[Congressional Record Volume 157, Number 65 (Thursday, May 12, 2011)]
[Senate]
[Page S2941]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. WYDEN (for himself and Mr. Thune):
  S. 971. A bill to promote neutrality, simplicity, and fairness in the 
taxation of digital goods and digital services; to the Committee on 
Finance.
  Mr. WYDEN. Mr. President, I rise today to introduce the Digital Goods 
and Services Tax Fairness Act. I am pleased to be joined by my 
colleague from South Dakota, Senator Thune, in introducing this needed 
legislation.
  The creation and consumption of downloadable digital goods, like 
books, songs, ringtones and video games, and the provision of digital 
services, like health care monitoring and cloud computing, represent a 
rapidly growing segment of our national economy. These goods and 
services, which are supporting a growing number of American jobs, are 
sold over communications networks that transcend numerous state and 
local boundaries. Tax law, not surprisingly, has failed to keep pace 
with the rapidly changing technology and economy. The lack of a 
national framework addressing how State and local taxes can be imposed 
upon these products has led to a confusing process that will only grow 
more burdensome for consumers and the providers of digital commerce as 
new, innovative and emerging technologies become available.
  Since digital goods and services can be downloaded in a mobile 
environment, there is a significant question as to which jurisdiction 
has the authority to tax such purchases. In fact, there is substantial 
risk that, without a national framework, multiple States and localities 
will claim they have authority to tax the same digital transaction. For 
example, if a consumer is on vacation in another State and downloads a 
song, the State the consumer is visiting, the State that houses the 
server providing the song, and the consumer's home State could all 
claim the authority to tax the purchase. This is not only an unfair tax 
burden on the consumer, but also for the seller that is responsible for 
identifying the jurisdiction on whose behalf it should be collecting 
taxes. Left unchecked, these multiple taxes could stifle the digital 
commerce and crush a growing industry that is creating the good jobs 
that our country needs.
  We can't let that happen. We need a uniform solution that will 
modernize our State and local tax system to appropriately address the 
inherent complexities that digital commerce presents.
  Neutrality should guide tax policy and administration in the area of 
digital commerce. 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. To ensure neutrality and avoid multiple taxation, 
rules should be adopted to reflect the unique nature of electronic 
commerce and how digital goods and digital services are provided.
  I am introducing the Digital Goods and Services Tax Fairness Act to 
establish a framework for when and how local governments can tax 
digital goods and services. The framework put forward in the 
legislation respects States' authority to tax these products while also 
fostering innovation and growth in this segment of global commerce.
  In most cases, this legislation will use the address of the consumer 
to determine which jurisdiction has the authority to tax a digital 
purchase, as long as the State has passed a law to do so and is 
lawfully able under the Internet Tax Freedom Act and the Supreme 
Court's Quill decision. Similar to mobile phones, digital purchases 
should be taxed by the State the consumer resides, not the State that 
they may have been traveling through while they downloaded the digital 
product.
  This legislation would also preclude discriminatory taxes from being 
imposed on digital goods and services solely because they are 
transmitted over communication networks. Additionally, this legislation 
would ensure that if States tax digital goods and services, they should 
only be taxed at the same rate imposed upon other tangible goods taxed 
under the general sales tax.
  The Digital Goods and Services Tax Fairness Act of 2011 is structured 
to provide discipline, but also certainty to States and local 
governments that wish to tax digital commerce and to the businesses and 
consumers that are engaged in this marketplace. Our economy is changing 
in a variety of exciting ways. Congress must be responsive to this 
reality and consider this legislation soon.
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