[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5649 Introduced in House (IH)]

111th CONGRESS
  2d Session
                                H. R. 5649

  To promote neutrality, simplicity, and fairness in the taxation of 
                  digital goods and digital services.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             June 30, 2010

    Mr. Boucher (for himself and Mr. Smith of Texas) introduced the 
  following bill; which was referred to the Committee on the Judiciary

_______________________________________________________________________

                                 A BILL


 
  To promote neutrality, simplicity, and fairness in the taxation of 
                  digital goods and digital services.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Digital Goods and Services Tax 
Fairness Act of 2010''.

SEC. 2. FINDINGS.

    The Congress finds the following:
            (1) Consumers, businesses, and other participants engaged 
        in electronic commerce may be subject to multiple, confusing, 
        and burdensome taxation because of inconsistent rules among 
        thousands of State and local jurisdictions and disparate 
        treatment of digital goods and digital services.
            (2) A consistent framework for taxation is needed that will 
        not impede electronic commerce and the sale of digital goods 
        and digital services, by preventing multiple taxation, and 
        providing greater certainty and simplicity.
            (3) Neutrality should guide tax policy and administration 
        in this area. Transactions involving similar types of goods and 
        services should be taxed fairly, regardless of the method and 
        means of distribution, whether through electronic transfer or 
        through other channels of commerce. New or different taxes on 
        electronic transactions should be barred.
            (4) To ensure neutrality and avoid multiple taxation, 
        certain rules should be adapted to reflect the unique nature of 
        electronic commerce and how digital goods and digital services 
        are provided.
            (5) To recognize the critical role that online health, 
        energy management, and education services will play in our 
        economy, these services should be exempt from all State and 
        local taxes.

SEC. 3. MULTIPLE AND DISCRIMINATORY TAXES PROHIBITED.

    No State or local jurisdiction shall impose multiple or 
discriminatory taxes on or with respect to the sale or use of digital 
goods or digital services.

SEC. 4. RETAIL, SOURCING, AND OTHER LIMITATIONS.

    (a) Retail Limitation.--Taxes on or with respect to the sale or use 
of digital goods or digital services may be imposed only on or with 
respect to a sale to, or use by, a customer.
    (b) Sourcing Limitation.--
            (1) In general.--Taxes on or with respect to the sale or 
        use of digital goods or digital services may be imposed only by 
        the State and local jurisdictions whose territorial limits 
        encompass the customer's tax address. This limitation shall be 
        deemed satisfied if sourcing is determined by a seller pursuant 
        to State sourcing rules adopted pursuant to the Streamlined 
        Sales and Use Tax Agreement.
            (2) Tax address.--The customer's tax address shall be--
                    (A) with respect to digital goods or digital 
                services that are sold to a customer by a provider of 
                mobile telecommunications service that is subject to 
                being sourced under section 117 of title 4 of the 
                United States Code, and furnished to the customer in 
                conjunction with such provider's mobile 
                telecommunications service, the customer's place of 
                primary use, as defined in section 124 of title 4 of 
                the United States Code;
                    (B) if subparagraph (A) does not apply, and if the 
                digital good or digital service is received by the 
                customer at a business location of the seller, such 
                business location;
                    (C) if neither subparagraph (A) nor subparagraph 
                (B) applies, and if the location where the digital good 
                or digital service is received by the customer is known 
                to the seller, such location;
                    (D) if none of subparagraphs (A) through (C) 
                applies, the customer's address that is either known to 
                the seller or, if not known, obtained by the seller 
                during the consummation of the transaction, including 
                the address of the customer's payment instrument if no 
                other address is available;
                    (E) if an address is neither known nor obtained as 
                provided in subparagraph (D), the address of the seller 
                from which the digital good or digital service was 
                sold; and
                    (F) notwithstanding subparagraphs (A) through (E), 
                for digital goods or digital services that are 
                delivered to a person other than the customer, 
                including advertising services, the delivery location 
                if known or, otherwise, the customer's address 
                determined under subparagraph (D) or (E).
    (c) Limit on Expansive Interpretation.--No tax on or with respect 
to the sale or use of tangible personal property, telecommunications 
service, Internet access service, or audio or video programming service 
may be construed by any regulation, administrative ruling, or 
otherwise, to be imposed on or with respect to the sale or use of a 
digital good or a digital service. No tax on or with respect to the 
sale or use of a digital good may be construed by any regulation, 
administrative ruling, or otherwise, to be imposed on or with respect 
to the sale or use of a digital service. The limitations provided by 
this subsection shall not apply to any construction that was approved 
by a judicial determination made on or before June 30, 2010.
    (d) Certain Taxes Prohibited.--No tax shall be imposed on or with 
respect to the sale or use of digital medical services, digital 
education services, or digital energy management services.

