Revenue hungry state lawmakers and tax administrators have begun to enact new taxes on digital goods and services, like downloaded music, movies, apps, and books. Yet, due to varying and vague tax laws, some states can levy excessively high and discriminatory taxes on digital downloads, with the potential for multiple states to try to tax the same digital good as it travels across the Internet.

Today, 12 free-market organizations sent a letter endorsing the Digital Goods and Services Tax Fairness Act (S. 971) sponsored by Sens. John Thune (R-S.D.) and Ron Wyden (D-Ore.). The bill would prevent double taxation and hold state policymakers accountable for enacting new taxes on e-commerce. Click here or see below for a copy of the letter.

April 25, 2012

U.S. Senate Committee on Finance

RE: S. 971, Digital Goods and Services Tax Fairness Act

Dear Members of the Senate Committee on Finance,

On behalf of millions of taxpaying Americans, we write to urge your support for the Digital Goods and Service Tax Fairness Act (S. 971). Sponsored by Sens. John Thune (R-S.D.) and Ron Wyden (D-Ore.), the measure creates a much-needed framework for taxing digital goods and services across the fifty states to prevent double taxation and hold policymakers accountable for enacting new taxes.

Across the country, states are establishing new taxes on downloaded goods, such as music, books, movies, and mobile applications. This has resulted in a patchwork of varying standards for taxing digital e-commerce, and could result in multiple states taxing a single consumer purchase or levying higher and discriminatory taxes on downloads. S. 971 will ensure that when a digital product is purchased, it is taxed once and only once.

E-commerce is inherently an interstate activity, as the Internet does not acknowledge state borders. As a result, a consumer in Montana could purchase a digital product online from a company in California that is located on a server in North Carolina. The legislation would ensure that only the state where the consumer is based has taxing authority. Without the federal framework contained in this bill, each of these states could claim taxing jurisdiction, resulting in excessive taxation of online goods and services.

The Digital Goods and Services Tax Fairness Act will make sure there is accountability and public awareness should a state begin to tax digital goods. Today, eight states have begun taxing downloaded products by administrative fiat at state Departments of Revenue, bypassing the legislative process altogether.

Internet and digital commerce is a highly dynamic and rapidly growing sector of the American economy. The Digital Goods and Services Tax Fairness Act will help to eliminate tax-related burdens on interstate commerce that could stifle the vital online market.

As you consider a number of tax-related measures impacting interstate commerce, we urge you to support S. 971, the Digital Goods and Services Tax Fairness Act. The measure will bring much needed clarity and simplicity to interstate e-commerce, while preventing states from engaging in excessive and discriminatory tax policy.

Sincerely,

Grover Norquist

President

Americans for Tax Reform

U.S. Chamber of Commerce

Andrew Moylan

Vice President of Government Affairs

National Taxpayers Union

David Williams

President

Taxpayers Protection Alliance

Chuck Muth

President

Citizen Outreach

Seton Motley

President

Less Government

Jeffrey Mazzella

President

Center for Individual Freedom

James Valvo

Director of Policy

Americans for Prosperity

Tom Schatz

President

Council for Citizens Against Government Waste

Mike Wendy

Director

MediaFreedom.org 

Kelly William Cobb

Executive Director

Digital Liberty

Webb Scott Brown

President/CEO

Montana Chamber of Commerce