II 

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. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Digital Goods and 

5 Services Tax Fairness Act of 2019’’. 

6 SEC. 2. MULTIPLE AND DISCRIMINATORY TAXES PROHIB7 ITED. 

8 (a) MULTIPLE TAXES.—No State or local jurisdiction 

9 shall impose multiple taxes on the sale or use of a covered 

10 electronic good or service. 


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1 (b) DISCRIMINATORY TAXES.—No State or local ju2 risdiction shall impose discriminatory taxes on the sale or 

3 use of a digital good or a digital service. 

4 SEC. 3. SOURCING LIMITATION. 

5 Subject to section 6(a), taxes on the sale of a covered 

6 electronic good or service may only be imposed by a State 

7 or local jurisdiction whose territorial limits encompass the 

8 customer tax address. 

9 SEC. 4. CUSTOMER TAX ADDRESS. 

10 (a) SELLER OBLIGATION.— 

11 (1) IN GENERAL.—Subject to subsection (e)(2), 

12 a seller shall be responsible for obtaining and main13 taining in the ordinary course of business the cus14 tomer tax address with respect to the sale of a cov15 ered electronic good or service, and shall be respon16 sible for collecting and remitting the correct amount 

17 of tax for the State and local jurisdictions whose ter18 ritorial limits encompass the customer tax address if 

19 the State or local jurisdiction has the authority to 

20 require such collection and remittance by the seller. 

21 (2) CERTAIN TRANSACTIONS.—When a cus22 tomer tax address is not a business location of the 

23 seller under clause (i) of section 7(4)(A)— 

24 (A) if the sale is a separate and discrete 

25 transaction, then a seller shall use reasonable 


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1 efforts to obtain a customer tax address, as 

2 such efforts are described in clauses (iii), (iv), 

3 and (v) of section 7(4)(A), before resorting to 

4 using a customer tax address as determined by 

5 clause (vi) of such section 7(4)(A); and 

6 (B) if the sale is not a separate and dis7 crete transaction, then a seller shall use reason8 able efforts to obtain a customer tax address, 

9 as such efforts are described in clauses (ii), 

10 (iii), (iv), and (v) of section 7(4)(A), before re11 sorting to using a customer tax address as de12 termined by clause (vi) of such section 7(4)(A). 

13 (b) RELIANCE ON CUSTOMER-PROVIDED INFORMA14 TION.—A seller that relies in good faith on information 

15 provided by a customer to determine a customer tax ad16 dress shall not be held liable for any additional tax based 

17 on a different determination of that customer tax address 

18 by a State or local jurisdiction or court of competent juris19 diction, unless and until binding notice is given as pro20 vided in subsection (c). 

21 (c) ADDRESS CORRECTION.—If a State or local juris22 diction is authorized under State law to administer a tax, 

23 and the jurisdiction determines that the customer tax ad24 dress determined by a seller is not the customer tax ad25 dress that would have been determined under section 


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1 7(4)(A) if the seller had the additional information pro2 vided by the State or local jurisdiction, then the jurisdic3 tion may give binding notice to the seller to correct the 

4 customer tax address on a prospective basis, effective not 

5 less than 45 days after the date of such notice, if— 

6 (1) when the determination is made by a local 

7 jurisdiction, such local jurisdiction obtains the con8 sent of all affected local jurisdictions within the 

9 State before giving such notice of determination; and 

10 (2) before the State or local jurisdiction gives 

11 such notice of determination, the customer is given 

12 an opportunity to demonstrate in accordance with 

13 applicable State or local tax administrative proce14 dures that the address used is the customer tax ad15 dress. 

