US Bill to simplify sales taxes on consumer digital downloads

Tue 7th Jan 2014

New legislation is to be debated by Congress this January aimed at preventing extensive double taxation of digital goods (ebooks, streaming video and music etc.) to consumers.

US States’ digital sales tax confusion

At present, the US states are largely free to set their own US sales tax legislation on digital goods supplied by companies within their jurisdictions and on purchases by their consumers from out-of-state online retailers.  This has given rise to extensive double taxation whereby sales across state border lines are taxed twice under Sales Tax rules.

The new Bill, presented by Lamar Smith (Texas) and backed by Steve Cohen (Tennessee) will aim to remove this uncertainty, and introduce an US-wide framework for the taxation of digital goods provided to consumers.  It will tax on the place-of-consumption-basis, meaning that the tax will be levied only where the final consumer is based (their ZIP code).  This follows the European Union VAT system.

The Bill excludes internet access services.