SEC. 5. BUNDLED GOODS AND SERVICES.

    If charges for digital goods or digital services are aggregated 
with, and not separately stated from, charges for other goods or 
services, then the charges for digital goods or digital services may be 
taxed for purposes of this Act at the same rate and on the same basis 
as charges for the other goods or services unless the seller can 
reasonably identify the charges for the digital goods or digital 
services from its books and records kept in the regular course of 
business.

SEC. 6. DEFINITIONS AND OTHER SPECIAL RULES.

    For the purposes of this Act, the following definitions and rules 
apply:
            (1) Customer.--The term ``customer'' means a person that 
        purchases a digital good or digital service, for a purpose 
        other than resale. For the purpose of determining a place of 
        primary use under section 4(b)(2)(A), ``customer'' means the 
        ``end user'', as such term is used in section 124 of title 4 of 
        the United States Code, of the purchased digital good or 
        digital service. For purposes of this definition, purchase for 
        resale includes purchase of a digital good or digital service 
        for further commercial broadcast, rebroadcast, transmission, 
        retransmission, licensing, relicensing, reproduction, copying, 
        distribution, redistribution, or exhibition of the digital good 
        or digital service, in whole or in part, to another person.
            (2) Delivered or transferred electronically.--The term 
        ``delivered or transferred electronically'' means delivered or 
        transferred to the customer by means other than tangible 
        storage media. It is not necessary that the product or service 
        be physically transferred to the customer, provided that the 
        customer may access or remotely use the product or service.
            (3) Digital good and digital service.--The term ``digital 
        good'' means any good or product that is delivered or 
        transferred electronically to the customer, including software, 
        information maintained in digital format, digital audio-visual 
        works, digital audio works, and digital books; and the term 
        ``digital service'' means any service that is delivered or 
        transferred electronically to the customer, including the 
        provision of remote access to or use of a digital good, but the 
        term ``digital service'' does not include telecommunications 
        service, Internet access service, or audio or video programming 
        service. For purposes of this section, ``audio or video 
        programming'' means programming provided by, or generally 
        considered comparable to programming provided by, a radio or 
        television broadcast station. ``Video programming'' shall not 
        include interactive on-demand services, pay-per-view services, 
        or services generally considered comparable to such services 
        regardless of the technology used to provide such services.
            (4) Digital education service.--The term ``digital 
        education service'' means a primary, secondary, undergraduate, 
        postgraduate, or professional educational service delivered or 
        transferred electronically to a practitioner or student.
            (5) Digital energy management service.--The term ``digital 
        energy management service'' means a service that utilizes 
        digital information to manage a customer's energy use, to allow 
        a customer to respond to energy market information or 
        circumstances, or to identify customer demand with particular 
        energy supply.
            (6) Digital medical service.--The term ``digital medical 
        service'' means a health care, health information, or health 
        education service that is delivered or transferred 
        electronically to a practitioner, researcher, or patient.
            (7) Digital code.--The term ``digital code'' means a code 
        that conveys to a customer only the right to obtain a digital 
        good or digital service. A digital code may be obtained by any 
        means, including by email or by tangible means regardless of 
        its designation as ``song code'', ``video code'', or ``book 
        code''. The tax treatment of the sale or use of a digital code 
        shall be the same as the tax treatment of the digital good or 
        digital service to which the digital code relates. The sale of 
        the digital code shall be considered the sale transaction for 
        purposes of this Act.
            (8) Discriminatory tax.--The term ``discriminatory tax'' 
        means any tax imposed by a State or local jurisdiction--
                    (A) on or with respect to the sale or use of any 
                digital good or digital service at a higher rate than 
                is generally imposed on or with respect to the sale or 
                use of tangible personal property or of similar 
                services that are not delivered or transferred 
                electronically;
                    (B) on or with respect to any seller of digital 
                goods or digital services at a higher rate or by 
                incorporating a broader tax base than is generally 
                imposed on or with respect to sellers in transactions 
                involving tangible personal property or involving 
                similar services that are not delivered or transferred 
                electronically. This provision applies only to the 
                extent that the higher rate or broader tax base is 
                attributable to the fact that such person sells digital 
                goods or digital services; or
                    (C) that is required to be collected with respect 
                to the sale or use of digital goods or digital services 
                by different sellers or under other terms that are 
                disadvantageous to those applied in taxing the sale or 
                use of tangible personal property or of similar 
                services that are not delivered or transferred 
                electronically.
        For purposes of this subsection, all taxes, tax rates, 
        exemptions, deductions, credits, incentives, exclusions, and 
        other similar factors shall be taken into account in 
        determining whether a tax is a discriminatory tax.
            (9) Generally imposed.--A tax shall not be considered 
        ``generally imposed'' if it is imposed only on specific 
        services, specific industries or business segments, or specific 
        types of property.
            (10) Multiple tax.--The term ``multiple tax'' means any tax 
        with respect to which no credit is given for comparable taxes 
        paid to other States or local jurisdictions on the same 
        transaction. Taxes imposed by physically overlapping State or 
        local jurisdictions shall not be considered to be multiple 
        taxes by reason of being applied within the overlapping area.
            (11) Sale and purchase.--The terms ``sale'' and 
        ``purchase'', and all variations thereof, shall include 
        ``lease'', ``rent'', and ``license'', and corresponding 
        variations thereof.
            (12) Seller.--The term ``seller'' means a person making 
        sales of tangible personal property, digital goods, digital 
        services, or other services.
            (13) State or local jurisdiction.--The term ``State or 
        local jurisdiction'' means any of the several States, the 
        District of Columbia, any territory or possession of the United 
        States, a political subdivision of any State, territory, or 
        possession, or any governmental entity or person acting on 
        behalf of such State, territory, possession, or subdivision and 
        with the authority to assess, impose, levy, or collect taxes.
            (14) Tax.--The term ``tax'' means any charge imposed by any 
        governmental entity for the purpose of generating revenues for 
        governmental purposes, including any tax, charge, or fee levied 
        by a taxing jurisdiction as a fixed charge for each customer or 
        measured by gross amounts charged to customers, regardless of 
        whether such tax, charge, or fee is imposed on the vendor or 
        customer and regardless of the terminology used to describe the 
        tax, charge, or fee. The term ``tax'' does not include a tax on 
        or measured by net income or an ad valorem tax.

