Digital Liberty’s Katie McAuliffe wrote an opinion in support of Senators Thune & Wyden’s Internet Tax Freedom Forever Act and Digital Goods and Services Tax Fairness Act in the Sioux Fall Business Journal. These bills permanently ban Internet access taxes and prevent multiple states from taxing the same purchase.
ITFFA is an extension of an Internet access tax ban that has been renewed three times since it was first enacted in 1997. Besides extending this prohibition permanently, ITFFA also eliminates Internet access taxes that were grandfathered in to the original legislation. Congress intended for those taxes to be gradually phased out, but as McAuliffe so aptly stated, “once a tax is levied, it rarely is reversed.” If ITFFA passes, these taxes will be gone in all states forever. This means Internet tax bills in locations that are currently taxing Internet access will go down. ITFFA also helps build online commerce by forbidding states from taxing online purchases at a higher rate than their general sales tax.
The Digital Goods and Services Tax Fairness Act builds on the foundation laid by ITFFA by establishing a federal framework for which state has the power to tax an Internet purchase. Currently there is a risk of purchases being taxed multiple times because consumers buy products from companies located outside their state which are on servers in yet another state. Right now there’s no legislation determining which state has the power to tax that purchase. The Digital Goods Fairness Act eliminates that problem and creates a fair taxation system for Internet purchases.