Digital Goods and Services Tax Fairness Act of 2013 - Prohibits a state or local jurisdiction from imposing multiple or discriminatory taxes on the sale or use of a digital good or service delivered or transferred electronically to a customer. Excludes from the definition of "digital service" a service that is predominantly attributable to the direct, contemporaneous expenditure of live human effort, skill, or expertise, a telecommunications service, an ancillary service, an Internet access service, an audio or video programming service, or a hotel intermediary service.
Restricts taxation of a digital good or service to taxation by a state or local jurisdiction whose territorial limits encompass a customer tax address, as defined by this Act. Makes the seller of digital goods or services responsible for obtaining and maintaining such address. Provides for the taxation of digital goods and services transactions that are aggregated and not separately stated.
[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[S. 1364 Introduced in Senate (IS)]
113th CONGRESS
1st Session
S. 1364
To promote neutrality, simplicity, and fairness in the taxation of
digital goods and digital services.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
July 25, 2013
Mr. Wyden (for himself and Mr. Thune) introduced the following bill;
which was read twice and referred to the Committee on Finance
_______________________________________________________________________
A BILL
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 2013''.
SEC. 2. MULTIPLE AND DISCRIMINATORY TAXES PROHIBITED.
No State or local jurisdiction shall impose multiple or
discriminatory taxes on the sale or use of a digital good or a digital
service.
SEC. 3. SOURCING LIMITATION.
Subject to section 6(a), taxes on the sale of a digital good or a
digital service may only be imposed by a State or local jurisdiction
whose territorial limits encompass the customer tax address.
SEC. 4. CUSTOMER TAX ADDRESS.
(a) Seller Obligation.--
(1) In general.--Subject to subsection (e)(2), a seller
shall be responsible for obtaining and maintaining in the
ordinary course of business the customer tax address with
respect to the sale of a digital good or a digital service, and
shall be responsible for collecting and remitting the correct
amount of tax for the State and local jurisdictions whose
territorial limits encompass the customer tax address if the
State has the authority to require such collection and
remittance by the seller.
(2) Certain transactions.--When a customer tax address is
not a business location of the seller under clause (i) of
section 7(2)(A)--
(A) if the sale is a separate and discrete
transaction, then a seller shall use reasonable efforts
to obtain a customer tax address, as such efforts are
described in clauses (iii), (iv), and (v) of section
7(2)(A), before resorting to using a customer tax
address as determined by clause (vi) of such section
7(2)(A); and
(B) if the sale is not a separate and discrete
transaction, then a seller shall use reasonable efforts
to obtain a customer tax address, as such efforts are
described in clauses (ii), (iii), (iv), and (v) of
section 7(2)(A), before resorting to using a customer
tax address as determined by clause (vi) of such
section 7(2)(A).
(b) Reliance on Customer-Povided Information.--A seller that relies
in good faith on information provided by a customer to determine a
customer tax address shall not be held liable for any additional tax
based on a different determination of that customer tax address by a
State or local jurisdiction or court of competent jurisdiction, except
if and until binding notice is given as provided in subsection (c).
(c) Address Correction.--If a State or local jurisdiction is
authorized under State law to administer a tax, and the jurisdiction
determines that the customer tax address determined by a seller is not
the customer tax address that would have been determined under section
7(2)(A) if the seller had the additional information provided by the
State or local jurisdiction, then the jurisdiction may give binding
notice to the seller to correct the customer tax address on a
prospective basis, effective not less than 45 days after the date of
such notice, if--
(1) when the determination is made by a local jurisdiction,
such local jurisdiction obtains the consent of all affected
local jurisdictions within the State before giving such notice
of determination; and
(2) before the State or local jurisdiction gives such
notice of determination, the customer is given an opportunity
to demonstrate in accordance with applicable State or local tax
administrative procedures that the address used is the customer
tax address.
