Tax on Digital Goods

Nowadays, technology is commonplace in everyday life of many families. People read books on their Amazon Kindles, they listen to music on phones, and are even able to watch their favorite TV shows on their tablets through a popular service Netflix. They download apps to help with basically everything like cooking, running, directions, and entertainment. Digital goods and services are becoming more and more integrated into people's lives.

There is a strange rule with the taxation of digital goods and services that sets up the possibility for multiple taxes being applied to a single transaction from different states. Since there is no actual physical link for a digital good or service, it can be taxed based on several personal and commercial connections to the sale. People purchasing digital items such as music, videos, and software through their app store or online marketplace should be more aware and concerned about the chances that they can be subjected to multiple and duplicative taxes for a single transaction. In addition, some state laws and regulations also impose a higher tax rate on digital goods and services than on the actual physical product.

Congress is currently working on a solution to provide a national structure for the purchase of digital goods by creating a standard nexus for the taxation of digital goods and services based on the home location of the purchaser, rather than subjecting her to multiple state taxes on the same purchase. The Digital Goods and Services Tax Fairness Act would end the imposition of multiple and duplicative taxes from various jurisdictions on a single digital download. The legislation also prohibits the imposition of taxes on digital goods at a higher rate than the actual physical product.

The Digital Goods and Services Tax Fairness Act will provide certainty to consumers that they will not be subject to multiple or duplicative taxes, regardless of where, how, and when they purchase and