II 

114TH CONGRESS 

1ST SESSION S. 851 

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

goods and digital services. 

IN THE SENATE OF THE UNITED STATES 

MARCH 24, 2015 

Mr. THUNE (for himself, Mr. WYDEN, and Mr. HELLER) 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 2015’’. 

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

8 No State or local jurisdiction shall impose multiple 

9 or discriminatory taxes on the sale or use of a digital good 

10 or a digital service. 


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1 SEC. 3. SOURCING LIMITATION. 

2 Subject to section 6(a), taxes on the sale of a digital 

3 good or a digital service may only be imposed by a State 

4 or local jurisdiction whose territorial limits encompass the 

5 customer tax address. 

6 SEC. 4. CUSTOMER TAX ADDRESS. 

7 (a) SELLER OBLIGATION.— 

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

9 a seller shall be responsible for obtaining and main10 taining in the ordinary course of business the cus11 tomer tax address with respect to the sale of a dig12 ital good or a digital service, and shall be responsible 

13 for collecting and remitting the correct amount of 

14 tax for the State and local jurisdictions whose terri15 torial limits encompass the customer tax address if 

16 the State has the authority to require such collection 

17 and remittance by the seller. 

18 (2) CERTAIN TRANSACTIONS.—When a cus19 tomer tax address is not a business location of the 

20 seller under clause (i) of section 7(2)(A)— 

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

22 transaction, then a seller shall use reasonable 

23 efforts to obtain a customer tax address, as 

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

25 and (v) of section 7(2)(A), before resorting to 


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1 using a customer tax address as determined by 

2 clause (vi) of such section 7(2)(A); and 

3 (B) if the sale is not a separate and dis4 crete transaction, then a seller shall use reason5 able efforts to obtain a customer tax address, 

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

7 (iii), (iv), and (v) of section 7(2)(A), before re8 sorting to using a customer tax address as de9 termined by clause (vi) of such section 7(2)(A). 

10 (b) RELIANCE ON CUSTOMER-PROVIDED INFORMA11 TION.—A seller that relies in good faith on information 

12 provided by a customer to determine a customer tax ad13 dress shall not be held liable for any additional tax based 

14 on a different determination of that customer tax address 

15 by a State or local jurisdiction or court of competent juris16 diction, except if and until binding notice is given as pro17 vided in subsection (c). 

18 (c) ADDRESS CORRECTION.—If a State or local juris19 diction is authorized under State law to administer a tax, 

20 and the jurisdiction determines that the customer tax ad21 dress determined by a seller is not the customer tax ad22 dress that would have been determined under section 

23 7(2)(A) if the seller had the additional information pro24 vided by the State or local jurisdiction, then the jurisdic25 tion may give binding notice to the seller to correct the 


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1 customer tax address on a prospective basis, effective not 

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

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

4 jurisdiction, such local jurisdiction obtains the con5 sent of all affected local jurisdictions within the 

6 State before giving such notice of determination; and 

7 (2) before the State or local jurisdiction gives 

8 such notice of determination, the customer is given 

9 an opportunity to demonstrate in accordance with 

10 applicable State or local tax administrative proce11 dures that the address used is the customer tax ad12 dress. 

13 (d) COORDINATION WITH SOURCING OF MOBILE

14 TELECOMMUNICATIONS SERVICE.— 

15 (1) IN GENERAL.—If— 

16 (A) a digital good or a digital service is 

17 sold to a customer by a home service provider 

18 of mobile telecommunications service that is 

19 subject to being sourced under section 117 of 

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

21 a digital good or a digital service are billed to 

22 the customer by such a home service provider; 

23 and 

24 (B) the digital good or digital service is de25 livered, transferred, or provided electronically 


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1 by means of mobile telecommunications service 

2 that is deemed to be provided by such home 

3 service provider under section 117 of such title, 

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

5 seller of the digital good or digital service, may pre6 sume that the customer’s place of primary use for 

7 such mobile telecommunications service is the cus8 tomer tax address described in section 7(2)(B) with 

9 respect to the sale of such digital good or digital 

10 service. 

11 (2) DEFINITIONS.—For purposes of this sub12 section, the terms ‘‘home service provider’’, ‘‘mobile 

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

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

15 title 4, United States Code. 

