Digital Goods

Woman using cell phoneMore than ever before, American consumers like you are using wireless to go online to buy and download what are called “digital goods and services.” Those include apps, music and ringtones, movies and TV episodes, e-books and video games.

The tax code in this kind of commerce is murky. Right now it’s possible you could be taxed by several different jurisdictions for the same digital purchase. For example, if your phone has one area code, but you buy something with your wireless device when you’re in another one, from a company in yet another part of the country, it’s possible today that you can be taxed by all three jurisdictions!

With state and local governments desperate for new revenue sources, that scenario is quite possible. That’s why it’s important to make sure wireless consumers are treated fairly and that we have a reasonable and sensible tax structure for such purchases.

Help From Congress: The ‘Digital Goods & Services Tax Fairness Act’

Thankfully, there’s a bill before the U.S. Senate that would prevent digital goods purchases from being subjected to multiple and discriminatory taxes. The bipartisan federal legislation on both sides of the Capitol called the ‘Digital Goods & Services Tax Fairness Act‘ (S. 851, H.R. 1643) would establish a “national framework” or some “rules of the road” for how this growing digital marketplace should be fairly taxed at the state and local levels.

What the Bill Does

  • The legislation being considered would make sure consumers aren’t punished with multiple taxes on digital purchases. It would prevent consumers from being double or even triple-taxed on an mp3, video or on that latest incredible app, as could be the case today.
  • The bill reinforces Congress’s important role in making tax policy for commerce that crosses state and international borders. That’s more important than ever with so many people making online purchases with their wireless device.
  • It would clearly establish which jurisdiction (the consumer’s home billing address, presumably) has the right to tax digital transactions, and then tell all others…hands off!

Support for the Bill

  • In the last Congress, Representatives Lamar Smith (R-TX) and Steve Cohen (D-TN) and Senators Ron Wyden (D-OR) and John Thune (R-SD)  introduced identical, bipartisan bills, ‘The Digital Goods and Services Tax Fairness Act.’ The House Judiciary Committee marked up the bill and reported it favorably out of Committee and the bill was gaining support in the Senate Finance Committee. This bill currently has 9 cosponsors.
  • These original sponsors are stepping up in common sense and pro-consumer fashion. They’re supporting a bill that would get ahead of a potential tax nightmare for wireless users. The possibility of multiple taxation for the same purchase is very real. As of 2012, 13 states have expanded their sales taxes to specifically include digital goods and services in their tax base, while many more have considered similar proposals.

Digital Goods Taxability as of 2013

Map of digital taxes in the U.S.

What You Can Do

Tell your U.S. Senators and Representative that digital goods and services should be taxed fairly today!

Take action now!