[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[S. 765 Introduced in Senate (IS)]
<DOC>
116th CONGRESS
1st Session
S. 765
To promote neutrality, simplicity, and fairness in the taxation of
digital goods and digital services.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
March 13, 2019
Mr. Thune (for himself and Mr. Wyden) 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 2019''.
SEC. 2. MULTIPLE AND DISCRIMINATORY TAXES PROHIBITED.
(a) Multiple Taxes.--No State or local jurisdiction shall impose
multiple taxes on the sale or use of a covered electronic good or
service.
(b) Discriminatory Taxes.--No State or local jurisdiction shall
impose 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 covered electronic
good or 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 covered electronic good or 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 or local jurisdiction 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(4)(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(4)(A), before resorting to using a customer tax
address as determined by clause (vi) of such section
7(4)(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(4)(A), before resorting to using a customer
tax address as determined by clause (vi) of such
section 7(4)(A).
(b) Reliance on Customer-Provided 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, unless
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(4)(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 covered electronic good or 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 covered electronic good or
service are billed to the customer by such a home
service provider; and
(B) the covered electronic good or 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 covered electronic good or 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(4)(A)(ii) with respect to the sale of
such covered electronic good or 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 service, audio or video
programming service, or VoIP 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 or at a later
time.
(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 covered electronic goods
or 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, DIGITAL CODES, AND OTHER
RULES.
(a) Bundled Transaction.--If a charge for a distinct and
identifiable covered electronic good or 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 covered
electronic goods or 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 covered
electronic good or service to which the digital code relates.
(c) Application of Fixed Charges to VoIP Service.--With respect to
VoIP service, if any tax is based on a fixed charge, such fixed charge
shall be based on the number of simultaneous outbound calls the
customer has purchased the right to place, regardless of actual usage
or the number of the customer's phone numbers.
(d) 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 covered electronic good or
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.
(d) Internet Tax Freedom Act.--Nothing in this Act modifies,
impairs, supersedes, or authorizes the modification, impairment, or
supersession of the Internet Tax Freedom Act (47 U.S.C. 151 note).
SEC. 7. DEFINITIONS.
In this Act, the following definitions shall apply:
(1) Audio or video programming service.--The term ``audio
or video programming service'' means programming provided by,
or generally considered comparable to programming provided by,
a radio or television broadcast station, regardless of the
facilities used to deliver or provide such service.
(2) Covered electronic good or service.--The term ``covered
electronic good or service'' means a digital good, digital
service, audio or video programming service, or VoIP service.
(3) Customer.--The term ``customer'' means a person that
purchases a covered electronic good or service or digital code.
(4) Customer tax address.--
(A) In general.--The term ``customer tax address''
means--
(i) with respect to the sale of a covered
electronic good or 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 covered electronic
good or service is known by the seller, such
location;
(iii) if neither clause (i) nor clause (ii)
applies, and if the location where the covered
electronic good or 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, one of the following
locations, as selected by the seller, provided
that such location is consistently used by the
seller for all such sales to which this clause
applies:
(I) The location in the United
States of the headquarters of the
seller's business.
(II) The location in the United
States where the seller has the
greatest number of employees.
(III) The location in the United
States--
(aa) from which the seller
makes digital goods available
for electronic delivery; or
(bb) from which digital
services, VoIP services, or
audio or video programming
services are provided
electronically.
(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.
(5) Delivered or transferred electronically; provided
electronically.--The term ``delivered or transferred
electronically'' means the delivery or transfer of a digital
good by means other than tangible storage media, and the term
``provided electronically'' means the provision of a digital
service, audio or video programming service, or VoIP service
remotely via electronic means.
(6) Digital code.--The term ``digital code'' means a code
that conveys only the right to obtain a covered electronic good
or service without making further payment.
(7) 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
software or other good is the true object of the transaction,
rather than the activity or service performed to create such
software or other good, that results in the delivery to the
customer of a complete copy of such software or other good,
with the right to use permanently or for a specified period,
and includes, as an incidental component, charges for the
delivery or transfer of such software or other good.
(8) 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, 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 ``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;
(iii) the term ``Internet access'' means
any service included within the definition of
the term ``internet access'' under section
1105(5) of the Internet Tax Freedom Act (47
U.S.C. 151 note); and
(iv) 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 VoIP 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.
(9) Discriminatory tax.--
(A) In general.--The term ``discriminatory tax''
means any tax imposed by a State or local jurisdiction
on digital goods or digital services that--
(i) 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;
(ii) 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;
(iii) imposes an obligation to collect or
pay the tax on a person, other than the seller,
that the State or local jurisdiction would not
impose in the case of transactions involving
similar property, goods, or services
accomplished through other means;
(iv) 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 imposed on providers of similar
property, goods, or services accomplished
through other means; or
(v) 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.
(B) Clarification.--For purposes of this paragraph,
any tax that is limited in its application to only
certain services, providers, or industries shall not be
considered to be generally imposed, with the exception
of any State tax which is imposed--
(i) in lieu of a generally imposed tax; and
(ii) at a rate which is not greater than
the rate of such tax.
(10) Local jurisdiction.--
(A) In general.--The term ``local jurisdiction''
means--
(i) any municipality, city, county,
township, parish, transportation district, or
assessment jurisdiction;
(ii) any other local jurisdiction in the
territorial jurisdiction of the United States
with the authority to impose a tax; and
(iii) any governmental entity or person
acting on behalf of an entity described in
clause (i) or (ii) and with the authority to
assess, impose, levy, or collect taxes.
(B) Exception.--The term ``local jurisdiction''
shall not include a State.
(11) 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 covered electronic good or
service 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 covered
electronic good or service or a tax on persons engaged
in selling covered electronic goods or services which
also may have been subject to a sales or use tax
thereon.
(12) Primary use location.--
(A) In general.--The term ``primary use location''
means a street address representative of where the
customer's use of a covered electronic good or service
will primarily occur, which shall be the residential
street address or a business street address of the
actual end user of the covered electronic good or
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 covered
electronic good or service, but does not include the
location of a person who uses the covered electronic
good or service as the purchaser of a separate good or
service from the customer.
(13) Sale and purchase.--The terms ``sale'' and
``purchase'', and all variations thereof, shall include the
provision, lease, rent, license, and corresponding variations
thereof.
(14) Seller.--
(A) In general.--The term ``seller'' means a person
making sales of covered electronic goods or 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 covered
electronic good or service, shall not be treated as a
seller of that covered electronic good or 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.
(15) Separate and discrete transaction.--The term
``separate and discrete transaction'' means a sale of a covered
electronic good or service or digital code sold in a single
transaction that does not involve any additional charges or
continued payment in order to maintain possession of the
digital good or access to or usage of the digital service,
audio or video programming service, or VoIP service.
(16) State.--The term ``State'' means--
(A) any of the several States, the District of
Columbia, or any territory or possession of the United
States; and
(B) any governmental entity or person acting on
behalf of an entity described in subparagraph (A) and
with the authority to assess, impose, levy, or collect
taxes.
(17) 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.
(18) VoIP service.--The term ``VoIP service'' means any
interconnected VoIP service, as defined in section 9.3 of title
47, Code of Federal Regulations, or any successor technology.
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
statute enacted prior to the 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>
Digital Goods and Services Tax Fairness Act of 2019
#765 | S Congress #116
Policy Area: Taxation
Last Action: Read twice and referred to the Committee on Finance. (text: CR S1847-1849) (3/13/2019)
Bill Text Source: Congress.gov
Summary and Impacts
Original Text