[Congressional Record Volume 165, Number 45 (Wednesday, March 13, 2019)]
[Senate]
[Pages S1847-S1849]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
By Mr. THUNE (for himself and Mr. Wyden):
S. 765. A bill to promote neutrality, simplicity, and fairness in the
taxation of digital goods and digital services; to the Committee on
Finance.
Mr. THUNE. Mr. President, I ask unanimous consent that the text of
the bill be printed in the Record.
There being no objection, the text of the bill was ordered to be
printed in the Record, as follows:
S. 765
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 2019''.
SEC. 2. MULTIPLE AND DISCRIMINATORY TAXES PROHIBITED.
(a) Multiple Taxes.--No State or local jurisdiction shall
impose multiple taxes on the sale or use of a covered
electronic good or service.
(b) Discriminatory Taxes.--No State or local jurisdiction
shall impose discriminatory taxes on the sale or use of a
digital good or a digital service.
SEC. 3. SOURCING LIMITATION.
Subject to section 6(a), taxes on the sale of a covered
electronic good or service may only be imposed by a State or
local jurisdiction whose territorial limits encompass the
customer tax address.
SEC. 4. CUSTOMER TAX ADDRESS.
(a) Seller Obligation.--
(1) In general.--Subject to subsection (e)(2), a seller
shall be responsible for obtaining and maintaining in the
ordinary course of business the customer tax address with
respect to the sale of a covered electronic good or service,
and shall be responsible for collecting and remitting the
correct amount of tax for the State and local jurisdictions
whose territorial limits encompass the customer tax address
if the State or local jurisdiction has the authority to
require such collection and remittance by the seller.
(2) Certain transactions.--When a customer tax address is
not a business location of the seller under clause (i) of
section 7(4)(A)--
(A) if the sale is a separate and discrete transaction,
then a seller shall use reasonable efforts to obtain a
customer tax address, as such efforts are described in
clauses (iii), (iv), and (v) of section 7(4)(A), before
resorting to using a customer tax address as determined by
clause (vi) of such section 7(4)(A); and
(B) if the sale is not a separate and discrete transaction,
then a seller shall use reasonable efforts to obtain a
customer tax address, as such efforts are described in
clauses (ii), (iii), (iv), and (v) of section 7(4)(A), before
resorting to using a customer tax address as determined by
clause (vi) of such section 7(4)(A).
(b) Reliance on Customer-Provided Information.--A seller
that relies in good faith on information provided by a
customer to determine a customer tax address shall not be
held liable for any additional tax based on a different
determination of that customer tax address by a State or
local jurisdiction or court of competent jurisdiction, unless
and until binding notice is given as provided in subsection
(c).
(c) Address Correction.--If a State or local jurisdiction
is authorized under State law to administer a tax, and the
jurisdiction determines that the customer tax address
determined by a seller is not the customer tax address that
would have been determined under section 7(4)(A) if the
seller had the additional information provided by the State
or local jurisdiction, then the jurisdiction may give binding
notice to the seller to correct the customer tax address on a
prospective basis, effective not less than 45 days after the
date of such notice, if--
(1) when the determination is made by a local jurisdiction,
such local jurisdiction obtains the consent of all affected
local jurisdictions within the State before giving such
notice of determination; and
(2) before the State or local jurisdiction gives such
notice of determination, the customer is given an opportunity
to demonstrate in accordance with applicable State or local
tax administrative procedures that the address used is the
customer tax address.
(d) Coordination With Sourcing of Mobile Telecommunications
Service.--
(1) In general.--If--
(A) a covered electronic good or service is sold to a
customer by a home service provider of mobile
telecommunications service that is subject to being sourced
under section 117 of title 4, United States Code, or the
charges for a covered electronic good or service are billed
to the customer by such a home service provider; and
(B) the covered electronic good or service is delivered,
transferred, or provided electronically by means of mobile
telecommunications service that is deemed to be provided by
such home service provider under section 117 of such title,
then the home service provider and, if different, the seller
of the covered electronic good or service, may presume that
the customer's place of primary use for such mobile
telecommunications service is the customer tax address
described in section 7(4)(A)(ii) with respect to the sale of
such covered electronic good or service.
(2) Definitions.--For purposes of this subsection, the
terms ``home service provider'', ``mobile telecommunications
service'', and ``place of primary use'' have the same
meanings as in section 124 of title 4, United States Code.