(d) Coordination With Sourcing of Mobile Telecommunications
Service.--
(1) In general.--If--
(A) a digital good or a digital service is sold to
a customer by a home service provider of mobile
telecommunications service that is subject to being
sourced under section 117 of title 4, United States
Code, or the charges for a digital good or a digital
service are billed to the customer by such a home
service provider; and
(B) the digital good or digital service is
delivered, transferred, or provided electronically by
means of mobile telecommunications service that is
deemed to be provided by such home service provider
under section 117 of such title,
then the home service provider and, if different, the seller of
the digital good or digital service, may presume that the
customer's place of primary use for such mobile
telecommunications service is the customer tax address
described in section 7(2)(B) with respect to the sale of such
digital good or digital service.
(2) Definitions.--For purposes of this subsection, the
terms ``home service provider'', ``mobile telecommunications
service'', and ``place of primary use'' have the same meanings
as in section 124 of title 4, United States Code.
(e) Multiple Locations.--
(1) In general.--If a digital good or a digital service is
sold to a customer and available for use by the customer in
multiple locations simultaneously, the seller may determine the
customer tax addresses using a reasonable and consistent method
based on the addresses of use as provided by the customer and
determined in agreement with the customer at the time of sale.
(2) Direct customer payment.--
(A) Establishment of direct payment procedures.--
Each State and local jurisdiction shall provide
reasonable procedures that permit the direct payment by
a qualified customer, as determined under procedures
established by the State or local jurisdiction, of
taxes that are on the sale of digital goods and digital
services to multiple locations of the customer and that
would, absent such procedures, be required or permitted
by law to be collected from the customer by the seller.
(B) Effect of customer compliance with direct
payment procedures.--When a qualified customer elects
to pay tax directly under the procedures established
under subparagraph (A), the seller shall--
(i) have no obligation to obtain the
multiple customer tax addresses under
subsection (a); and
(ii) not be liable for such tax, provided
the seller follows the State and local
procedures and maintains appropriate
documentation in its books and records.
SEC. 5. TREATMENT OF BUNDLED TRANSACTIONS AND DIGITAL CODES.
(a) Bundled Transaction.--If a charge for a distinct and
identifiable digital good or a digital service is aggregated with and
not separately stated from one or more charges for other distinct and
identifiable goods or services, which may include other digital goods
or digital services, and any part of the aggregation is subject to
taxation, then the entire aggregation may be subject to taxation,
except to the extent that the seller can identify, by reasonable and
verifiable standards, one or more charges for the nontaxable goods or
services from its books and records kept in the ordinary course of
business.
(b) 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.
(c) Rule of Construction.--The sale of a digital code shall be
considered the sale transaction for purposes of this Act.
SEC. 6. NO INFERENCE.
(a) Customer Liability.--Subject to the prohibition provided in
section 2, nothing in this Act modifies, impairs, supersedes, or
authorizes the modification, impairment, or supersession of any law
allowing a State or local jurisdiction to impose tax on and collect tax
directly from a customer based upon use of a digital good or digital
service in such State.
(b) Non-Tax Matters.--This Act shall not be construed to apply in,
or to affect, any non-tax regulatory matter or other context.
(c) State Tax Matters.--The definitions contained in this Act are
intended to be used with respect to interpreting this Act. Nothing in
this Act shall prohibit a State or local jurisdiction from adopting
different nomenclature to enforce the provisions set forth in this Act.
SEC. 7. DEFINITIONS.
In this Act, the following definitions shall apply:
(1) Customer.--The term ``customer'' means a person that
purchases a digital good, digital service, or digital code.
(2) Customer tax address.--
(A) In general.--The term ``customer tax address''
means--
(i) with respect to the sale of a digital
good or digital service that is received by the
customer at a business location of the seller,
such business location;
(ii) if clause (i) does not apply and the
primary use location of the digital good or
digital service is known by the seller, such
location;
(iii) if neither clause (i) nor clause (ii)
applies, and if the location where the digital
good or digital service is received by the
customer, or by a donee of the customer that is
identified by such customer, is known to the
seller and maintained in the ordinary course of
the seller's business, such location;
(iv) if none of clauses (i) through (iii)
applies, the location indicated by an address
for the customer that is available from the
business records of the seller that are
maintained in the ordinary course of the
seller's business, when use of the address does
not constitute bad faith;
(v) if none of clauses (i) through (iv)
applies, the location indicated by an address
for the customer obtained during the
consummation of the sale, including the address
of a customer's payment instrument, when use of
this address does not constitute bad faith; or
(vi) if none of clauses (i) through (v)
applies, including the circumstance in which
the seller is without sufficient information to
apply such paragraphs, the location from which
the digital good was first available for
transmission by the seller (disregarding for
these purposes any location that merely
provides for the digital transfer of the
product sold), or from which the digital
service was provided by the seller.
