[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[S. 971 Introduced in Senate (IS)]

112th CONGRESS
  1st Session
                                 S. 971

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


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                              May 12, 2011

 Mr. Wyden (for himself and Mr. Thune) introduced the following bill; 
     which was read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 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 2011''.

SEC. 2. FINDING.

    The Congress finds that it is appropriate to exercise congressional 
enforcement authority under section 5 of the 14th amendment to the 
Constitution of the United States and Congress' plenary power under 
article I, section 8, clause 3 of the Constitution of the United States 
(commonly known as the ``commerce clause'') in order to ensure that 
States and political subdivisions thereof do not discriminate against 
providers and consumers of digital goods and digital services by 
imposing multiple, excessive and discriminatory taxes and other burdens 
on such providers and consumers.

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 AND RULES.

    (a) Retail Limitation.--Taxes on or with respect to the sale of 
digital goods or digital services may only be imposed on or with 
respect to a sale to a customer.
    (b) Taxpayer Limitation.--Taxes on or with respect to the sale of 
digital goods or digital services may only be imposed on and collected 
only from a customer or a seller.
    (c) Sourcing Limitation.--
            (1) In general.--Taxes on or with respect to the sale 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.
            (2) Multiple locations.--If the sale of digital goods or 
        digital services is made to multiple locations of a customer, 
        whether simultaneously or over a period of time, the seller may 
        determine the customer's tax address or addresses using the 
        address or addresses of use as provided by the customer.
            (3) Seller held harmless.--A seller that relies in good 
        faith on information provided by a customer to determine the 
        customer's tax address or addresses shall not be held liable 
        for any additional tax based on a different determination of 
        the customer's tax address or addresses.
    (d) Limitation 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. For purposes of this Act, a 
transaction involving a digital good shall be characterized solely as a 
transaction involving the provision of a digital service unless the 
transaction results in the transfer or delivery of a complete copy, 
with the right to use permanently or for a specified period, of the 
digital good that is the subject of the transaction. 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 of a 
statute that was approved by a judicial interpretation of that statute 
on or before the date of the enactment of this Act.
    (e) Treatment of Bundled Goods and Services.--
            (1) In general.--Subject to paragraph (2), 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.
            (2) Charges for delivery and transfer.--If the charge for a 
        digital good or digital service is aggregated with, and not 
        separately stated from, a charge for electronically delivering 
        or transferring the digital good, or providing the digital 
        service, to the customer, then the seller may either apply 
        paragraph (1) or treat the service of electronic delivery or 
        transfer as a non-severable and incidental component of the 
        digital good or digital service.
    (f) Treatment of Digital Code.--The tax treatment of the sale of a 
digital code shall be the same as the tax treatment of the sale 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.

SEC. 5. DEFINITIONS.

