National Framework for the Taxation of Digital Goods and Services – Proposed Legislation

[5/14/2019] The U.S. Senate and the U.S. House of Representatives have both introduced bills entitled, “Digital Goods and Services Tax Fairness Act of 2019.” The legislation aims to create a national framework for when and how state and local governments can tax digital goods and services.

The proposed legislation establishes that the “customer tax address” determines which jurisdiction has the authority to tax a digital purchase. The legislation includes a hierarchy of rules for determining the “customer tax address” but in simplified terms, the state and local jurisdiction in which the customer resides would have the primary authority to tax digital purchases. While other jurisdictions could also impose a tax on the customer based upon the use of a digital good or service, they must allow a credit for sales tax paid.

Additionally, the legislation would prohibit a jurisdiction from:

imposing a tax on digital goods and services solely because they are “digital”; and
imposing a tax on digital goods and services at a higher rate than that imposed on similar non-digital goods and services.
Sovos is closely monitoring the status of these bills and will report back with any notable developments.

View Senate bill, S. 765.

View House bill, H.R. 1725.

Author

Daniel Kostrzewa

Daniel Kostrzewa is a Regulatory Counsel at Sovos. Within Sovos’ Regulatory Analysis function, Daniel focuses on domestic sales tax issues. Prior to joining Sovos in 2018, he worked as an attorney in Boston. Daniel received his B.A. in Economics from Boston College and J.D. from Boston College Law School. He is a member of the Massachusetts Bar.
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