Bill Proposes Uniform Tax Framework For Digital Goods But Not Telecom


Stating that “existing sales and use taxes are inadequate and ill-equipped to address today‘s digital economy,” Congressman Rick Boucher (D-VA), Chairman of the House Communications, Technology & Internet Subcommittee introduced legislation that would establish a uniform national framework for the taxation of digital goods and services, the Digital Goods and Services Tax Fairness Act (HR-5649).  The bill is co-sponsored by ranking House Judiciary Committee member Lamar Smith (R-TX).

Industry support is wide spread, coming from telecommunications, electronics and media groups, including Verizon Communications, Apple, Inc., Time Warner, the Recording Industry Association of America, and wireless association CTIA. In a letter addressed to Boucher and Smith, CTIA joined the National Cable & Telecommunications Association, US Telecom, TechAmerica and NetChoice in describing the bill as “critical to the continued growth of digital commerce and the overall economic competitiveness of the United States.”  The bill seeks to eliminate the imposition of “discriminatory” and duplicative state taxes on digital goods by specifying that the ultimate tax jurisdiction is determined by the customer‘s tax address.  Goods and services covered by the bill include (1) digital music, movies and games, (2) software downloads, and (3) e-books.

However, telecommunications services, Internet access, and digital audio or visual programming services, (those that are comparable to broadcast television programming) are not covered by the bill, which also exempts online medical, education and energy management services from taxation.  (The measure stipulates, however, that taxes could be applied to interactive on-demand and pay-per-view services.)  The legislation would also prohibit state and local tax authorities “from retroactively construing taxes imposed on tangible personal property to also apply to digital goods and services through administrative rulings or regulations.”

This legislation will be analyzed and a further report will address the likelihood of having telecom and Internet access included in the bill.

Questions should be directed to Charles H. Helein of the firm.  He asks anyone receiving this to let him know of their concerns about the exclusion of protection for telecom and Internet access from this Bill.

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