October 11, 2018

Wyden, Thune Reintroduce Bill to Protect Innovative Digital Goods and Services

Finance Committee senators say bipartisan legislation targets multiple and discriminatory taxes

Washington, D.C. – U.S. Sens. Ron Wyden (D-Ore.) and John Thune (R-S.D.) today reintroduced legislation to prevent discriminatory and duplicative taxes on digital goods and services, including online downloads of music, literature, movies, mobile apps, and cloud computing services.

The potential for multiple and discriminatory taxes levied on these types of goods and services could threaten the growth and innovation of this important sector of the economy, Wyden and Thune said.

“Preventing unfair taxes on music, books and other important goods and services benefits consumers and innovators alike,” said Wyden, ranking member of the Senate Finance Committee. “This bipartisan legislation solves a 21st century tax riddle by establishing a comprehensive set of rules for states to follow. I encourage my colleagues to support this bill as Senator Thune and I push for its swift passage.” 

The Digital Goods and Services Tax Fairness Act introduced by Wyden and Thune, a member of the Senate Finance Committee, provides some “rules of the road” for taxing digital goods and services and establishes a framework across multiple tax jurisdictions.

The bill prohibits state and local governments from applying taxes to those products that do not apply to similar tangible goods, as has been the law since Congress made the Internet Tax Freedom Act permanent law in 2016. For example, a state or local tax jurisdiction cannot simply apply a tax on an electronic newspaper subscription if it does not apply the same tax to a physical newspaper.

As digital goods and services move from one tax jurisdiction to another across the internet, the legislation also prevents state and local tax jurisdictions from imposing multiple taxes on consumers. Instead, the bill requires that when legitimate taxes are imposed on a digital product, a tax jurisdiction can only impose them on the final customer or end user.

Without this provision, the retailer in one state can be taxed on a product or service, as can the consumer in another state. If that consumer is traveling in a third state, all three states could conceivably claim the right to tax the downloaded product or service. These stacked taxes create an unlevel marketplace and can raise the final prices on digitally enabled commerce.