(B) Exclusion.--For purposes of this paragraph, the
term ``location'' does not include the location of a
server, machine, or device, including an intermediary
server, that is used simply for routing or storage.
(3) Delivered or transferred electronically; provided
electronically.--The term ``delivered or transferred
electronically'' means the delivery or transfer by means other
than tangible storage media, and the term ``provided
electronically'' means the provision remotely via electronic
means.
(4) Digital code.--The term ``digital code'' means a code
that conveys only the right to obtain a digital good or digital
service without making further payment.
(5) Digital good.--The term ``digital good'' means any
software or other good that is delivered or transferred
electronically, including sounds, images, data, facts, or
combinations thereof, maintained in digital format, where such
good is the true object of the transaction, rather than the
activity or service performed to create such good, and
includes, as an incidental component, charges for the delivery
or transfer of the digital good.
(6) Digital service.--
(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, and includes, as an incidental component, charges
for the electronic provision of the digital service to
the customer.
(B) Exceptions.--The term ``digital service'' does
not include a service that is predominantly
attributable to the direct, contemporaneous expenditure
of live human effort, skill, or expertise, a
telecommunications service, an ancillary service,
Internet access service, audio or video programming
service, or a hotel intermediary service.
(C) Clarifying definitions.--For purposes of
subparagraph (B)--
(i) the term ``ancillary service'' means a
service that is associated with or incidental
to the provision of telecommunications
services, including, but not limited to,
detailed telecommunications billing, directory
assistance, vertical service, and voice mail
services;
(ii) the term ``audio or video programming
service''--
(I) means programming provided by,
or generally considered comparable to
programming provided by, a radio or
television broadcast station; and
(II) does not include interactive
on-demand services, as defined in
paragraph (12) of section 602 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;
(iii) the term ``hotel intermediary
service''--
(I) means a service provided by a
person that facilitates the sale, use,
or possession of a hotel room or other
transient accommodation to the general
public; and
(II) does not include the purchase
of a digital service by a person who
provides a hotel intermediary service
or by a person who owns, operates, or
manages hotel rooms or other transient
accommodations;
(iv) the term ``Internet access service''
means a service that enables users to connect
to the Internet, as defined in the Internet Tax
Freedom Act (47 U.S.C. 151 note), to access
content, information, or other services offered
over the Internet; and
(v) the term ``telecommunications
service''--
(I) means the electronic
transmission, conveyance, or routing of
voice, data, audio, video, or any other
information or signals to a point, or
between or among points;
(II) includes such transmission,
conveyance, or routing in which
computer processing applications are
used to act on the form, code, or
protocol of the content for purposes of
transmission, conveyance, or routing,
without regard to whether such service
is referred to as voice over Internet
protocol service; and
(III) does not include data
processing and information services
that allow data to be generated,
acquired, stored, processed, or
retrieved and delivered by an
electronic transmission to a purchaser
where such purchaser's primary purpose
for the underlying transaction is the
processed data or information.
(7) Discriminatory tax.--The term ``discriminatory tax''
means any tax imposed by a State or local jurisdiction on
digital goods or digital services that--
(A) is not generally imposed and legally
collectible by such State or local jurisdiction on
transactions involving similar property, goods, or
services accomplished through other means;
(B) is not generally imposed and legally
collectible at the same or higher rate by such State or
local jurisdiction on transactions involving similar
property, goods, or services accomplished through other
means;
(C) imposes an obligation to collect or pay the tax
on a person, other than the seller, than the State or
local jurisdiction would impose in the case of
transactions involving similar property, goods, or
services accomplished through other means;
(D) establishes a classification of digital
services or digital goods providers for purposes of
establishing a higher tax rate to be imposed on such
providers than the tax rate generally applied to
providers of similar property, goods, or services
accomplished through other means; or
(E) does not provide a resale and component part
exemption for the purchase of digital goods or digital
services in a manner consistent with the State's resale
and component part exemption applicable to the purchase
of similar property, goods, or services accomplished
through other means.