16 (d) COORDINATION WITH SOURCING OF MOBILE

17 TELECOMMUNICATIONS SERVICE.— 

18 (1) IN GENERAL.—If— 

19 (A) a covered electronic good or service is 

20 sold to a customer by a home service provider 

21 of mobile telecommunications service that is 

22 subject to being sourced under section 117 of 

23 title 4, United States Code, or the charges for 

24 a covered electronic good or service are billed to 


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1 the customer by such a home service provider; 

2 and 

3 (B) the covered electronic good or service 

4 is delivered, transferred, or provided electroni5 cally by means of mobile telecommunications 

6 service that is deemed to be provided by such 

7 home service provider under section 117 of such 

8 title, 

9 then the home service provider and, if different, the 

10 seller of the covered electronic good or service, may 

11 presume that the customer’s place of primary use 

12 for such mobile telecommunications service is the 

13 customer tax address described in section 7(4)(A)(ii) 

14 with respect to the sale of such covered electronic 

15 good or service. 

16 (2) DEFINITIONS.—For purposes of this sub17 section, the terms ‘‘home service provider’’, ‘‘mobile 

18 telecommunications service’’, and ‘‘place of primary 

19 use’’ have the same meanings as in section 124 of 

20 title 4, United States Code. 

21 (e) MULTIPLE LOCATIONS.— 

22 (1) IN GENERAL.—If a digital service, audio or 

23 video programming service, or VoIP service is sold 

24 to a customer and available for use by the customer 

25 in multiple locations simultaneously, the seller may 


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1 determine the customer tax addresses using a rea2 sonable and consistent method based on the address3 es of use as provided by the customer and deter4 mined in agreement with the customer at the time 

5 of sale or at a later time. 

6 (2) DIRECT CUSTOMER PAYMENT.— 

7 (A) ESTABLISHMENT OF DIRECT PAYMENT

8 PROCEDURES.—Each State and local jurisdic9 tion shall provide reasonable procedures that 

10 permit the direct payment by a qualified cus11 tomer, as determined under procedures estab12 lished by the State or local jurisdiction, of taxes 

13 that are on the sale of covered electronic goods 

14 or services to multiple locations of the customer 

15 and that would, absent such procedures, be re16 quired or permitted by law to be collected from 

17 the customer by the seller. 

18 (B) EFFECT OF CUSTOMER COMPLIANCE

19 WITH DIRECT PAYMENT PROCEDURES.—When 

20 a qualified customer elects to pay tax directly 

21 under the procedures established under sub22 paragraph (A), the seller shall— 

23 (i) have no obligation to obtain the 

24 multiple customer tax addresses under sub25 section (a); and 


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1 (ii) not be liable for such tax, provided 

2 the seller follows the State and local proce3 dures and maintains appropriate docu4 mentation in its books and records. 

5 SEC. 5. TREATMENT OF BUNDLED TRANSACTIONS, DIGITAL 

6 CODES, AND OTHER RULES. 

7 (a) BUNDLED TRANSACTION.—If a charge for a dis8 tinct and identifiable covered electronic good or service is 

9 aggregated with and not separately stated from one or 

10 more charges for other distinct and identifiable goods or 

11 services, which may include other covered electronic goods 

12 or services, and any part of the aggregation is subject to 

13 taxation, then the entire aggregation may be subject to 

14 taxation, except to the extent that the seller can identify, 

15 by reasonable and verifiable standards, one or more 

16 charges for the nontaxable goods or services from its books 

17 and records kept in the ordinary course of business. 

18 (b) DIGITAL CODE.—The tax treatment of the sale 

19 of a digital code shall be the same as the tax treatment 

20 of the sale of the covered electronic good or service to 

21 which the digital code relates. 

22 (c) APPLICATION OF FIXED CHARGES TO VOIP 

23 SERVICE.—With respect to VoIP service, if any tax is 

24 based on a fixed charge, such fixed charge shall be based 

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1 tomer has purchased the right to place, regardless of ac2 tual usage or the number of the customer’s phone num3 bers. 

4 (d) RULE OF CONSTRUCTION.—The sale of a digital 

5 code shall be considered the sale transaction for purposes 

6 of this Act. 

