I 

111TH CONGRESS 

2D SESSION H. R. 5649 

To promote neutrality, simplicity, and fairness in the taxation of digital 

goods and digital services. 

IN THE HOUSE OF REPRESENTATIVES 

JUNE 30, 2010 

Mr. BOUCHER (for himself and Mr. SMITH of Texas) introduced the following 

bill; which was referred to the Committee on the Judiciary 

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 2010’’. 

6 SEC. 2. FINDINGS. 

7 The Congress finds the following: 

8 (1) Consumers, businesses, and other partici9 pants engaged in electronic commerce may be sub10 ject to multiple, confusing, and burdensome taxation 


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1 because of inconsistent rules among thousands of 

2 State and local jurisdictions and disparate treatment 

3 of digital goods and digital services. 

4 (2) A consistent framework for taxation is 

5 needed that will not impede electronic commerce and 

6 the sale of digital goods and digital services, by pre7 venting multiple taxation, and providing greater cer8 tainty and simplicity. 

9 (3) Neutrality should guide tax policy and ad10 ministration in this area. Transactions involving 

11 similar types of goods and services should be taxed 

12 fairly, regardless of the method and means of dis13 tribution, whether through electronic transfer or 

14 through other channels of commerce. New or dif15 ferent taxes on electronic transactions should be 

16 barred. 

17 (4) To ensure neutrality and avoid multiple tax18 ation, certain rules should be adapted to reflect the 

19 unique nature of electronic commerce and how dig20 ital goods and digital services are provided. 

21 (5) To recognize the critical role that online 

22 health, energy management, and education services 

23 will play in our economy, these services should be ex24 empt from all State and local taxes. 


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1 SEC. 3. MULTIPLE AND DISCRIMINATORY TAXES PROHIB2 ITED. 

3 No State or local jurisdiction shall impose multiple 

4 or discriminatory taxes on or with respect to the sale or 

5 use of digital goods or digital services. 

6 SEC. 4. RETAIL, SOURCING, AND OTHER LIMITATIONS. 

7 (a) RETAIL LIMITATION.—Taxes on or with respect 

8 to the sale or use of digital goods or digital services may 

9 be imposed only on or with respect to a sale to, or use 

10 by, a customer. 

11 (b) SOURCING LIMITATION.— 

12 (1) IN GENERAL.—Taxes on or with respect to 

13 the sale or use of digital goods or digital services 

14 may be imposed only by the State and local jurisdic15 tions whose territorial limits encompass the cus16 tomer’s tax address. This limitation shall be deemed 

17 satisfied if sourcing is determined by a seller pursu18 ant to State sourcing rules adopted pursuant to the 

19 Streamlined Sales and Use Tax Agreement. 

20 (2) TAX ADDRESS.—The customer’s tax ad21 dress shall be— 

22 (A) with respect to digital goods or digital 

23 services that are sold to a customer by a pro24 vider of mobile telecommunications service that 

25 is subject to being sourced under section 117 of 

26 title 4 of the United States Code, and furnished 


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1 to the customer in conjunction with such pro2 vider’s mobile telecommunications service, the 

3 customer’s place of primary use, as defined in 

4 section 124 of title 4 of the United States Code; 

5 (B) if subparagraph (A) does not apply, 

6 and if the digital good or digital service is re7 ceived by the customer at a business location of 

8 the seller, such business location; 

9 (C) if neither subparagraph (A) nor sub10 paragraph (B) applies, and if the location where 

11 the digital good or digital service is received by 

12 the customer is known to the seller, such loca13 tion; 

14 (D) if none of subparagraphs (A) through 

15 (C) applies, the customer’s address that is ei16 ther known to the seller or, if not known, ob17 tained by the seller during the consummation of 

18 the transaction, including the address of the 

19 customer’s payment instrument if no other ad20 dress is available; 

21 (E) if an address is neither known nor ob22 tained as provided in subparagraph (D), the ad23 dress of the seller from which the digital good 

24 or digital service was sold; and 


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1 (F) notwithstanding subparagraphs (A) 

2 through (E), for digital goods or digital services 

3 that are delivered to a person other than the 

4 customer, including advertising services, the de5 livery location if known or, otherwise, the cus6 tomer’s address determined under subpara7 graph (D) or (E). 

8 (c) LIMIT ON EXPANSIVE INTERPRETATION.—No tax 

9 on or with respect to the sale or use of tangible personal 

10 property, telecommunications service, Internet access serv11 ice, or audio or video programming service may be con12 strued by any regulation, administrative ruling, or other13 wise, to be imposed on or with respect to the sale or use 

14 of a digital good or a digital service. No tax on or with 

15 respect to the sale or use of a digital good may be con16 strued by any regulation, administrative ruling, or other17 wise, to be imposed on or with respect to the sale or use 

18 of a digital service. The limitations provided by this sub19 section shall not apply to any construction that was ap20 proved by a judicial determination made on or before June 

21 30, 2010. 

