On October 11, Senators John Thune (R-S.D.) and Ron Wyden (D-Ore) introduced a bill to promote neutrality, simplicity, and fairness in the taxation of digital goods and digital services (S.3581). The bill establishes a framework that would protect Americans from being charged duplicative and discriminatory taxes online. A sister bill, H.R.7058, was introduced in the House on October 12.
A similar bill (S.851/H.R.1643) was previously introduced in the 114th Congress by Senator Thune (R-S.D.) in the Senate and Representative Lamar Smith (R-TX) in the House. The House bill made it through four separate committees and a mark-up before being ordered to be amended in June of 2015. The Senate bill was read twice then referred to the Committee on Finance.
The current legislation takes into consideration that the internet inherently crosses borders. The legislation would prevent state and local tax jurisdictions from imposing multiple taxes on consumers as digital goods and services move from one tax jurisdiction to another. State and local governments also would not be allowed to apply taxes to products that do not apply to similar tangible goods, similar to the provisions of the Internet Tax Freedom Act, which became law in 2016. ATR supports this legislation in order to prevent double taxation and for establishing digital tax borders across the fifty states.
Recently the Supreme Court overturned a longstanding precedent from the Quill corp. v. North Dakota case which established that only companies with a physical brick and mortar or employee presence were allowed to collect and remit taxes. Following the Wayfair v. South Dakota case, states are now in a free for all to tax American consumers online. Without a reasonable framework, Americans are subject to huge tax liabilities by money-hungry jurisdictions. As the internet continues to develop and innovate, our laws have to catch up in order to fairly regulate this ever-changing market space, and protect American consumers.
ATR and Digital Liberty congratulate the Senate on the introduction of this bill, and hope that it passes quickly.
Photo credit: Eric Fischer