Video and Video Game Taxes

The Entertainment Merchants Association (EMA) opposes proposals to single out the sale and/or rental of pre-recorded DVDs and video games for disparate taxation.

Some communities see the high volume of DVD and video game sales and rentals as an opportunity to raise revenues and have proposed special video and video game taxes in addition to normal sales and use taxes. Such proposals punish DVDs and video games for their popularity and reduce the inherent value of these entertainment option.

A special tax on DVD and/or video game sales and rentals would fall most heavily on families with children. Home video is the most economical way for most families to view the latest movies, and for many it is the only affordable way. EMA research shows that households with children are much more likely to rent a video at least once a week than are households without children. For as little as $1.00, the entire family can enjoy a movie. For children's videos and other videos they will watch numerous times, families can purchase DVDs for less than it costs to take an average family to the movies just once. Similarly, more than two-thirds of video game consoles are found in households with children. Research has found that more than one-third of American parents play computer and video games, and 80 percent do so with their children.

Although the amount of a special DVD and/or video game tax that would levied on each transaction may seem small, it would place "brick and mortar" retailers at a competitive disadvantage. Home video competes with other motion picture delivery systems, including cable and satellite pay-per-view and Internet video on demand. Likewise, physical versions of video games, such as the discs played on video game consoles, compete with other video game delivery systems, including Internet-based video games and downloadable games. A special tax on DVD and/or video game sales and rentals would place an unfair burden on traditional retailers as they compete against other delivery systems that are not subject to the same level of taxation.

In addition, the U.S. Supreme Court has regularly found differential taxation of expressive products to be presumptively unconstitutional because the differential treatment suggests the goal of the tax is not unrelated to suppression of the expression. See, e.g., Minneapolis Star v. Minnesota Commissioner of Revenue, 460 U.S. 575, 585 (1983); Police Department of Chicago v. Moseley, 408 U.S. 92, 95-96 (1972). Thus, any proposal to single out the sale and rental of DVDs and video games for special taxation unrelated to a legitimate regulatory scheme would heavily burden speech and likely would be constitutionally invalid. Such an impairment on speech could be subjected to a federal court challenge.

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