22 (d) CERTAIN TAXES PROHIBITED.—No tax shall be 

23 imposed on or with respect to the sale or use of digital 

24 medical services, digital education services, or digital en25 ergy management services. 


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1 SEC. 5. BUNDLED GOODS AND SERVICES. 

2 If charges for digital goods or digital services are ag3 gregated with, and not separately stated from, charges for 

4 other goods or services, then the charges for digital goods 

5 or digital services may be taxed for purposes of this Act 

6 at the same rate and on the same basis as charges for 

7 the other goods or services unless the seller can reasonably 

8 identify the charges for the digital goods or digital services 

9 from its books and records kept in the regular course of 

10 business. 

11 SEC. 6. DEFINITIONS AND OTHER SPECIAL RULES. 

12 For the purposes of this Act, the following definitions 

13 and rules apply: 

14 (1) CUSTOMER.—The term ‘‘customer’’ means 

15 a person that purchases a digital good or digital 

16 service, for a purpose other than resale. For the pur17 pose of determining a place of primary use under 

18 section 4(b)(2)(A), ‘‘customer’’ means the ‘‘end 

19 user’’, as such term is used in section 124 of title 

20 4 of the United States Code, of the purchased dig21 ital good or digital service. For purposes of this defi22 nition, purchase for resale includes purchase of a 

23 digital good or digital service for further commercial 

24 broadcast, rebroadcast, transmission, retransmission, 

25 licensing, relicensing, reproduction, copying, dis26 tribution, redistribution, or exhibition of the digital 


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1 good or digital service, in whole or in part, to an2 other person. 

3 (2) DELIVERED OR TRANSFERRED ELECTRONI4 CALLY.—The term ‘‘delivered or transferred elec5 tronically’’ means delivered or transferred to the 

6 customer by means other than tangible storage 

7 media. It is not necessary that the product or service 

8 be physically transferred to the customer, provided 

9 that the customer may access or remotely use the 

10 product or service. 

11 (3) DIGITAL GOOD AND DIGITAL SERVICE.— 

12 The term ‘‘digital good’’ means any good or product 

13 that is delivered or transferred electronically to the 

14 customer, including software, information main15 tained in digital format, digital audio-visual works, 

16 digital audio works, and digital books; and the term 

17 ‘‘digital service’’ means any service that is delivered 

18 or transferred electronically to the customer, includ19 ing the provision of remote access to or use of a dig20 ital good, but the term ‘‘digital service’’ does not in21 clude telecommunications service, Internet access 

22 service, or audio or video programming service. For 

23 purposes of this section, ‘‘audio or video program24 ming’’ means programming provided by, or generally 

25 considered comparable to programming provided by, 


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1 a radio or television broadcast station. ‘‘Video pro2 gramming’’ shall not include interactive on-demand 

3 services, pay-per-view services, or services generally 

4 considered comparable to such services regardless of 

5 the technology used to provide such services. 

6 (4) DIGITAL EDUCATION SERVICE.—The term 

7 ‘‘digital education service’’ means a primary, sec8 ondary, undergraduate, postgraduate, or professional 

9 educational service delivered or transferred electroni10 cally to a practitioner or student. 

11 (5) DIGITAL ENERGY MANAGEMENT SERVICE.— 

12 The term ‘‘digital energy management service’’ 

13 means a service that utilizes digital information to 

14 manage a customer’s energy use, to allow a cus15 tomer to respond to energy market information or 

16 circumstances, or to identify customer demand with 

17 particular energy supply. 

18 (6) DIGITAL MEDICAL SERVICE.—The term 

19 ‘‘digital medical service’’ means a health care, health 

20 information, or health education service that is deliv21 ered or transferred electronically to a practitioner, 

22 researcher, or patient. 

23 (7) DIGITAL CODE.—The term ‘‘digital code’’ 

24 means a code that conveys to a customer only the 

25 right to obtain a digital good or digital service. A 


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1 digital code may be obtained by any means, includ2 ing by email or by tangible means regardless of its 

3 designation as ‘‘song code’’, ‘‘video code’’, or ‘‘book 

4 code’’. The tax treatment of the sale or use of a dig5 ital code shall be the same as the tax treatment of 

6 the digital good or digital service to which the digital 

7 code relates. The sale of the digital code shall be 

8 considered the sale transaction for purposes of this 

9 Act. 

10 (8) DISCRIMINATORY TAX.—The term ‘‘dis11 criminatory tax’’ means any tax imposed by a State 