SEC. 7. FEDERAL JURISDICTION.

    Notwithstanding section 1341 of title 28 of the United States Code, 
and without regard to the amount in controversy or citizenship of the 
parties, a district court of the United States has jurisdiction, 
concurrent with other jurisdiction of courts of the United States and 
the States, to prevent a violation of this Act.

SEC. 8. REGULATIONS.

    The Secretary of Commerce, in consultation with the Secretary of 
the Treasury, shall prescribe such regulations as may be necessary or 
appropriate to carry out the purposes of this Act. In promulgating any 
regulations under this Act, the Secretary shall also seek the 
consultation of the Executive Director of the Governing Board of the 
Streamlined Sales Tax Project.

SEC. 9. EFFECTIVE DATE; APPLICATION.

    (a) General Rule.--This Act shall take effect on the date of the 
enactment of this Act.
    (b) Application to Liabilities and Pending Cases.--Nothing in this 
Act affects liability for taxes accrued and enforced before the date of 
enactment of this Act, or affects ongoing litigation relating to such 
taxes, except as provided in section 4(c) of this Act.

SEC. 10. SENSE OF THE CONGRESS.

    It is the sense of the Congress that each State shall take 
reasonable steps necessary to prevent multiple taxation of digital 
goods and digital services in situations where a foreign country has 
imposed a tax on such goods or services.
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