"The Force is what gives a Jedi his power. It's an energy field created by all living things. It surrounds us and penetrates us. It binds the galaxy together." – Obi-Wan Kenobi
The next installment of the Star Wars saga hits theaters across the galaxy this Friday, and excitement
is mounting. Whether you are at the
box office or a dinner party, you can distinguish yourself as a
tax enthusiast if you pose this question: is the Force tangible personal
property subject to sales and use tax, or is it a nontaxable intangible?
Surprised you might be, young padawan, but view the Force as taxable tangible personal property many states would. Read on to learn why.
States with a sales tax tend to follow a common taxability framework by:
Assuming that some enterprising inventor figured out a way to capture and harness the Force such that she could sell it to aspiring Jedis and Siths (and possibly start another epic series?), then the taxing authorities would have to determine if her sales of the Force would be taxable. If the Galactic Republic uses the above taxability regime and adheres to the Streamlined Sales and Use Tax Agreement (SSUTA) standardized definitions, then we can determine whether the inventor-retailer’s sales would be taxable.
Seen, Felt, Weighed, Measured, or Touched
The inventor-retailer here appears not to be selling a service, so our analysis depends on whether the Force is tangible or intangible. The Galactic Republic will impose sales tax on sales of the Force only if it is tangible personal property. That is a fact-intensive inquiry.
The SSUTA defines the term “tangible personal property” as “personal property that can be seen, weighed, measured, felt, or touched, or that is in any other manner perceptible to the senses.” The term explicitly “includes electricity, water, gas, steam, and prewritten computer software,” all of which tend to pose challenging taxability questions for states.
Here, the Force is a ubiquitous, binding power that joins the universe together. It has a spiritual and religious component in the movies, and it drives the entire series by presenting the duality of and struggle between good and evil. That duality is a consistent theme throughout the entire Star Wars franchise, but the franchise has seen a much bumpier road in explaining exactly how the Force operates.
In the original Star Wars trilogy, the Force was a state of mind. Dialogue from the movies implied that the Force was a hereditary trait, as J.W. Rinzler explains on starwars.com. For example, in Return of the Jedi Luke tells Leia that the force is “strong in [his] family.” George Lucas himself even referred to the Force in 1977 as “a way of seeing,” “a way of being with life,” an “awareness,” and a “perception.” He likened the Force to yoga and karate, saying that “everybody can do it” and that the Jedi merely use the Force “as a technique.” Thus, the Force doesn’t appear to be tangible personal property at all.
But everything changed in Episode 1: The Phantom Menace. There, we learned that the Force is more than just a state of mind and a way of being with the universe. Instead, the Force consists of midi-chlorians—intelligent, microscopic organisms living inside our cells. We learned that one could measure a person’s midi-chlorian count by administering a blood test, and we learned that Anakin Skywalker had off-the-charts midi-chlorian levels so high that he was destined to be the Chosen One. (Late-breaking spoiler alert!)
The Midi-Chlorian Revolution
Under the Galactic Republic’s definition, midi-chlorians are arguably tangible personal property. We can measure midi-chlorians with a simple blood test. We can also see their effects, such as when the Emperor uses the midi-chlorians inside him to shoot Force lightning from his fingertips. Perhaps, then, the Force and its midi-chlorians are no different than electricity, which the SSUTA categorizes as tangible. Indeed, if we are to believe that electricity and computer software are tangible, then surely one does not stretch in arguing that the Force and midi-chlorians are too.
Therefore, because our retailer is selling tangible personal property, the Galactic Republic would impose sales and use tax on the transaction unless an exemption applies. I am not aware of such an exemption in galactic law, but that might change if our retailer can get the Trade Federation to lobby the galactic legislature on her behalf. If light of the money that she could make by selling the Force, surely she could afford a top governmental relations team.
With the Force consisting of tangible, blood-based midi-chlorians, it stands to reason that our inventor-retailer would need to collect sales tax on her sales of the Force.
Continue the discussion on LinkedIn: Is the Force tangible?
For more information about state tax issues, sign up for a free trial on Bloomberg BNA’s Premier State Tax Library.
By Ryan J. Voorhees
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