Taxes on e-Books Could Spike Prices by 21%

from Fast COmpany - Austin Carr, December 22nd, 2010

The e-book market is unstoppable. Barnes & Noble's Nook and Amazon's Kindle are flying off the shelves--the latter actually completely sold-out this week from holiday sales. But this burgeoning industry might be hampered by everyone's least favorite obligation: taxes.

According to a report by nonprofit consumer advocacy group MyWireless, state and local taxes on e-books could bump up the total price of digital literature by 21%. While e-books have always been far cheaper than their hard-copy counterparts, such high taxes could drive costs higher than physical books, reports SmartMoney.

Meanwhile, with budget deficits booming and states required to balance their budgets, the likelihood of state taxes on downloadable products is only going to grow.

The going rate for an e-book is $9, so even a 20% tax would only spike costs by a few dollars. But the industry as a whole is set to surpass sales of $1 billion this year, a figure which will likely triple to $3 billion by 2015.

Local government's take from taxing e-books? We're looking at between $200 million and $600 million in the coming years. That's great for profligate legislatures--but it also looks suspiciously like a tax on literacy.