This week, Sens. Ron Wyden (D-Ore.) and John Thune (R-S.D.), and Reps. Lamar Smith (R-Texas) and Steve Cohen (D-TN), introduced the Digital Goods and Services Tax Fairness Act that would prevent states and localities from enacting discriminatory taxes on digital goods, including music, movies, books, and ringtones.

The legislation will restrict multiple states from enacting taxes on one digital good, or levying higher and discriminatory tax rates on digital downloads.  Currently, twenty-three states explicitly tax digital goods.  The legislation would permit states to tax downloads, but only if elected officials approve a measure to do so. Eight states tax downloaded products by administrative fiat, bypassing the legislative process. 

Kelly William Cobb, government affairs manager of Americans for Tax Reform and executive director of StopETaxes.com, made the following statement:

“The Digital Goods and Services Tax Fairness Act rightly prevents multiple states from taxing the same downloaded song, movie, or book as it travels across the Internet to a consumer.  It means if the good is taxed, it happens once and only once.  The legislation ties the hands of revenue-hungry state and local governments by not allowing them to double or triple tax the digital equivalent of a CD or book you’d buy in a store.

“The bill means that if states want to tax your downloads, elected officials will be held responsible for that vote.  No state lawmaker should be looking to raise taxes right now, but quietly behind the scenes, bureaucrats at state Departments of Revenue are enacting taxes on digital goods with zero accountability or public awareness.  The measure puts a stop to it and ensures the public knows when government wants to raise their taxes.

“States spending themselves into the red should be looking for places to cut, not looking to raise taxes on downloads.  The Digital Goods and Services Tax Fairness Act provides clarity and simplicity, ensuring state and local governments don’t tax digital goods in a discriminatory and burdensome way."