(8) Multiple tax.--
(A) In general.--The term ``multiple tax'' means
any tax that is imposed by one State, one or more of
that State's local jurisdictions, or both on the same
or essentially the same digital goods and digital
services that is also subject to tax imposed by another
State, one or more local jurisdictions in such other
State (whether or not at the same rate or on the same
basis), or both, without a credit for taxes paid in
other jurisdictions.
(B) Exception.--The term ``multiple tax'' shall not
include a tax imposed by a State and one or more
political subdivisions thereof on the same digital
goods and digital services or a tax on persons engaged
in selling digital goods and digital services which
also may have been subject to a sales or use tax
thereon.
(9) Primary use location.--
(A) In general.--The term ``primary use location''
means a street address representative of where the
customer's use of a digital good or digital service
will primarily occur, which shall be the residential
street address or a business street address of the
actual end user of the digital good or digital service,
including, if applicable, the address of a donee of the
customer that is designated by the customer.
(B) Customers that are not individuals.--For the
purpose of subparagraph (A), if the customer is not an
individual, the primary use location is determined by
the location of the customer's employees or equipment
(machine or device) that make use of the digital good
or digital service, but does not include the location
of a person who uses the digital good or digital
service as the purchaser of a separate good or service
from the customer.
(10) Sale and purchase.--The terms ``sale'' and
``purchase'', and all variations thereof, shall include the
provision, lease, rent, license, and corresponding variations
thereof.
(11) Seller.--
(A) In general.--The term ``seller'' means a person
making sales of digital goods or digital services.
(B) Exceptions.--A person that provides billing
service or electronic delivery or transport service on
behalf of another unrelated or unaffiliated person,
with respect to the other person's sale of a digital
good or digital service, shall not be treated as a
seller of that digital good or digital service.
(C) Rule of construction.--Nothing in this
paragraph shall preclude the person providing the
billing service or electronic delivery or transport
service from entering into a contract with the seller
to assume the tax collection and remittance
responsibilities of the seller.
(12) Separate and discrete transaction.--The term
``separate and discrete transaction'' means a sale of a digital
good, digital code, or a digital service sold in a single
transaction which does not involve any additional charges or
continued payment in order to maintain possession of the
digital good or access to the 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.--
(A) In general.--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.
(B) Exclusions.--The term ``tax'' does not include
an ad valorem tax, a tax on or measured by capital, a
tax on or measured by net income, apportioned gross
income, apportioned revenue, apportioned taxable
margin, or apportioned gross receipts, or, a State or
local jurisdiction business and occupation tax imposed
on a broad range of business activity in a State that
enacted a State tax on gross receipts after January 1,
1932, and before January 1, 1936.
SEC. 8. EFFECTIVE DATE; APPLICATION.
(a) General Rule.--This Act shall take effect 60 days after the
date of enactment of this Act.
(b) Exceptions.--A State or Local jurisdiction shall have 2 years
from the date of enactment of this Act to modify any State or local tax
statue enacted prior to date of enactment of this Act to conform to the
provisions set forth in sections 4 and 5 of this Act.
(c) Application to Liabilities and Pending Cases.--Nothing in this
Act shall affect liability for taxes accrued and enforced before the
effective date of this Act, or affect ongoing litigation relating to
such taxes.
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 unless such holding substantially limits
or impairs the essential elements of this Act, in which case this Act
shall be deemed invalid and of no legal effect as of the date that the
judgment on such holding is final and no longer subject to appeal.
<all>
Introduced in Senate
Read twice and referred to the Committee on Finance.
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