There's a new non-profit lobbying group in town, the Download Fairness Coalition, and it wants to stop double or triple taxation practices that states charge on digitally downloaded purchases, like music, movies or books. The group has pushed for, and gotten, a new bill dubbed the Digital Goods and Services Tax Fairness Act. The bill was introduced in the Senate last week by U.S. Senator Ron Wyden (D-Ore.) and John Thune (R-S.D.). It's House counterpart was introduced by Judiciary Chair Lamar Smith (R-TX) and Steve Cohen (D-TN).
States with shrinking revenues are looking at ways to fix their shortfalls and many of them have latched onto taxing digital downloads. This may be fine, if it were fair. But states want to apply multiple taxes to the same transaction on the weakest of pretexts.
The DFC Website explains, "When you purchase a digital good – you are potentially subject to paying sales tax more than once. For example, if you live in Colorado and you make an online purchase of an app in Virginia, and the company from whom you bought the app has their servers located in a Texas, any and all of those states could lay claim to the right to tax your purchase."
For instance, California right now is contemplating legislation pushed by local retailers called " E-Fairness" that would tax e-commerce transactions that it hasn't been taxing so far. The claim there is that these transactions aren't being taxed at all and should be. Meanwhile some of the state-level taxes are being used as business-incentive pawns. For instance, the South Carolina House recently voted to remove planned taxation of Amazon, and give it sales-tax-exemption status, but only if it creates 2,000 jobs in the vicinity, instead of the 1,250 that the retailer planned on adding.
Ergo, Senators Wyden and Thune want Federal legislation to create a framework to clean up this mess. “Unfortunately, the rules regarding how these goods and services can be taxed are ill-defined, creating the potential for multiple taxes by different jurisdictions on a single purchase by a consumer. Our legislation, which would provide clarity and uniformity in the taxation of digital goods, is good for consumers and job creators alike,” said Thune in a press release.
The DFC couldn't agree more. And the recently established non-profit has the clout to be heard. It's members include: Amazon, Apple, Comcast, Computer and Communications Industry Association, Cox Enterprises, CTIA – The Wireless Association, MyWireless.org, Newspaper Association of America, TechAmerica, Time Warner Cable, T-Mobile, US Telecom, Verizon, as well as a number of other national and regional business associations.
The new DFC isn't messing around when choosing its lead lobbyist, either. It is headed by Sam Whitehorn, a former Senate Commerce committee staffer.
The new bill forbids the taxation of downloadable stuff bought over the Internet if that service isn't otherwise taxed when purchased locally. For instance, if you aren't taxed on a newspaper subscription delivered to your house, you can't be taxed for an e-reader subscription to the same newspaper. Taxation would also occur only in the state where the buyer resides and not where the seller is, or in every state that hosts the Internet's wires while it carries that transaction.
Sounds good, right? Well, we'll see. The hopeful sign is that this is bi-partisan legislation. On the downside, Rep. Smith introduced some similar bills in Congress last session, which earned industry support as well, but otherwise went nowhere