7 SEC. 6. NO INFERENCE. 

8 (a) CUSTOMER LIABILITY.—Subject to the prohibi9 tion provided in section 2, nothing in this Act modifies, 

10 impairs, supersedes, or authorizes the modification, im11 pairment, or supersession of any law allowing a State or 

12 local jurisdiction to impose tax on and collect tax directly 

13 from a customer based upon use of a covered electronic 

14 good or service in such State. 

15 (b) NON-TAX MATTERS.—This Act shall not be con16 strued to apply in, or to affect, any non-tax regulatory 

17 matter or other context. 

18 (c) STATE TAX MATTERS.—The definitions con19 tained in this Act are intended to be used with respect 

20 to interpreting this Act. Nothing in this Act shall prohibit 

21 a State or local jurisdiction from adopting different no22 menclature to enforce the provisions set forth in this Act. 

23 (d) INTERNET TAX FREEDOM ACT.—Nothing in this 

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1 fication, impairment, or supersession of the Internet Tax 

2 Freedom Act (47 U.S.C. 151 note). 

3 SEC. 7. DEFINITIONS. 

4 In this Act, the following definitions shall apply: 

5 (1) AUDIO OR VIDEO PROGRAMMING SERV6 ICE.—The term ‘‘audio or video programming serv7 ice’’ means programming provided by, or generally 

8 considered comparable to programming provided by, 

9 a radio or television broadcast station, regardless of 

10 the facilities used to deliver or provide such service. 

11 (2) COVERED ELECTRONIC GOOD OR SERV12 ICE.—The term ‘‘covered electronic good or service’’ 

13 means a digital good, digital service, audio or video 

14 programming service, or VoIP service. 

15 (3) CUSTOMER.—The term ‘‘customer’’ means 

16 a person that purchases a covered electronic good or 

17 service or digital code. 

18 (4) CUSTOMER TAX ADDRESS.— 

19 (A) IN GENERAL.—The term ‘‘customer 

20 tax address’’ means— 

21 (i) with respect to the sale of a cov22 ered electronic good or service that is re23 ceived by the customer at a business loca24 tion of the seller, such business location; 


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1 (ii) if clause (i) does not apply and 

2 the primary use location of the covered 

3 electronic good or service is known by the 

4 seller, such location; 

5 (iii) if neither clause (i) nor clause (ii) 

6 applies, and if the location where the cov7 ered electronic good or service is received 

8 by the customer, or by a donee of the cus9 tomer that is identified by such customer, 

10 is known to the seller and maintained in 

11 the ordinary course of the seller’s business, 

12 such location; 

13 (iv) if none of clauses (i) through (iii) 

14 applies, the location indicated by an ad15 dress for the customer that is available 

16 from the business records of the seller that 

17 are maintained in the ordinary course of 

18 the seller’s business, when use of the ad19 dress does not constitute bad faith; 

20 (v) if none of clauses (i) through (iv) 

21 applies, the location indicated by an ad22 dress for the customer obtained during the 

23 consummation of the sale, including the 

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1 ment, when use of this address does not 

2 constitute bad faith; or 

3 (vi) if none of clauses (i) through (v) 

4 applies, including the circumstance in 

5 which the seller is without sufficient infor6 mation to apply such paragraphs, one of 

7 the following locations, as selected by the 

8 seller, provided that such location is con9 sistently used by the seller for all such 

10 sales to which this clause applies: 

11 (I) The location in the United 

12 States of the headquarters of the sell13 er’s business. 

14 (II) The location in the United 

15 States where the seller has the great16 est number of employees. 

17 (III) The location in the United 

18 States— 

19 (aa) from which the seller 

20 makes digital goods available for 

21 electronic delivery; or 

22 (bb) from which digital serv23 ices, VoIP services, or audio or 

24 video programming services are 

25 provided electronically. 


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1 (B) EXCLUSION.—For purposes of this 

2 paragraph, the term ‘‘location’’ does not include 

3 the location of a server, machine, or device, in4 cluding an intermediary server, that is used 

5 simply for routing or storage. 

