[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.--

[[Page S1849]]

       (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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