    In this Act:
            (1) Customer.--
                    (A) In general.--Subject to subparagraph (B), the 
                term ``customer'' means a person that purchases a 
                digital good or digital service, for a purpose other 
                than resale.
                    (B) End user.--For the purpose of determining a 
                place of primary use under paragraph (2)(A), the term 
                ``customer'' means the ``end user'' (as such term is 
                used in section 124 of title 4, United States Code) of 
                the purchased digital good or digital service.
            (2) Customer's tax address.--The term ``customer's tax 
        address'' means--
                    (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, United 
                States Code, or for which the charges are billed to the 
                customer by such provider, and delivered or transferred 
                electronically by means of such provider's mobile 
                telecommunications service, the customer's place of 
                primary use, as defined in section 124 of such title;
                    (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 that are delivered or transferred, or 
                digital services that are provided, to a person other 
                than the customer, including advertising services, the 
                location of delivery, transfer, or provision if known 
                or, otherwise, the customer's address determined under 
                subparagraph (D) or (E).
            (3) Delivered or transferred electronically; provided 
        electronically.--The term ``delivered or transferred 
        electronically'' means delivered or transferred by means other 
        than tangible storage media and the term ``provided 
        electronically'' means provided remotely via electronic means.
            (4) Digital code.--The term ``digital code'' means a code 
        that conveys only the right to obtain a single type of digital 
        good or digital service.
            (5) Digital good.--The term ``digital good'' means any good 
        or product that is delivered or transferred electronically, 
        including software, information maintained in digital format, 
        digital audio-visual works, digital audio works, and digital 
        books.
            (6) Digital service.--
                    (A) In general.--The term ``digital service'' means 
                any service that is provided electronically, including 
                the provision of remote access to or use of a digital 
                good.
                    (B) Exception.--
                            (i) In general.--The term ``digital 
                        service'' does not include telecommunications 
                        service, Internet access service, or audio or 
                        video programming service.
                            (ii) Audio or video programming.--The term 
                        ``audio or video programming'' means 
                        programming provided by, or generally 
                        considered comparable to programming provided 
                        by, a radio or television broadcast station.
                            (iii) Video programming.--The term ``video 
                        programming'' shall not include interactive on-
                        demand services (as defined section 602(12) of 
                        the Communications Act of 1934 (47 U.S.C. 
                        522(12)), pay-per-view services, or services 
                        generally considered comparable to such 
                        services regardless of the technology used to 
                        provide such services.
            (7) Discriminatory tax.--
                    (A) In general.--The term ``discriminatory tax'' 
                means any tax imposed by a State or local 
                jurisdiction--
                            (i) 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 provided electronically;
                            (ii) 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 provided electronically, except 
                        that this clause shall apply 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;
                            (iii) 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 provided electronically; or
                            (iv) on or with respect to any separately 
                        stated amount that is charged by the seller of 
                        a specific digital good or digital service, and 
                        is directly related to electronically 
                        delivering or transferring that good or 
                        providing that service, at a higher rate than 
                        is generally imposed on or with respect to 
                        delivery charges, or shipping and handling 
                        charges, on tangible personal property.
                    (B) Application.--For purposes of this paragraph, 
                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.
            (8) 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.
            (9) Multiple tax.--The term ``multiple tax'' means any tax 
        that is imposed on or with respect to the sale or use of a 
        digital good or a digital service by a State or local 
        jurisdiction, for which such State or local jurisdiction gives 
        no credit with respect to a tax that was previously paid on or 
        with respect to the sale or use of such digital good or digital 
        service to another State or local jurisdiction, unless the 
        territorial limits of the jurisdiction imposing the earlier tax 
        and the jurisdiction imposing the later tax both encompass the 
        same tax address of the customer.
            (10) Purchase for resale.--A digital good or digital 
        service is purchased for the purpose of resale if such good or 
        service is purchased for the purpose of reselling it, or for 
        using it as a component part of or integration into another 
        digital good or digital service that is to be sold to another 
        person, and includes the purchase of a digital good or digital 
        service for further commercial broadcast, rebroadcast, 
        streaming, restreaming, 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.
            (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, and does not include a person that 
        provides, on behalf of another person, order taking, order 
        fulfillment, billing, or electronic delivery or transfer 
        service with respect to the sale of a digital good or a digital 
        service.
            (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 
        State or local jurisdiction for the purpose of generating 
        revenues for governmental purposes, including any tax, charge, 
        or fee levied as a fixed charge or measured by gross amounts 
        charged, regardless of whether such tax, charge, or fee is 
        imposed on the seller or the customer and regardless of the 
        terminology used to describe the tax, charge, or fee. Such term 
        does not include a tax on or measured by net income or an ad 
        valorem tax.

SEC. 6. FEDERAL JURISDICTION.

    Notwithstanding section 1341 of title 28, 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. 7. 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 shall affect liability for taxes accrued and enforced before the 
date of the enactment of this Act, or affect ongoing litigation 
relating to such taxes, except as provided in section 4(d) of this Act.

SEC. 8. SENSE OF CONGRESS.

    It is the sense of 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.

SEC. 9. SAVINGS PROVISION.

    If any provision or part of this Act is held to be invalid or 
unenforceable by a court of competent jurisdiction for any reason, such 
holding shall not affect the validity or enforceability of any other 
provision or part of this Act.
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