6 (5) DELIVERED OR TRANSFERRED ELECTRONI7 CALLY; PROVIDED ELECTRONICALLY.—The term 

8 ‘‘delivered or transferred electronically’’ means the 

9 delivery or transfer of a digital good by means other 

10 than tangible storage media, and the term ‘‘provided 

11 electronically’’ means the provision of a digital serv12 ice, audio or video programming service, or VoIP 

13 service remotely via electronic means. 

14 (6) DIGITAL CODE.—The term ‘‘digital code’’ 

15 means a code that conveys only the right to obtain 

16 a covered electronic good or service without making 

17 further payment. 

18 (7) DIGITAL GOOD.—The term ‘‘digital good’’ 

19 means any software or other good that is delivered 

20 or transferred electronically, including sounds, im21 ages, data, facts, or combinations thereof, main22 tained in digital format, where such software or 

23 other good is the true object of the transaction, 

24 rather than the activity or service performed to cre25 ate such software or other good, that results in the 


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1 delivery to the customer of a complete copy of such 

2 software or other good, with the right to use perma3 nently or for a specified period, and includes, as an 

4 incidental component, charges for the delivery or 

5 transfer of such software or other good. 

6 (8) DIGITAL SERVICE.— 

7 (A) IN GENERAL.—The term ‘‘digital serv8 ice’’ means any service that is provided elec9 tronically, including the provision of remote ac10 cess to or use of a digital good, and includes, 

11 as an incidental component, charges for the 

12 electronic provision of the digital service to the 

13 customer. 

14 (B) EXCEPTIONS.—The term ‘‘digital serv15 ice’’ does not include a service that is predomi16 nantly attributable to the direct, contempora17 neous expenditure of live human effort, skill, or 

18 expertise, a telecommunications service, an an19 cillary service, Internet access, audio or video 

20 programming service, or a hotel intermediary 

21 service. 

22 (C) CLARIFYING DEFINITIONS.—For pur23 poses of subparagraph (B)— 

24 (i) the term ‘‘ancillary service’’ means 

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1 dental to the provision of telecommuni2 cations services, including, but not limited 

3 to, detailed telecommunications billing, di4 rectory assistance, vertical service, and 

5 voice mail services; 

6 (ii) the term ‘‘hotel intermediary serv7 ice’’— 

8 (I) means a service provided by a 

9 person that facilitates the sale, use, or 

10 possession of a hotel room or other 

11 transient accommodation to the gen12 eral public; and 

13 (II) does not include the pur14 chase of a digital service by a person 

15 who provides a hotel intermediary 

16 service or by a person who owns, oper17 ates, or manages hotel rooms or other 

18 transient accommodations; 

19 (iii) the term ‘‘Internet access’’ means 

20 any service included within the definition 

21 of the term ‘‘internet access’’ under section 

22 1105(5) of the Internet Tax Freedom Act 

23 (47 U.S.C. 151 note); and 

24 (iv) the term ‘‘telecommunications 

25 service’’— 


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1 (I) means the electronic trans2 mission, conveyance, or routing of 

3 voice, data, audio, video, or any other 

4 information or signals to a point, or 

5 between or among points; 

6 (II) includes such transmission, 

7 conveyance, or routing in which com8 puter processing applications are used 

9 to act on the form, code, or protocol 

10 of the content for purposes of trans11 mission, conveyance, or routing, with12 out regard to whether such service is 

13 referred to as VoIP service; and 

14 (III) does not include data proc15 essing and information services that 

16 allow data to be generated, acquired, 

17 stored, processed, or retrieved and de18 livered by an electronic transmission 

19 to a purchaser where such purchaser’s 

20 primary purpose for the underlying 

21 transaction is the processed data or 

22 information. 

