> the law changed, requiring that taxes be paid on unsold inventory each year, these warehouses became a tax liability
How exactly did the law change? I can see them costing as an expense in the year published and not counted as revenue until sold (that's a "tax advantage") - but having to pay tax each year on inventory? That's more than just removing a tax advantage.
My understanding (I am not an accountant or lawyer and this is not legal advice, but a layman's uncertain organic memory) is that it was just that:
- old law: tax is deferred until item is sold
- new law: tax is owed on property in inventory each year until sold
There were hearings on Congress and Librarians holding marches protesting the bill, but it all seems to have faded away into obscurity and the new status quo.
> - new law: tax is owed on property in inventory each year until sold
This type of "property" tax is very rare except on physical real estate (at least in US) but it might be they did that. If so, it'd destroy the long tail entirely, so much so that I'd think print on demand companies like Amazon were behind the tax bill.
>In the US, backlist and midlist publications were negatively affected by the US Supreme Court decision in the 1979 case Thor Power Tool Company v. Commissioner of Internal Revenue. This decision reinterpreted rules for inventory depreciation, changing how book publishers had to account for unsold inventory each year, and their ability to depreciate it. Because stocks of unsold books could no longer be written down without proof of value, it became more efficient tax-wise for companies to simply destroy inventory.
How exactly did the law change? I can see them costing as an expense in the year published and not counted as revenue until sold (that's a "tax advantage") - but having to pay tax each year on inventory? That's more than just removing a tax advantage.