WASHINGTON, DC- Information Technology and Innovation Foundation President Rob Atkinson is advising Congress to create a national framework to ensure fair, consistent and non-discriminatory taxation of digital goods and services to ensure the continued development of a growing and important sector of the U.S. economy.
In testimony to be delivered later today at a House Judiciary Subcommittee on Courts, Commercial and Administrative Law hearing on H.R. 1860, the “Digital Goods and Services Tax Fairness Act of 2011,” Atkinson will explain that the digital economy is an area of growth and dynamism and warn that short-term measures by states to raise revenue that impose multiple or discriminatory taxes on digital goods and services are ill-advised. The legislation was introduced by Subcommittee Chairman Lamar Smith, R-Texas, and Rep. Steve Cohen, D-Tenn., the panel’s ranking member.
With more than 20 states now taxing digital goods and services, Atkinson will tell lawmakers national guidelines are needed so that state and local governments cannot tax consumers twice for the same purchase or impose higher tax rates for digital goods, like e-books, that are replacing physical goods. He warns that multiple and discriminatory taxes of digital goods and services will, “…discourage investment in the digital economy, increase the cost of doing business online, lower national productivity, and ultimately hurt businesses and consumers.”
Among the highlights of his remarks are the following:
- The sale of digital goods, such as downloadable software, music, movies, games, and books, continues to increase. In 2010, for example, U.S. online retailers sold 1.17 billion digital music tracks totaling $1.5 billion in revenue.
- E-book sales in the United States reached $1 billion and are expected to almost triple by 2015.
- Among the 100 most popular websites in 2009, online-only companies comprised the overwhelming majority. For example, in 2007, the top five search engines (Google, Yahoo!, AOL, Microsoft, and Ask.com) together employed close to 40,000 individuals and generated roughly $30 billion in revenue.
- If tax policy penalizes high-productivity industries, like digital goods, overall productivity and U.S. standards of living will increase more slowly.
- The legislation does not compromise states’ rights. States are still free to tax digital goods under the proposed legislation. However, state and local tax jurisdictions would have to adhere to a common framework which would prevent them from imposing multiple or discriminatory taxes on digital goods.
The hearing is scheduled for 4:00 PM in 2141 Rayburn House Office Building. To obtain a copy of testimony contact Steve Norton (202)626-5758 or [email protected].
Through its research, policies proposals, and commentary, the Information Technology and Innovation Foundation is working to advance and support public policies that boost innovation, e-transformation and productivity. For additional information, visit ITIF at www.itif.org or contact Steve Norton at (202) 626-5758 or [email protected].