(e) Multiple Locations.--
(1) In general.--If a digital service, audio or video
programming service, or VoIP service is sold to a customer
and available for use by the customer in multiple locations
simultaneously, the seller may determine the customer tax
addresses using a reasonable and consistent method based on
the addresses of use as provided by the customer and
determined in agreement with the customer at the time of sale
or at a later time.
(2) Direct customer payment.--
(A) Establishment of direct payment procedures.--Each State
and local jurisdiction shall provide reasonable procedures
that permit the direct payment by a qualified customer, as
determined under procedures established by the State or local
jurisdiction, of taxes that are on the sale of covered
electronic goods or services to multiple locations of the
customer and that would, absent such procedures, be required
or permitted by law to be collected from the customer by the
seller.
(B) Effect of customer compliance with direct payment
procedures.--When a qualified customer elects to pay tax
directly under the procedures established under subparagraph
(A), the seller shall--
(i) have no obligation to obtain the multiple customer tax
addresses under subsection (a); and
(ii) not be liable for such tax, provided the seller
follows the State and local procedures and maintains
appropriate documentation in its books and records.
SEC. 5. TREATMENT OF BUNDLED TRANSACTIONS, DIGITAL CODES, AND
OTHER RULES.
(a) Bundled Transaction.--If a charge for a distinct and
identifiable covered electronic good or service is aggregated
with and not separately stated from one or more charges for
other distinct and identifiable goods or services, which may
include other covered electronic goods or services, and any
part of the aggregation is subject to taxation, then the
entire aggregation may be subject to taxation, except to the
extent that the seller can identify, by reasonable and
verifiable standards, one or more charges for the nontaxable
goods or services from its books and records kept in the
ordinary course of business.
(b) 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 covered electronic good or service to which the
digital code relates.
(c) Application of Fixed Charges to VoIP Service.--With
respect to VoIP service, if any tax is based on a fixed
charge, such fixed charge shall be based on the number of
simultaneous outbound calls the customer has purchased the
right to place, regardless of actual usage or the number of
the customer's phone numbers.
(d) Rule of Construction.--The sale of a digital code shall
be considered the sale transaction for purposes of this Act.
SEC. 6. NO INFERENCE.
(a) Customer Liability.--Subject to the prohibition
provided in section 2, nothing in this Act modifies, impairs,
supersedes, or authorizes the modification, impairment, or
supersession of any law allowing a State or local
jurisdiction to impose tax on and collect tax directly from a
customer based upon use of a covered electronic good or
service in such State.
(b) Non-Tax Matters.--This Act shall not be construed to
apply in, or to affect, any non-tax regulatory matter or
other context.
(c) State Tax Matters.--The definitions contained in this
Act are intended to be used with respect to interpreting this
Act. Nothing in this Act shall prohibit a State or local
jurisdiction from adopting different nomenclature to enforce
the provisions set forth in this Act.
(d) Internet Tax Freedom Act.--Nothing in this Act
modifies, impairs, supersedes, or authorizes the
modification, impairment, or supersession of the Internet Tax
Freedom Act (47 U.S.C. 151 note).
SEC. 7. DEFINITIONS.
In this Act, the following definitions shall apply:
(1) Audio or video programming service.--The term ``audio
or video programming service'' means programming provided by,
or
[[Page S1848]]
generally considered comparable to programming provided by, a
radio or television broadcast station, regardless of the
facilities used to deliver or provide such service.
(2) Covered electronic good or service.--The term ``covered
electronic good or service'' means a digital good, digital
service, audio or video programming service, or VoIP service.
(3) Customer.--The term ``customer'' means a person that
purchases a covered electronic good or service or digital
code.
(4) Customer tax address.--
(A) In general.--The term ``customer tax address'' means--
(i) with respect to the sale of a covered electronic good
or service that is received by the customer at a business
location of the seller, such business location;
(ii) if clause (i) does not apply and the primary use
location of the covered electronic good or service is known
by the seller, such location;
(iii) if neither clause (i) nor clause (ii) applies, and if
the location where the covered electronic good or service is
received by the customer, or by a donee of the customer that
is identified by such customer, is known to the seller and
maintained in the ordinary course of the seller's business,
such location;
(iv) if none of clauses (i) through (iii) applies, the
location indicated by an address for the customer that is
available from the business records of the seller that are
maintained in the ordinary course of the seller's business,
when use of the address does not constitute bad faith;
(v) if none of clauses (i) through (iv) applies, the
location indicated by an address for the customer obtained
during the consummation of the sale, including the address of
a customer's payment instrument, when use of this address
does not constitute bad faith; or
(vi) if none of clauses (i) through (v) applies, including
the circumstance in which the seller is without sufficient
information to apply such paragraphs, one of the following
locations, as selected by the seller, provided that such
location is consistently used by the seller for all such
sales to which this clause applies:
(I) The location in the United States of the headquarters
of the seller's business.
