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Digital Goods and Services Tax Fairness Act
As businesses sell more and more goods and services to consumers through digital platforms, it is imperative that the tax treatment of those goods and services be consistent and fair. In short, consumers should be protected from having to pay duplicative state taxes. Legislation that would provide consumers with the protection from duplicative taxes has been introduced in the United States Senate and the House of Representatives. Duplicative taxation of goods and services can be a huge drain on the economy — resulting in fewer purchases — when the economy is still struggling to recover from the recent downturn.
NAA is a member of the Download Fairness Coalition, which believes that the purchaser of digital products — whether a newspaper, a magazine, a video or music — should not be subject to taxation by multiple states. The coalition is working with policy makers in the House and the Senate on legislation that would prevent against multiple and discriminatory taxes on digital goods.
Here is why legislation is needed:
- Unlike traditional internet purchases, digital goods are not products you can hold in your hands, they are items like songs for your MP3 player or iPod, newspaper apps for your tablet or the streaming of a movie for your mobile phone.
- Unlike making a purchase at a store of a tangible item — when you purchase a digital good — you are potentially subject to paying sales tax more than once. For example, if you live in Colorado and you make an online purchase of an app in an airport in Virginia, and the company from which you bought the app has their servers located in Texas, any and all of those states could lay claim to the right to tax your purchase.
- Digital transactions typically cross several state boundaries when you hit the send button. Because there is no uniformity in how these taxes are applied today, tax collectors in multiple states can use vastly different rules to decide how and when they will impose taxes on these transactions. As a result, an individual may get taxed by multiple states.
- State laws governing sales and use taxes are not able to address the complexities that arise in today’s e-commerce economy. This can only be resolved through a national framework passed by Congress.
- The Digital Goods and Services Tax Fairness Act, introduced on May 12, 2011 by Senator Ron Wyden (D-OR) and Senator John Thune (R-SD) and in the House of Representatives by Chairman Lamar Smith (R-TX) and Congressman Steve Cohen (D-TN), would provide consumers with tax certainty when purchasing digital goods and provide consistent guidelines to the providers required to collect such taxes.