{Off-topic} The (Dormant) Angry Birds Commerce Clause

{Off-topic} The (Dormant) Angry Birds Commerce Clause



Well, it seems like a good week for being off-topic. This post is very off-topic.

Let’s say I bought my dad a Nook HD+ for Christmas. I bought it in Missouri and paid Missouri sales tax. OK!

Then, I transported it over states lines, and gave it to my dad for Christmas, in chilly Idaho. He opened it and was super happy. OK!

Yesterday, he decides to buy an “app”, specifically “Angry Birds” from the Nook Store. Angry Birds cost $2.99. OK!

Then, $0.18 in taxes! What?

Eighteen cents–going where? I’ll have to assume Idaho because Idaho sales tax is 6% and 6% of $2.99 is $0.18.

I don’t know. But let’s think this through:

Sales tax for the physical Nook was already taken care of in Missouri.

Barnes and Noble Inc. (HQ in New York) and Microsoft own Nook Media LLC which operates the Nook Store, the online marketplace where he bought Angry Birds, a game created by Rovio (HQ in Finland!).

So, B&N has physical locations in every state, but their subsidiary, Nook Media LLC, doesn’t really seem to physically exist. But let’s say it exists on paper in New York. Arguably, Nook Media has no substantial ties to Idaho, other than it sells stuff to people in Idaho.

Why is that important? Everyone’s favorite Constitutional clause, the dormant commerce clause!

From this very useful online paper:

“The Commerce Clause grants Congress the authority to “regulate Commerce … among the several States.” The Supreme Court has interpreted the Commerce Clause not only as a grant of power to Congress but also as a limitation on states’
power to interfere with interstate commerce, a doctrine is known as the Dormant Commerce Clause.

..It further explained that the “very purpose of the commerce clause was to ensure a national economy free from such unjustifiable local entanglements. In Bella Hess, the Supreme Court created a bright line rules for sales and use taxes. It held that a company whose sole contacts with a State are by mail or common carrier lacks the substantial nexus required by the Commerce clause for sales and uses taxes to be imposed..”

So is Angry Birds taxable by Idaho?

Well Idaho tries to define what is taxable tangible property.

63-3616. TANGIBLE PERSONAL PROPERTY. (a) The term “tangible personal property” means personal property which may be seen, weighed, measured, felt or touched, or which is in any other manner perceptible to the senses.

(b)  The term “tangible personal property” includes any computer software which is not a custom computer program.
(i)   As used in this subsection, the term “computer software” means any computer program, part of a program or any sequence of instructions for automatic data processing equipment or information stored in an electronic medium. Computer software is deemed to be tangible personal property for purposes of this chapter regardless of the method by which the title, possession or right to use the software is transferred to the user.

I guess Angry Birds qualifies as this? I’m sure tech people could quibble over this, but let’s give them the benefit of the doubt and say it is.

Idaho law then tries to define what a substantial nexus is, but in my pretend world, I’m challenging to Constitutionality of the tax, so Idaho’s definition doesn’t matter as much as a federal definition or a federal judicial one. But they (definitions) don’t exist.

But, here’s the real gotcha: he bought Angry Birds, which is a product from Rovio, stationed in Finland!! Surely Rovio has no contacts with Idaho.

So, let’s say I am right and this tax is not ok. Who would I sue? Barnes and Noble? Nook Media LLC? Rovio? The Idaho Tax Commission? Really, it should be Nook Media and Rovio suing Idaho. But I’m sure the litigation costs far outweigh the tax savings on $0.18, so they will just make the consumer pay it…

I’m gonna send out some emails, see what I can find out. Probably not going to start the Angry Birds Class action lawsuit for the $.18 in tax refund though. But a good opportunity for dormant commerce clause thinking.

Posted on January 3, 2013, in Off-topic and tagged , , , , , , , , , , . Bookmark the permalink. 1 Comment.

  1. I erased all of my Angry Bird apps after Snowden revealed that the government is spying on you through this app. I don’t want the government to know how much of my life I wasted playing this game.

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