16 (e) MULTIPLE LOCATIONS.— 

17 (1) IN GENERAL.—If a digital good or a digital 

18 service is sold to a customer and available for use 

19 by the customer in multiple locations simultaneously, 

20 the seller may determine the customer tax addresses 

21 using a reasonable and consistent method based on 

22 the addresses of use as provided by the customer 

23 and determined in agreement with the customer at 

24 the time of sale. 

25 (2) DIRECT CUSTOMER PAYMENT.— 


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1 (A) ESTABLISHMENT OF DIRECT PAYMENT

2 PROCEDURES.—Each State and local jurisdic3 tion shall provide reasonable procedures that 

4 permit the direct payment by a qualified cus5 tomer, as determined under procedures estab6 lished by the State or local jurisdiction, of taxes 

7 that are on the sale of digital goods and digital 

8 services to multiple locations of the customer 

9 and that would, absent such procedures, be re10 quired or permitted by law to be collected from 

11 the customer by the seller. 

12 (B) EFFECT OF CUSTOMER COMPLIANCE

13 WITH DIRECT PAYMENT PROCEDURES.—When 

14 a qualified customer elects to pay tax directly 

15 under the procedures established under sub16 paragraph (A), the seller shall— 

17 (i) have no obligation to obtain the 

18 multiple customer tax addresses under sub19 section (a); and 

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

21 the seller follows the State and local proce22 dures and maintains appropriate docu23 mentation in its books and records. 


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1 SEC. 5. TREATMENT OF BUNDLED TRANSACTIONS AND DIG2 ITAL CODES. 

3 (a) BUNDLED TRANSACTION.—If a charge for a dis4 tinct and identifiable digital good or a digital service is 

5 aggregated with and not separately stated from one or 

6 more charges for other distinct and identifiable goods or 

7 services, which may include other digital goods or digital 

8 services, and any part of the aggregation is subject to tax9 ation, then the entire aggregation may be subject to tax10 ation, except to the extent that the seller can identify, by 

11 reasonable and verifiable standards, one or more charges 

12 for the nontaxable goods or services from its books and 

13 records kept in the ordinary course of business. 

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

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

16 of the sale of the digital good or digital service to which 

17 the digital code relates. 

18 (c) RULE OF CONSTRUCTION.—The sale of a digital 

19 code shall be considered the sale transaction for purposes 

20 of this Act. 

21 SEC. 6. NO INFERENCE. 

22 (a) CUSTOMER LIABILITY.—Subject to the prohibi23 tion provided in section 2, nothing in this Act modifies, 

24 impairs, supersedes, or authorizes the modification, im25 pairment, or supersession of any law allowing a State or 

26 local jurisdiction to impose tax on and collect tax directly 


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1 from a customer based upon use of a digital good or digital 

2 service in such State. 

3 (b) NON-TAX MATTERS.—This Act shall not be con4 strued to apply in, or to affect, any non-tax regulatory 

5 matter or other context. 

6 (c) STATE TAX MATTERS.—The definitions con7 tained in this Act are intended to be used with respect 

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

9 a State or local jurisdiction from adopting different no10 menclature to enforce the provisions set forth in this Act. 

11 SEC. 7. DEFINITIONS. 

12 In this Act, the following definitions shall apply: 

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

14 a person that purchases a digital good, digital serv15 ice, or digital code. 

16 (2) CUSTOMER TAX ADDRESS.— 

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

18 tax address’’ means— 

19 (i) with respect to the sale of a digital 

20 good or digital service that is received by 

21 the customer at a business location of the 

22 seller, such business location; 

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

24 the primary use location of the digital good 


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1 or digital service is known by the seller, 

2 such location; 

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

4 applies, and if the location where the dig5 ital good or digital service is received by 

6 the customer, or by a donee of the cus7 tomer that is identified by such customer, 

8 is known to the seller and maintained in 

9 the ordinary course of the seller’s business, 

10 such location; 

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

12 applies, the location indicated by an ad13 dress for the customer that is available 

14 from the business records of the seller that 

15 are maintained in the ordinary course of 

16 the seller’s business, when use of the ad17 dress does not constitute bad faith; 

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

19 applies, the location indicated by an ad20 dress for the customer obtained during the 

21 consummation of the sale, including the 

22 address of a customer’s payment instru23 ment, when use of this address does not 

24 constitute bad faith; or 


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

2 applies, including the circumstance in 

3 which the seller is without sufficient infor4 mation to apply such paragraphs, the loca5 tion from which the digital good was first 

6 available for transmission by the seller 

7 (disregarding for these purposes any loca8 tion that merely provides for the digital 

9 transfer of the product sold), or from 

10 which the digital service was provided by 

11 the seller. 

