During the recent debate in the Senate on the Marketplace Fairness Act, S. 743, another 21st century tax issue popped up, albeit briefly. We think it’s worth going back to consider an amendment submitted by Sen. John Thune (R-SD) that clarifies the taxation of digital goods and services. This amendment is based on bipartisan legislation the Senator introduced last Congress with Senator Ron Wyden (D-OR).
Simply put, digital goods are electronic files sold online. This includes software, manuals in digital form, and images among other products. Digital services include products ranging from cloud computing to alarm monitoring. These are all products and services that may be leveraged by manufacturers to increase the efficiency of their shopfloor, enhance their ability to connect with customers, and help them better manage their supply chain.
When these goods and services are “shipped” online it is not always as simple as traveling from point A to point B. These digital products can actually bounce around to many “locations” in cyberspace all in the blink of an eye. Today’s current tax regime allows multiple states to tax a manufacturer or other taxpayer on just one transaction.
Manufacturers are already under intense economic pressure ranging from global competition and other adverse and unnecessary regulations in the United States. Fixing this statute with Senators Thune and Wyden’s proposal that would eliminate duplicative and discriminatory taxes would increase manufacturers’ ability to compete.
We look forward to working with both chambers on this very targeted issue so that manufacturers have one less obstacle in their way as they continue to lead America’s most innovative industry.