12 or local jurisdiction— 

13 (A) on or with respect to the sale or use 

14 of any digital good or digital service at a higher 

15 rate than is generally imposed on or with re16 spect to the sale or use of tangible personal 

17 property or of similar services that are not de18 livered or transferred electronically; 

19 (B) on or with respect to any seller of dig20 ital goods or digital services at a higher rate or 

21 by incorporating a broader tax base than is 

22 generally imposed on or with respect to sellers 

23 in transactions involving tangible personal prop24 erty or involving similar services that are not 

25 delivered or transferred electronically. This proVerDate Mar 15 2010 23:11 Jul 01, 2010 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H5649.IH H5649

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1 vision applies only to the extent that the higher 

2 rate or broader tax base is attributable to the 

3 fact that such person sells digital goods or dig4 ital services; or 

5 (C) that is required to be collected with re6 spect to the sale or use of digital goods or dig7 ital services by different sellers or under other 

8 terms that are disadvantageous to those applied 

9 in taxing the sale or use of tangible personal 

10 property or of similar services that are not de11 livered or transferred electronically. 

12 For purposes of this subsection, all taxes, tax rates, 

13 exemptions, deductions, credits, incentives, exclu14 sions, and other similar factors shall be taken into 

15 account in determining whether a tax is a discrimi16 natory tax. 

17 (9) GENERALLY IMPOSED.—A tax shall not be 

18 considered ‘‘generally imposed’’ if it is imposed only 

19 on specific services, specific industries or business 

20 segments, or specific types of property. 

21 (10) MULTIPLE TAX.—The term ‘‘multiple tax’’ 

22 means any tax with respect to which no credit is 

23 given for comparable taxes paid to other States or 

24 local jurisdictions on the same transaction. Taxes 

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1 risdictions shall not be considered to be multiple 

2 taxes by reason of being applied within the overlap3 ping area. 

4 (11) SALE AND PURCHASE.—The terms ‘‘sale’’ 

5 and ‘‘purchase’’, and all variations thereof, shall in6 clude ‘‘lease’’, ‘‘rent’’, and ‘‘license’’, and cor7 responding variations thereof. 

8 (12) SELLER.—The term ‘‘seller’’ means a per9 son making sales of tangible personal property, dig10 ital goods, digital services, or other services. 

11 (13) STATE OR LOCAL JURISDICTION.—The 

12 term ‘‘State or local jurisdiction’’ means any of the 

13 several States, the District of Columbia, any terri14 tory or possession of the United States, a political 

15 subdivision of any State, territory, or possession, or 

16 any governmental entity or person acting on behalf 

17 of such State, territory, possession, or subdivision 

18 and with the authority to assess, impose, levy, or 

19 collect taxes. 

20 (14) TAX.—The term ‘‘tax’’ means any charge 

21 imposed by any governmental entity for the purpose 

22 of generating revenues for governmental purposes, 

23 including any tax, charge, or fee levied by a taxing 

24 jurisdiction as a fixed charge for each customer or 

25 measured by gross amounts charged to customers, 


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1 regardless of whether such tax, charge, or fee is im2 posed on the vendor or customer and regardless of 

3 the terminology used to describe the tax, charge, or 

4 fee. The term ‘‘tax’’ does not include a tax on or 

5 measured by net income or an ad valorem tax. 

6 SEC. 7. FEDERAL JURISDICTION. 

7 Notwithstanding section 1341 of title 28 of the 

8 United States Code, and without regard to the amount 

9 in controversy or citizenship of the parties, a district court 

10 of the United States has jurisdiction, concurrent with 

11 other jurisdiction of courts of the United States and the 

12 States, to prevent a violation of this Act. 

13 SEC. 8. REGULATIONS. 

14 The Secretary of Commerce, in consultation with the 

15 Secretary of the Treasury, shall prescribe such regulations 

16 as may be necessary or appropriate to carry out the pur17 poses of this Act. In promulgating any regulations under 

18 this Act, the Secretary shall also seek the consultation of 

19 the Executive Director of the Governing Board of the 

20 Streamlined Sales Tax Project. 

21 SEC. 9. EFFECTIVE DATE; APPLICATION. 

22 (a) GENERAL RULE.—This Act shall take effect on 

23 the date of the enactment of this Act. 

24 (b) APPLICATION TO LIABILITIES AND PENDING

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1 crued and enforced before the date of enactment of this 

2 Act, or affects ongoing litigation relating to such taxes, 

3 except as provided in section 4(c) of this Act. 

4 SEC. 10. SENSE OF THE CONGRESS. 

5 It is the sense of the Congress that each State shall 

6 take reasonable steps necessary to prevent multiple tax7 ation of digital goods and digital services in situations 

8 where a foreign country has imposed a tax on such goods 

9 or services. 

Æ 


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