bill taking care of sales taxes for items purchased, its past time to pass it – but we don’t have rational actors on both sides. Of course, if they wait, this item is a good one for a Value Added Tax.

    The Tax Refund Threat Protection Act is good government service – but I hope they fund additional workers to make that easier. Of course, for those of us who owe money, especially over a number of years, there is nothing to steal. The IRS would stop an refund someone would attempt to get. Indeed, given the W-2s and 1099’s filed with the IRS already, I don’t see how this scam is possible – yet it is. Lets hope an easy software fix can shut it down forever.

    I commented on the Gleckman piece on Friday and posted it on the web just now. The bottom line is, whether it is a good idea or not depends on your personal expected morbidity – just like all life insurance and annuity schemes.

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  4. Ed Shiers  ::  10:44 pm on August 23rd, 2014:

    Apple now has Rhapsody as an app, which is a great start, but it is currently hampered by the inability to store locally on your iPod, and has a dismal 64kbps bit rate. If this changes, then it will somewhat negate this advantage for the Zune, but the 10 songs per month will still be a big plus in Zune Pass’ favor.