12 (B) EXCLUSION.—For purposes of this 

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

14 the location of a server, machine, or device, in15 cluding an intermediary server, that is used 

16 simply for routing or storage. 

17 (3) DELIVERED OR TRANSFERRED ELECTRONI18 CALLY; PROVIDED ELECTRONICALLY.—The term 

19 ‘‘delivered or transferred electronically’’ means the 

20 delivery or transfer by means other than tangible 

21 storage media, and the term ‘‘provided electroni22 cally’’ means the provision remotely via electronic 

23 means. 

24 (4) DIGITAL CODE.—The term ‘‘digital code’’ 

25 means a code that conveys only the right to obtain 


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1 a digital good or digital service without making fur2 ther payment. 

3 (5) DIGITAL GOOD.—The term ‘‘digital good’’ 

4 means any software or other good that is delivered 

5 or transferred electronically, including sounds, im6 ages, data, facts, or combinations thereof, main7 tained in digital format, where such good is the true 

8 object of the transaction, rather than the activity or 

9 service performed to create such good, and includes, 

10 as an incidental component, charges for the delivery 

11 or transfer of the digital good. 

12 (6) DIGITAL SERVICE.— 

13 (A) IN GENERAL.—The term ‘‘digital serv14 ice’’ means any service that is provided elec15 tronically, including the provision of remote ac16 cess to or use of a digital good, and includes, 

17 as an incidental component, charges for the 

18 electronic provision of the digital service to the 

19 customer. 

20 (B) EXCEPTIONS.—The term ‘‘digital serv21 ice’’ does not include a service that is predomi22 nantly attributable to the direct, contempora23 neous expenditure of live human effort, skill, or 

24 expertise, a telecommunications service, an an25 cillary service, Internet access service, audio or 


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1 video programming service, or a hotel inter2 mediary service. 

3 (C) CLARIFYING DEFINITIONS.—For pur4 poses of subparagraph (B)— 

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

6 a service that is associated with or inci7 dental to the provision of telecommuni8 cations services, including, but not limited 

9 to, detailed telecommunications billing, di10 rectory assistance, vertical service, and 

11 voice mail services; 

12 (ii) the term ‘‘audio or video program13 ming service’’— 

14 (I) means programming provided 

15 by, or generally considered com16 parable to programming provided by, 

17 a radio or television broadcast station; 

18 and 

19 (II) does not include interactive 

20 on-demand services, as defined in 

21 paragraph (12) of section 602 of the 

22 Communications Act of 1934 (47 

23 U.S.C. 522(12)), pay-per-view serv24 ices, or services generally considered 

25 comparable to such services regardless 


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1 of the technology used to provide such 

2 services; 

3 (iii) the term ‘‘hotel intermediary 

4 service’’— 

5 (I) means a service provided by a 

6 person that facilitates the sale, use, or 

7 possession of a hotel room or other 

8 transient accommodation to the gen9 eral public; and 

10 (II) does not include the pur11 chase of a digital service by a person 

12 who provides a hotel intermediary 

13 service or by a person who owns, oper14 ates, or manages hotel rooms or other 

15 transient accommodations; 

16 (iv) the term ‘‘Internet access service’’ 

17 means a service that enables users to con18 nect to the Internet, as defined in the 

19 Internet Tax Freedom Act (47 U.S.C. 151 

20 note), to access content, information, or 

21 other services offered over the Internet; 

22 and 

23 (v) the term ‘‘telecommunications 

24 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 voice over Internet pro14 tocol service; and 

15 (III) does not include data proc16 essing and information services that 

17 allow data to be generated, acquired, 

18 stored, processed, or retrieved and de19 livered by an electronic transmission 

20 to a purchaser where such purchaser’s 

21 primary purpose for the underlying 

22 transaction is the processed data or 

23 information. 

