Legislation
in Congress would create a common sense framework for state taxation of
interstate sales of digital goods and services. It would thereby stave off taxation
of the same transactions for digital goods and services by multiple states. Importantly,
the bill would not impose any new
taxes or mandate tax or no-tax decisions by individual states. For the sake of
consumers and the future of the digital economy, let's hope this bill gains
traction in Congress.
S. 1364 –
the "Digital
Goods and Services Tax Fairness Act" – would set sourcing rules for
determining when states have jurisdiction to tax retailers or taxpaying
consumers. Again, this would prohibit multiple states from imposing taxes on
the same transaction.
The bill
would also require states that decide to tax such transactions to clearly make
that determination through legislation.
Taxation of digital goods through state tax department interpretations would be
impermissible.
Finally, S.
1364 would ban discriminatory state taxes on the sale or use of digital
goods or services. That is, it would prohibit the sale or use of digital goods
or services from being specially taxed or taxed at a rate higher than similar
goods or services that are not provided electronically.
In my Perspectives from FSF Scholars essay,
"Digital
Downloads Should Be Protected From Discriminatory and Duplicate Taxes,"
I explained the merits of this type of legislation in a bit more detail.
Similar legislation was introduced in the last Congress. It is encouraging that
members of Congress are again taking up this matter.
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