Canada Authorizes Tax on Downloaded Music

The Copyright Board of Canada has approved taxes on music purchased through music download services like iTunes.

The Copyright Board of Canada has approved a new tax on music purchased through download services (PDF) like Napster, Yahoo Music, and the ever-popular iTunes. The tariff will amount to roughly three cents (Canadian) on an individual song that sells for $0.99, or about 1.5 cents per track sold in an album.

The tariff is intended as a way to compensate artists for lost sales due to digital music piracy, and will be retroactive to 1996—easily covering all music sold through Apple’s iTunes store and its competitors. The tax will be paid to the Society of Composers, Authors, and Music Publishers of Canada (SOCAN) for distribution to performers, songwriters, and publishers. The tax is similar to fees imposed on blank CD media in Canada (as well as the United States) to compensate artists and music publishers for presumed piracy that will be committed using the blank media.

The tariff specifically enacts a 3.1 percent rate on so-called “permanent” downloads, with a minimum fee of 1.5 cents per file on a bundle (like an album) or 2.1 cents per file in all other cases. For limited downloads (e.g., streamed music and downloads with a limited lifespan) the tariff amounts to 5.7 percent of the amount paid by service subscribers, with a minimum fee of 54.8 cents per month per subscriber if the user can transfer the tunes to a portable device, 35.9 cents per user per month if not. On-demand streams will be subject to a 6.8 percent tax, with a minimum of 43.3 cents per subscriber per month.

The Copyright Board has yet to issue a decision on Internet radio stations or the use of music on personal or business Web sites.

Operators of online music stores and streaming music services have yet to respond to the Copyright Board’s ruling. Industry watchers expect most services will raise their prices in Canada to account for the new fees, although a handful might choose to absorb the cost rather than face consumer backlash from a price increase.