Canada’s Supreme Court declines to hear record companies’ arguments for a levy on digital music players.

July 29, 2005

Canada’s top court has put to rest a special tax on digital music players that had been intended to compensate musicians for illegal use of their content, cheering levy opponents who argued it unfairly punished people who use MP3 devices for photos and non-music data files.

A Federal Court had struck down the policy last year but the Canadian Private Copying Collective (CPCC), which collects tariffs on behalf of musicians and record companies, later appealed the case.

The Supreme Court of Canada declined to hear further arguments on the case Thursday, all but killing the tax and ensuring MP3 devices will remain cheaper for Canadian consumers.

The CPCC started taking taxes on MP3 players in December 2003 after arguing that MP3 players like iPods were a way to make illegal copies of songs. The levy, the CPCC argued, was a way to pay music creators for unfair use of their work.

Originally created for blank audio cassette tapes, the tax is also applied to blank CDs and was extended to MP3 players. The player taxes were built into the prices of the devices. A CAN $2 ($1.63) tax was levied for a device with non-removable memory of up to 1 GB, CAN $14 for one with memory up to 15 GB, and CAN $25 for one with more than 10 GB.

About $4 million in tariffs was collected before the Federal Court’s action in December 2004. At the time, the Canadian Coalition for Fair Digital Access, representing music player retailers and manufacturers, successfully argued that the levy system is unfair since players can also be used for photos and non-music data files.

The coalition also maintains consumers already pay for music when they use legal sites like iTunes and Puretracks to download songs.

However, the Supreme Court rejected the coalition’s motion to re-examine the law permitting the CPCC to collect tariffs. Thus, taxes on blank DVDs and tapes still stand.