23 (9) DISCRIMINATORY TAX.— 

24 (A) IN GENERAL.—The term ‘‘discrimina25 tory tax’’ means any tax imposed by a State or 


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1 local jurisdiction on digital goods or digital 

2 services that— 

3 (i) is not generally imposed and le4 gally collectible by such State or local ju5 risdiction on transactions involving similar 

6 property, goods, or services accomplished 

7 through other means; 

8 (ii) is not generally imposed and le9 gally collectible at the same or higher rate 

10 by such State or local jurisdiction on 

11 transactions involving similar property, 

12 goods, or services accomplished through 

13 other means; 

14 (iii) imposes an obligation to collect or 

15 pay the tax on a person, other than the 

16 seller, that the State or local jurisdiction 

17 would not impose in the case of trans18 actions involving similar property, goods, 

19 or services accomplished through other 

20 means; 

21 (iv) establishes a classification of dig22 ital services or digital goods providers for 

23 purposes of establishing a higher tax rate 

24 to be imposed on such providers than the 

25 tax rate generally imposed on providers of 


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1 similar property, goods, or services accom2 plished through other means; or 

3 (v) does not provide a resale and com4 ponent part exemption for the purchase of 

5 digital goods or digital services in a man6 ner consistent with the State’s resale and 

7 component part exemption applicable to 

8 the purchase of similar property, goods, or 

9 services accomplished through other 

10 means. 

11 (B) CLARIFICATION.—For purposes of this 

12 paragraph, any tax that is limited in its appli13 cation to only certain services, providers, or in14 dustries shall not be considered to be generally 

15 imposed, with the exception of any State tax 

16 which is imposed— 

17 (i) in lieu of a generally imposed tax; 

18 and 

19 (ii) at a rate which is not greater than 

20 the rate of such tax. 

21 (10) LOCAL JURISDICTION.— 

22 (A) IN GENERAL.—The term ‘‘local juris23 diction’’ means— 


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1 (i) any municipality, city, county, 

2 township, parish, transportation district, or 

3 assessment jurisdiction; 

4 (ii) any other local jurisdiction in the 

5 territorial jurisdiction of the United States 

6 with the authority to impose a tax; and 

7 (iii) any governmental entity or per8 son acting on behalf of an entity described 

9 in clause (i) or (ii) and with the authority 

10 to assess, impose, levy, or collect taxes. 

11 (B) EXCEPTION.—The term ‘‘local juris12 diction’’ shall not include a State. 

13 (11) MULTIPLE TAX.— 

14 (A) IN GENERAL.—The term ‘‘multiple 

15 tax’’ means any tax that is imposed by one 

16 State, one or more of that State’s local jurisdic17 tions, or both on the same or essentially the 

18 same covered electronic good or service that is 

19 also subject to tax imposed by another State, 

20 one or more local jurisdictions in such other 

21 State (whether or not at the same rate or on 

22 the same basis), or both, without a credit for 

23 taxes paid in other jurisdictions. 

24 (B) EXCEPTION.—The term ‘‘multiple 

25 tax’’ shall not include a tax imposed by a State 


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1 and one or more political subdivisions thereof 

2 on the same covered electronic good or service 

3 or a tax on persons engaged in selling covered 

4 electronic goods or services which also may have 

5 been subject to a sales or use tax thereon. 

6 (12) PRIMARY USE LOCATION.— 

7 (A) IN GENERAL.—The term ‘‘primary use 

8 location’’ means a street address representative 

9 of where the customer’s use of a covered elec10 tronic good or service will primarily occur, 

11 which shall be the residential street address or 

12 a business street address of the actual end user 

13 of the covered electronic good or service, includ14 ing, if applicable, the address of a donee of the 

15 customer that is designated by the customer. 

16 (B) CUSTOMERS THAT ARE NOT INDIVID17 UALS.—For the purpose of subparagraph (A), if 

18 the customer is not an individual, the primary 

19 use location is determined by the location of the 

20 customer’s employees or equipment (machine or 

21 device) that make use of the covered electronic 

22 good or service, but does not include the loca23 tion of a person who uses the covered electronic 

24 good or service as the purchaser of a separate 

25 good or service from the customer. 


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1 (13) SALE AND PURCHASE.—The terms ‘‘sale’’ 

2 and ‘‘purchase’’, and all variations thereof, shall in3 clude the provision, lease, rent, license, and cor4 responding variations thereof. 

