To promote neutrality, simplicity, and fairness in the taxation
of digital goods and digital services.
IN THE SENATE OF THE UNITED STATES
May 12, 2011
Mr. WYDEN (for himself and Mr. THUNE) introduced the following bill;
which was read twice and referred to the Committee on Finance
To promote neutrality, simplicity, and fairness in the taxation
of digital goods and digital services.
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 2011'.
SEC. 2. FINDING.
The Congress finds that it is appropriate to exercise congressional
enforcement authority under section 5 of the 14th amendment to the Constitution
of the United States and Congress' plenary power under article I, section
8, clause 3 of the Constitution of the United States (commonly known
as the `commerce clause') in order to ensure that States and political
subdivisions thereof do not discriminate against providers and consumers
of digital goods and digital services by imposing multiple, excessive
and discriminatory taxes and other burdens on such providers and consumers.
SEC. 3. MULTIPLE AND DISCRIMINATORY TAXES PROHIBITED.
No State or local jurisdiction shall impose multiple or discriminatory
taxes on or with respect to the sale or use of digital goods or digital
SEC. 4. RETAIL, SOURCING, AND OTHER LIMITATIONS AND RULES.
(a) Retail Limitation- Taxes on or with respect to the sale of digital
goods or digital services may only be imposed on or with respect to
a sale to a customer.
(b) Taxpayer Limitation- Taxes on or with respect to the sale of digital
goods or digital services may only be imposed on and collected only
from a customer or a seller.
(1) IN GENERAL- Taxes on or with respect to the sale of digital goods
or digital services may be imposed only by the State and local jurisdictions
whose territorial limits encompass the customer's tax address.
(2) MULTIPLE LOCATIONS- If the sale of digital goods or digital services
is made to multiple locations of a customer, whether simultaneously
or over a period of time, the seller may determine the customer's
tax address or addresses using the address or addresses of use as
provided by the customer.
(3) SELLER HELD HARMLESS- A seller that relies in good faith on information
provided by a customer to determine the customer's tax address or
addresses shall not be held liable for any additional tax based on
a different determination of the customer's tax address or addresses.
(d) Limitation on Expansive Interpretation- No tax on or with respect
to the sale or use of tangible personal property, telecommunications
service, Internet access service, or audio or video programming service
may be construed by any regulation, administrative ruling, or otherwise,
to be imposed on or with respect to the sale or use of a digital good
or a digital service. For purposes of this Act, a transaction involving
a digital good shall be characterized solely as a transaction involving
the provision of a digital service unless the transaction results in
the transfer or delivery of a complete copy, with the right to use permanently
or for a specified period, of the digital good that is the subject of
the transaction. No tax on or with respect to the sale or use of a digital
good may be construed by any regulation, administrative ruling, or otherwise,
to be imposed on or with respect to the sale or use of a digital service.
The limitations provided by this subsection shall not apply to any construction
of a statute that was approved by a judicial interpretation of that
statute on or before the date of the enactment of this Act.
(e) Treatment of Bundled Goods and Services-
(1) IN GENERAL- Subject to paragraph (2), if charges for digital goods
or digital services are aggregated with, and not separately stated
from, charges for other goods or services, then the charges for digital
goods or digital services may be taxed for purposes of this Act at
the same rate and on the same basis as charges for the other goods
or services unless the seller can reasonably identify the charges
for the digital goods or digital services from its books and records
kept in the regular course of business.
(2) CHARGES FOR DELIVERY AND TRANSFER- If the charge for a digital
good or digital service is aggregated with, and not separately stated
from, a charge for electronically delivering or transferring the digital
good, or providing the digital service, to the customer, then the
seller may either apply paragraph (1) or treat the service of electronic
delivery or transfer as a non-severable and incidental component of
the digital good or digital service.
(f) Treatment of 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 digital
good or digital service to which the digital code relates. The sale
of the digital code shall be considered the sale transaction for purposes
of this Act.
SEC. 5. DEFINITIONS.
(A) IN GENERAL- Subject to subparagraph (B), the term `customer'
means a person that purchases a digital good or digital service,
for a purpose other than resale.
(B) END USER- For the purpose of determining a place of primary
use under paragraph (2)(A), the term `customer' means the `end user'
(as such term is used in section 124 of title 4, United States Code)
of the purchased digital good or digital service.
(2) Customer's TAX ADDRESS- The term `customer's tax address' means--
(A) with respect to digital goods or digital services that are sold
to a customer by a provider of mobile telecommunications service
that is subject to being sourced under section 117 of title 4, United
States Code, or for which the charges are billed to the customer
by such provider, and delivered or transferred electronically by
means of such provider's mobile telecommunications service, the
customer's place of primary use, as defined in section 124 of such
(B) if subparagraph (A) does not apply, and if the digital good
or digital service is received by the customer at a business location
of the seller, such business location;
(C) if neither subparagraph (A) nor subparagraph (B) applies, and
if the location where the digital good or digital service is received
by the customer is known to the seller, such location;
(D) if none of subparagraphs (A) through (C) applies, the customer's
address that is either known to the seller or, if not known, obtained
by the seller during the consummation of the transaction, including
the address of the customer's payment instrument if no other address
(E) if an address is neither known nor obtained as provided in subparagraph
(D), the address of the seller from which the digital good or digital
service was sold; and
(F) notwithstanding subparagraphs (A) through (E), for digital goods
that are delivered or transferred, or digital services that are
provided, to a person other than the customer, including advertising
services, the location of delivery, transfer, or provision if known
or, otherwise, the customer's address determined under subparagraph
(D) or (E).
