Today, Congressmen Steve Cohen (D-Tenn.) and John Ratcliffe (R-Texas) introduced the Digital Goods and Services Tax Fairness Act, a bill to ensure that digital goods and services do not receive duplicative taxes.
Since technology is advancing at such a rapid pace and we are becoming more and more interconnected through the internet, Congress needs to ensure that single transactions online aren’t taxed multiple times.
For example, a customer based in Nebraska, who digitally purchases a good from California, where the transaction goes through a server in Wyoming, could be subject to taxation from all three states.
The legislation would ensure that digital goods, like MP3 downloads, would not receive discriminatory taxes compared to their physical counterparts. State and local governments would not be allowed to apply taxes to products that do not apply to similar tangible goods, similar to the provisions of the Internet Tax Freedom Act, which became law in 2016.
A Senate version of the bill was also introduced today by Senators John Thune (R-S.D.) and Ron Wyden (D-Ore.).
The Digital Goods and Services Tax Fairness Act understands that the internet is inherently borderless. If signed into law, the bill would ensure that only one jurisdiction has the power to tax the sale of digital products, so Americans do not receive duplicative taxes for digital goods.
The bill was initially proposed in 2011 but has not been signed into law. While the 115th Congress version of the bill was introduced at the end of 2018, the 114th Congress version of the bill made it through four separate committees and a mark-up before being ordered to be amended in June of 2015. The Senate bill was read twice then referred to the Committee on Finance.
ATR and Digital Liberty support this legislation in order to prevent double taxation and for establishing digital tax borders across the fifty states.