WebProNews

A proposal to tax Internet downloads in the state of California has been defeated by an Assembly panel after strong opposition from companies that do business in Silicon Valley.

The bill sought to reclassify digital downloads as "tangible personal property." It would have required companies doing business in California to charge sales tax to residents who purchased their downloads.

Author of the bill, Assemblyman Charles Calderon (D-City of Industry), plans to seek a reconsideration vote as early as next week.

About 130 companies and organizations were formally opposed to the bill. Only six groups supported the measure.

"We don't think this legislation is necessary," said Greg Turner, a lobbyist for the American Electronics Association, according to the Mercury News. "It's not just about digital equivalents, it's much broader than that," he said.

Companies and organizations that were against the bill included Yahoo, Microsoft, TechNet, cable television operators and the California Manufactures and Technology Association. Representatives of the recording industry and the motion picture industry said the law would increase piracy.

Calderon said the measure would help with the states $8 billion budget shortfall and believes it would bring in $500 million in annual revenue by charging sales tax on downloads.