(3) DELIVERED OR TRANSFERRED ELECTRONICALLY; PROVIDED ELECTRONICALLY-
The term `delivered or transferred electronically' means delivered
or transferred by means other than tangible storage media and the
term `provided electronically' means provided remotely via electronic
(4) DIGITAL CODE- The term `digital code' means a code that conveys
only the right to obtain a single type of digital good or digital
(5) DIGITAL GOOD- The term `digital good' means any good or product
that is delivered or transferred electronically, including software,
information maintained in digital format, digital audio-visual works,
digital audio works, and digital books.
(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.
(i) IN GENERAL- The term `digital service' does not include telecommunications
service, Internet access service, or audio or video programming
(ii) AUDIO OR VIDEO PROGRAMMING- The term `audio or video programming'
means programming provided by, or generally considered comparable
to programming provided by, a radio or television broadcast station.
(iii) VIDEO PROGRAMMING- The term `video programming' shall not
include interactive on-demand services (as defined section 602(12)
of the Communications Act of 1934 (47 U.S.C. 522(12)), pay-per-view
services, or services generally considered comparable to such
services regardless of the technology used to provide such services.
(A) IN GENERAL- The term `discriminatory tax' means any tax imposed
by a State or local jurisdiction--
(i) on or with respect to the sale or use of any digital good
or digital service at a higher rate than is generally imposed
on or with respect to the sale or use of tangible personal property
or of similar services that are not provided electronically;
(ii) on or with respect to any seller of digital goods or digital
services at a higher rate or by incorporating a broader tax base
than is generally imposed on or with respect to sellers in transactions
involving tangible personal property or involving similar services
that are not provided electronically, except that this clause
shall apply only to the extent that the higher rate or broader
tax base is attributable to the fact that such person sells digital
goods or digital services;
(iii) that is required to be collected with respect to the sale
or use of digital goods or digital services by different sellers
or under other terms that are disadvantageous to those applied
in taxing the sale or use of tangible personal property or of
similar services that are not provided electronically; or
(iv) on or with respect to any separately stated amount that is
charged by the seller of a specific digital good or digital service,
and is directly related to electronically delivering or transferring
that good or providing that service, at a higher rate than is
generally imposed on or with respect to delivery charges, or shipping
and handling charges, on tangible personal property.
(B) APPLICATION- For purposes of this paragraph, all taxes, tax
rates, exemptions, deductions, credits, incentives, exclusions,
and other similar factors shall be taken into account in determining
whether a tax is a discriminatory tax.
(8) GENERALLY IMPOSED- A tax shall not be considered `generally imposed'
if it is imposed only on specific services, specific industries or
business segments, or specific types of property.
(9) MULTIPLE TAX- The term `multiple tax' means any tax that is imposed
on or with respect to the sale or use of a digital good or a digital
service by a State or local jurisdiction, for which such State or
local jurisdiction gives no credit with respect to a tax that was
previously paid on or with respect to the sale or use of such digital
good or digital service to another State or local jurisdiction, unless
the territorial limits of the jurisdiction imposing the earlier tax
and the jurisdiction imposing the later tax both encompass the same
tax address of the customer.
(10) PURCHASE FOR RESALE- A digital good or digital service is purchased
for the purpose of resale if such good or service is purchased for
the purpose of reselling it, or for using it as a component part of
or integration into another digital good or digital service that is
to be sold to another person, and includes the purchase of a digital
good or digital service for further commercial broadcast, rebroadcast,
streaming, restreaming, transmission, retransmission, licensing, relicensing,
reproduction, copying, distribution, redistribution, or exhibition
of the digital good or digital service, in whole or in part, to another
(11) SALE AND PURCHASE- The terms `sale' and `purchase', and all variations
thereof, shall include lease, rent, and license, and corresponding
(12) SELLER- The term `seller' means a person making sales of tangible
personal property, digital goods, digital services, or other services,
and does not include a person that provides, on behalf of another
person, order taking, order fulfillment, billing, or electronic delivery
or transfer service with respect to the sale of a digital good or
a digital service.
(13) STATE OR LOCAL JURISDICTION- The term `State or local jurisdiction'
means any of the several States, the District of Columbia, any territory
or possession of the United States, a political subdivision of any
State, territory, or possession, or any governmental entity or person
acting on behalf of such State, territory, possession, or subdivision
and with the authority to assess, impose, levy, or collect taxes.
(14) TAX- 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. Such
term does not include a tax on or measured by net income or an ad
SEC. 6. FEDERAL JURISDICTION.
Notwithstanding section 1341 of title 28, United States Code, and without
regard to the amount in controversy or citizenship of the parties, a
district court of the United States has jurisdiction, concurrent with
other jurisdiction of courts of the United States and the States, to
prevent a violation of this Act.
SEC. 7. EFFECTIVE DATE; APPLICATION.
(a) General Rule- This Act shall take effect on the date of the enactment
of this Act.
(b) Application to Liabilities and Pending Cases- Nothing in this Act
shall affect liability for taxes accrued and enforced before the date
of the enactment of this Act, or affect ongoing litigation relating
to such taxes, except as provided in section 4(d) of this Act.
SEC. 8. SENSE OF CONGRESS.
It is the sense of Congress that each State shall take reasonable steps
necessary to prevent multiple taxation of digital goods and digital
services in situations where a foreign country has imposed a tax on
such goods or services.
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.