(II) The location in the United States where the seller has
the greatest number of employees.
(III) The location in the United States--
(aa) from which the seller makes digital goods available
for electronic delivery; or
(bb) from which digital services, VoIP services, or audio
or video programming services are provided electronically.
(B) Exclusion.--For purposes of this paragraph, the term
``location'' does not include the location of a server,
machine, or device, including an intermediary server, that is
used simply for routing or storage.
(5) Delivered or transferred electronically; provided
electronically.--The term ``delivered or transferred
electronically'' means the delivery or transfer of a digital
good by means other than tangible storage media, and the term
``provided electronically'' means the provision of a digital
service, audio or video programming service, or VoIP service
remotely via electronic means.
(6) Digital code.--The term ``digital code'' means a code
that conveys only the right to obtain a covered electronic
good or service without making further payment.
(7) Digital good.--The term ``digital good'' means any
software or other good that is delivered or transferred
electronically, including sounds, images, data, facts, or
combinations thereof, maintained in digital format, where
such software or other good is the true object of the
transaction, rather than the activity or service performed to
create such software or other good, that results in the
delivery to the customer of a complete copy of such software
or other good, with the right to use permanently or for a
specified period, and includes, as an incidental component,
charges for the delivery or transfer of such software or
other good.
(8) 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, and
includes, as an incidental component, charges for the
electronic provision of the digital service to the customer.
(B) Exceptions.--The term ``digital service'' does not
include a service that is predominantly attributable to the
direct, contemporaneous expenditure of live human effort,
skill, or expertise, a telecommunications service, an
ancillary service, Internet access, audio or video
programming service, or a hotel intermediary service.
(C) Clarifying definitions.--For purposes of subparagraph
(B)--
(i) the term ``ancillary service'' means a service that is
associated with or incidental to the provision of
telecommunications services, including, but not limited to,
detailed telecommunications billing, directory assistance,
vertical service, and voice mail services;
(ii) the term ``hotel intermediary service''--
(I) means a service provided by a person that facilitates
the sale, use, or possession of a hotel room or other
transient accommodation to the general public; and
(II) does not include the purchase of a digital service by
a person who provides a hotel intermediary service or by a
person who owns, operates, or manages hotel rooms or other
transient accommodations;
(iii) the term ``Internet access'' means any service
included within the definition of the term ``internet
access'' under section 1105(5) of the Internet Tax Freedom
Act (47 U.S.C. 151 note); and
(iv) the term ``telecommunications service''--
(I) means the electronic transmission, conveyance, or
routing of voice, data, audio, video, or any other
information or signals to a point, or between or among
points;
(II) includes such transmission, conveyance, or routing in
which computer processing applications are used to act on the
form, code, or protocol of the content for purposes of
transmission, conveyance, or routing, without regard to
whether such service is referred to as VoIP service; and
(III) does not include data processing and information
services that allow data to be generated, acquired, stored,
processed, or retrieved and delivered by an electronic
transmission to a purchaser where such purchaser's primary
purpose for the underlying transaction is the processed data
or information.
(9) Discriminatory tax.--
(A) In general.--The term ``discriminatory tax'' means any
tax imposed by a State or local jurisdiction on digital goods
or digital services that--
(i) is not generally imposed and legally collectible by
such State or local jurisdiction on transactions involving
similar property, goods, or services accomplished through
other means;
(ii) is not generally imposed and legally collectible at
the same or higher rate by such State or local jurisdiction
on transactions involving similar property, goods, or
services accomplished through other means;
(iii) imposes an obligation to collect or pay the tax on a
person, other than the seller, that the State or local
jurisdiction would not impose in the case of transactions
involving similar property, goods, or services accomplished
through other means;
(iv) establishes a classification of digital services or
digital goods providers for purposes of establishing a higher
tax rate to be imposed on such providers than the tax rate
generally imposed on providers of similar property, goods, or
services accomplished through other means; or
(v) does not provide a resale and component part exemption
for the purchase of digital goods or digital services in a
manner consistent with the State's resale and component part
exemption applicable to the purchase of similar property,
goods, or services accomplished through other means.
(B) Clarification.--For purposes of this paragraph, any tax
that is limited in its application to only certain services,
providers, or industries shall not be considered to be
generally imposed, with the exception of any State tax which
is imposed--
(i) in lieu of a generally imposed tax; and
(ii) at a rate which is not greater than the rate of such
tax.
