Thursday, July 1, 2010

A Proposal for a New Digital Goods and Services Tax for U.S. Congress

Representatives Rick Boucher (D-Va.) and Lamar Smith (R-Texas) introduced the Digital Goods and Services Tax Fairness Act (H.R. 5649) that calls for the creation of a national framework for taxing digital downloads and applications. Sponsors of the bill note that the first state tax on digital goods was imposed in 2007 and that already some 25 states have considered legislation imposing new taxes on digital goods and services.

"Duplicative or increased taxes imposed by states for online products could create significant disadvantages for U.S. companies competing in global high tech industries. This important legislation protects U.S. high tech companies and American consumers by establishing a uniform system for taxes on goods and services purchased online. Specifically, the legislation prevents states from applying duplicative taxing systems to products simply because they are purchased online," said Judiciary Committee Ranking Member Lamar Smith.

Verizon expressed support for the measure: "The Boucher-Smith bill offers a smart solution to a growing Internet-age problem. Consumers face potential multiple and discriminatory taxation of the music, movies, games and other goods and services they download from the Internet. Discouraging Internet use makes no sense, particularly at a time when jobs and the economy are top concerns. This legislation takes into account that the new digital economy has no borders, and it creates a uniform framework to protect consumers, much like the Internet Tax Moratorium has done for Internet access," stated Peter Davidson, Verizon senior vice president of federal government relations.

CTIA-The Wireless Association also issued a statement expressing support: "CTIA is pleased Congressmen Boucher and Smith recognize the importance of establishing a national framework to prevent multiple and discriminatory taxation of digital goods and services. Enacting a federal tax framework makes sense, although we hope that any taxation of digital goods and services be implemented in a manner that is minimal. This bi-partisan legislation will provide tax administrators and consumers alike a better understanding of how digital commerce should be taxed. That will enable digital commerce to continue to flourish in a way that will both assist in the nation's economic recovery and enhance American economic competitiveness."