5 (14) SELLER.— 

6 (A) IN GENERAL.—The term ‘‘seller’’ 

7 means a person making sales of covered elec8 tronic goods or services. 

9 (B) EXCEPTIONS.—A person that provides 

10 billing service or electronic delivery or transport 

11 service on behalf of another unrelated or unaf12 filiated person, with respect to the other per13 son’s sale of a covered electronic good or serv14 ice, shall not be treated as a seller of that cov15 ered electronic good or service. 

16 (C) RULE OF CONSTRUCTION.—Nothing in 

17 this paragraph shall preclude the person pro18 viding the billing service or electronic delivery 

19 or transport service from entering into a con20 tract with the seller to assume the tax collection 

21 and remittance responsibilities of the seller. 

22 (15) SEPARATE AND DISCRETE TRANS23 ACTION.—The term ‘‘separate and discrete trans24 action’’ means a sale of a covered electronic good or 

25 service or digital code sold in a single transaction 


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1 that does not involve any additional charges or con2 tinued payment in order to maintain possession of 

3 the digital good or access to or usage of the digital 

4 service, audio or video programming service, or VoIP 

5 service. 

6 (16) STATE.—The term ‘‘State’’ means— 

7 (A) any of the several States, the District 

8 of Columbia, or any territory or possession of 

9 the United States; and 

10 (B) any governmental entity or person act11 ing on behalf of an entity described in subpara12 graph (A) and with the authority to assess, im13 pose, levy, or collect taxes. 

14 (17) TAX.— 

15 (A) IN GENERAL.—The term ‘‘tax’’ means 

16 any charge imposed by any State or local juris17 diction for the purpose of generating revenues 

18 for governmental purposes, including any tax, 

19 charge, or fee levied as a fixed charge or meas20 ured by gross amounts charged, regardless of 

21 whether such tax, charge, or fee is imposed on 

22 the seller or the customer and regardless of the 

23 terminology used to describe the tax, charge, or 

24 fee. 


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1 (B) EXCLUSIONS.—The term ‘‘tax’’ does 

2 not include an ad valorem tax, a tax on or 

3 measured by capital, a tax on or measured by 

4 net income, apportioned gross income, appor5 tioned revenue, apportioned taxable margin, or 

6 apportioned gross receipts, or a State or local 

7 jurisdiction business and occupation tax im8 posed on a broad range of business activity in 

9 a State that enacted a State tax on gross re10 ceipts after January 1, 1932, and before Janu11 ary 1, 1936. 

12 (18) VOIP SERVICE.—The term ‘‘VoIP service’’ 

13 means any interconnected VoIP service, as defined 

14 in section 9.3 of title 47, Code of Federal Regula15 tions, or any successor technology. 

16 SEC. 8. EFFECTIVE DATE; APPLICATION. 

17 (a) GENERAL RULE.—This Act shall take effect 60 

18 days after the date of enactment of this Act. 

19 (b) EXCEPTIONS.—A State or local jurisdiction shall 

20 have 2 years from the date of enactment of this Act to 

21 modify any State or local tax statute enacted prior to the 

22 date of enactment of this Act to conform to the provisions 

23 set forth in sections 4 and 5 of this Act. 

24 (c) APPLICATION TO LIABILITIES AND PENDING

25 CASES.—Nothing in this Act shall affect liability for taxes 


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1 accrued and enforced before the effective date of this Act 

2 or affect ongoing litigation relating to such taxes. 

3 SEC. 9. SAVINGS PROVISION. 

4 If any provision or part of this Act is held to be in5 valid or unenforceable by a court of competent jurisdiction 

6 for any reason, such holding shall not affect the validity 

7 or enforceability of any other provision or part of this Act 

8 unless such holding substantially limits or impairs the es9 sential elements of this Act, in which case this Act shall 

10 be deemed invalid and of no legal effect as of the date 

11 that the judgment on such holding is final and no longer 

12 subject to appeal. 

Æ 


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