(10) Local jurisdiction.--
(A) In general.--The term ``local jurisdiction'' means--
(i) any municipality, city, county, township, parish,
transportation district, or assessment jurisdiction;
(ii) any other local jurisdiction in the territorial
jurisdiction of the United States with the authority to
impose a tax; and
(iii) any governmental entity or person acting on behalf of
an entity described in clause (i) or (ii) and with the
authority to assess, impose, levy, or collect taxes.
(B) Exception.--The term ``local jurisdiction'' shall not
include a State.
(11) Multiple tax.--
(A) In general.--The term ``multiple tax'' means any tax
that is imposed by one State, one or more of that State's
local jurisdictions, or both on the same or essentially the
same covered electronic good or service that is also subject
to tax imposed by another State, one or more local
jurisdictions in such other State (whether or not at the same
rate or on the same basis), or both, without a credit for
taxes paid in other jurisdictions.
(B) Exception.--The term ``multiple tax'' shall not include
a tax imposed by a State and one or more political
subdivisions thereof on the same covered electronic good or
service or a tax on persons engaged in selling covered
electronic goods or services which also may have been subject
to a sales or use tax thereon.
(12) Primary use location.--
(A) In general.--The term ``primary use location'' means a
street address representative of where the customer's use of
a covered electronic good or service will primarily occur,
which shall be the residential street address or a business
street address of the actual end user of the covered
electronic good or service, including, if applicable, the
address of a donee of the customer that is designated by the
customer.
(B) Customers that are not individuals.--For the purpose of
subparagraph (A), if the customer is not an individual, the
primary use location is determined by the location of the
customer's employees or equipment (machine or device) that
make use of the covered electronic good or service, but does
not include the location of a person who uses the covered
electronic good or service as the purchaser of a separate
good or service from the customer.
(13) Sale and purchase.--The terms ``sale'' and
``purchase'', and all variations thereof, shall include the
provision, lease, rent, license, and corresponding variations
thereof.
(14) Seller.--
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(A) In general.--The term ``seller'' means a person making
sales of covered electronic goods or services.
(B) Exceptions.--A person that provides billing service or
electronic delivery or transport service on behalf of another
unrelated or unaffiliated person, with respect to the other
person's sale of a covered electronic good or service, shall
not be treated as a seller of that covered electronic good or
service.
(C) Rule of construction.--Nothing in this paragraph shall
preclude the person providing the billing service or
electronic delivery or transport service from entering into a
contract with the seller to assume the tax collection and
remittance responsibilities of the seller.
(15) Separate and discrete transaction.--The term
``separate and discrete transaction'' means a sale of a
covered electronic good or service or digital code sold in a
single transaction that does not involve any additional
charges or continued payment in order to maintain possession
of the digital good or access to or usage of the digital
service, audio or video programming service, or VoIP service.
(16) State.--The term ``State'' means--
(A) any of the several States, the District of Columbia, or
any territory or possession of the United States; and
(B) any governmental entity or person acting on behalf of
an entity described in subparagraph (A) and with the
authority to assess, impose, levy, or collect taxes.
(17) Tax.--
(A) In general.--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.
(B) Exclusions.--The term ``tax'' does not include an ad
valorem tax, a tax on or measured by capital, a tax on or
measured by net income, apportioned gross income, apportioned
revenue, apportioned taxable margin, or apportioned gross
receipts, or a State or local jurisdiction business and
occupation tax imposed on a broad range of business activity
in a State that enacted a State tax on gross receipts after
January 1, 1932, and before January 1, 1936.
(18) VoIP service.--The term ``VoIP service'' means any
interconnected VoIP service, as defined in section 9.3 of
title 47, Code of Federal Regulations, or any successor
technology.
SEC. 8. EFFECTIVE DATE; APPLICATION.
(a) General Rule.--This Act shall take effect 60 days after
the date of enactment of this Act.
(b) Exceptions.--A State or local jurisdiction shall have 2
years from the date of enactment of this Act to modify any
State or local tax statute enacted prior to the date of
enactment of this Act to conform to the provisions set forth
in sections 4 and 5 of this Act.
(c) Application to Liabilities and Pending Cases.--Nothing
in this Act shall affect liability for taxes accrued and
enforced before the effective date of this Act or affect
ongoing litigation relating to such taxes.
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
unless such holding substantially limits or impairs the
essential elements of this Act, in which case this Act shall
be deemed invalid and of no legal effect as of the date that
the judgment on such holding is final and no longer subject
to appeal.
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