January 4, 2019
“The Digital Goods Tax”… aka “You Could Pay Multiple Taxes on the Same Product”
You can be taxed many times for the SAME digital product. Surprised? Outraged? How does this work?
Here’s an example: Let’s say you live in Arizona and buy an app while visiting New York. The company that made the app has its servers located in Texas. Any or ALL of those states—Arizona, New York, and Texas, could add a sales tax to your purchase.
This outdated rule is allowing duplicative and discriminatory taxes on a wide-range of digitally delivered goods and services – take the quiz, test your knowledge, and then call Congress.
1) What’s an example of a digital good?
A. Downloaded song
B. Downloaded movie
C. Downloaded book
D. All of the Above
If you answered “D” All of the Above, you are correct. The list doesn’t stop there. You could be paying duplicative sales taxes on practically any electronic purchase, including apps, games, and ringtones, among others.
2) How many times can a digital good be taxed?
B. The law is unclear
The answer is “B”. Currently the law is very unclear about how a digital good is taxed. Under the current state tax regimes, because of a lack of consistency, if you make a purchase electronically you could be paying multiple states’ sales taxes on the same transaction. A national framework would help ensure your digital purchase is only taxed once.
3) Who decides which digital goods can be taxed and which can’t?
D. None of the above
If you answered “A,” you’re correct. While Congress needs to take action on legislation that will set a clear framework for the fair taxation of digital goods, the decision whether to tax such goods or not is left to each state respecting state sovereignty. However, without action by Congress, there is no uniform standard today and governments in multiple states can use very different rules to decide when a tax is imposed, potentially subjecting these goods to duplicative taxation.
4) What is the purpose of a Digital Goods and Services Tax Fairness Act?
A. Fix double taxation on digital goods
B. Set a clear framework for taxing digital goods
C. Remove uncertainly on digital goods taxes
D. All of the Above
“D” all of the above. A Digital Goods and Services Tax Fairness Act will set up a rational system of how taxes can be applied. Shouldn’t the tax on these products be fair and straightforward?