House Committee Approval for Digital Goods and Services Tax Fairness

BY CCIA Staff
July 6, 2012

Last week, the House Judiciary Committee passed the Manager’s Amendment of H.R. 1860, the Digital Goods and Services Tax Fairness Act, by voice vote.  The bill establishes a national framework for how state and local taxes apply to digital goods and digital services so as to prevent multiple and discriminatory taxation.  CCIA welcomes committee passage of this legislation as we believe it recognizes the importance of innovation and the need to provide for the continued development of the growing digital marketplace.

The Digital Goods and Services Tax Fairness Act, sponsored by Judiciary Committee Chairman Lamar Smith (R-TX) and Rep. Steve Cohen (D-TN), would limit taxes on digital goods and services to either the buyer or seller, clarifies that the customer’s tax address is the only jurisdiction with the right to tax a digital transaction, and prohibits the taxation of digital goods and services at a higher rate than similar non-digital goods and services.

The fact that digital transactions transcend physical borders enables a far-flung marketplace unhindered by distance and geography.  However, at the same time, this extra-geographic nature makes them vulnerable to multiple tax jurisdictions seeking to use any connection (no matter how marginal) to the transaction to take their cut.  The real and potential benefits of the digital marketplace need to be shielded from such exploitation, and the clarification provided by H.R. 1860 would do that.

While it is heartening that H.R. 1860 was passed with broad support in the committee, some members made troubling comments about their willingness to link it with efforts on other bills (the Main Street Fairness Act and the Marketplace Equity Act) that would force out-of-state online retailers to collect sales and use taxes on purchases made by residents of a state, regardless of whether the retailer had any physical presence in that state.  While these bills do deal with online markets and taxes, their approach to innovation could not be more different.  H.R. 1860 seeks to prevent new digital markets from being penalized for their innovation, while online sales tax collection bills would allow states to do just that by targeting them as convenient sources (and collectors) of revenue.  Online sales tax collection is a completely separate issue and we hope that Congress will keep it that way.

Related Articles

Global Coalition of Industry Groups Offer Digital Recommendations to G7 Leaders

Apr 9, 2021

Washington — The Computer & Communications Industry Association joined 16 other tech and business groups today to offer joint recommendations  for G7 leaders. The recommendations precede the  G7 Digital and Technology Ministerial on April 28-29. Representatives from tech organizations in each of the G7 countries and Europe plan to meet April 15 to further discuss…

CCIA Offers Recommendations on EU-US Regulatory Agenda

Apr 9, 2021

Washington — The Computer & Communications Industry Association released recommendations for a new start to EU-US cooperation on trade and digital regulations. The Transatlantic relationship remains a key trade partnership, and a renewed commitment to strengthening it through increased dialogue on urgent digital issues is welcomed. CCIA offered recommendations to policymakers supporting increased cooperation on…

CCIA Offers USTR Comments Ahead of Annual Special 301 Report On Trade Barriers

Jan 28, 2021

Washington — In comments filed with the U.S. Trade Representative today, the Computer & Communications Industry Association asked USTR to identify countries using intellectual property rules in ways that pose trade barriers for U.S. exporters in its upcoming Special 301 report. The following can be attributed to CCIA President Matt Schruers:  “Countries continue to pursue…