A proposed levy on digital storage devices, known as the "iPod tax," has been quashed by the Federal Court of Appeal after opponents argued it assumed illegal behaviour on the part of Canadian consumers.

Following hearings on Jan.9, the court ruled that the Canadian Copyright Board did not have the right to impose new taxes on digital music players and storage devices. The taxes were to be introduced later this year.

The proposed levies included a $2 tax on 1 GB removable electronic memory cards, $5 tax on digital audio players no more than 1 GB and an extra $75 on digital audio players more than 30 GBs.

In its decision, the FCA stated: "The Copyright Board erred in law when it concluded that it has the legal authority to certify the tariff that CPCC (Canadian Private Copying Collective) has proposed for 2008-2009 on digital audio recorders."

Small tariffs are currently in place for such items as rewritable CDs and cassettes. The CPCC, a non-profit agency that represents the music industry, first requested a levy on removable electronic memory in its 2003-2004 tariff proposal.

The Retail Council of Canada opposed the tax, saying it created a non-competitive market environment for retailers and assumed anyone that owned a storage device was illegally copying and sharing digital files.

"On behalf of retailers and consumers, RCC welcomes this decision," Diane J. Brisebois, president of the Retail Council of Canada, said in a statement Thursday.

"This has been a very long battle, but a necessary one. Retailers have fought against these levies since their creation in 1997 because it taxes a product based on what a consumer possibly could use it for."

The Copyright Board initially concluded that there was insufficient evidence to warrant a new tax; however, the CPCC noted the growing popularity of digital memory devices is cause for concern.

"Our surveys show the vast majority of copies that people put on their iPods come from sources other than legitimately purchased copies," said David Basskin, the director of the CPCC.

According to a CPCC media release, "During the period from July 1, 2005 to June 30, 2006, 25 per cent of all the content copied onto electronic memory cards, including cards of all formats and capacities, was music, and 14 per cent of respondents copied only music."