24 (7) DISCRIMINATORY TAX.—The term ‘‘dis25 criminatory tax’’ means any tax imposed by a State 


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1 or local jurisdiction on digital goods or digital serv2 ices that— 

3 (A) is not generally imposed and legally 

4 collectible by such State or local jurisdiction on 

5 transactions involving similar property, goods, 

6 or services accomplished through other means; 

7 (B) is not generally imposed and legally 

8 collectible at the same or higher rate by such 

9 State or local jurisdiction on transactions in10 volving similar property, goods, or services ac11 complished through other means; 

12 (C) imposes an obligation to collect or pay 

13 the tax on a person, other than the seller, than 

14 the State or local jurisdiction would impose in 

15 the case of transactions involving similar prop16 erty, goods, or services accomplished through 

17 other means; 

18 (D) establishes a classification of digital 

19 services or digital goods providers for purposes 

20 of establishing a higher tax rate to be imposed 

21 on such providers than the tax rate generally 

22 applied to providers of similar property, goods, 

23 or services accomplished through other means; 

24 or 


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1 (E) does not provide a resale and compo2 nent part exemption for the purchase of digital 

3 goods or digital services in a manner consistent 

4 with the State’s resale and component part ex5 emption applicable to the purchase of similar 

6 property, goods, or services accomplished 

7 through other means. 

8 (8) MULTIPLE TAX.— 

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

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

11 State, one or more of that State’s local jurisdic12 tions, or both on the same or essentially the 

13 same digital goods and digital services that is 

14 also subject to tax imposed by another State, 

15 one or more local jurisdictions in such other 

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

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

18 taxes paid in other jurisdictions. 

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

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

21 and one or more political subdivisions thereof 

22 on the same digital goods and digital services or 

23 a tax on persons engaged in selling digital 

24 goods and digital services which also may have 

25 been subject to a sales or use tax thereon. 


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1 (9) PRIMARY USE LOCATION.— 

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

3 location’’ means a street address representative 

4 of where the customer’s use of a digital good or 

5 digital service will primarily occur, which shall 

6 be the residential street address or a business 

7 street address of the actual end user of the dig8 ital good or digital service, including, if applica9 ble, the address of a donee of the customer that 

10 is designated by the customer. 

11 (B) CUSTOMERS THAT ARE NOT INDIVID12 UALS.—For the purpose of subparagraph (A), if 

13 the customer is not an individual, the primary 

14 use location is determined by the location of the 

15 customer’s employees or equipment (machine or 

16 device) that make use of the digital good or dig17 ital service, but does not include the location of 

18 a person who uses the digital good or digital 

19 service as the purchaser of a separate good or 

20 service from the customer. 

21 (10) SALE AND PURCHASE.—The terms ‘‘sale’’ 

22 and ‘‘purchase’’, and all variations thereof, shall in23 clude the provision, lease, rent, license, and cor24 responding variations thereof. 

25 (11) SELLER.— 


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

2 means a person making sales of digital goods or 

3 digital services. 

4 (B) EXCEPTIONS.—A person that provides 

5 billing service or electronic delivery or transport 

6 service on behalf of another unrelated or unaf7 filiated person, with respect to the other per8 son’s sale of a digital good or digital service, 

9 shall not be treated as a seller of that digital 

10 good or digital service. 

11 (C) RULE OF CONSTRUCTION.—Nothing in 

12 this paragraph shall preclude the person pro13 viding the billing service or electronic delivery 

14 or transport service from entering into a con15 tract with the seller to assume the tax collection 

16 and remittance responsibilities of the seller. 

17 (12) SEPARATE AND DISCRETE TRANS18 ACTION.—The term ‘‘separate and discrete trans19 action’’ means a sale of a digital good, digital code, 

20 or a digital service sold in a single transaction which 

21 does not involve any additional charges or continued 

22 payment in order to maintain possession of the dig23 ital good or access to the digital service. 

24 (13) STATE OR LOCAL JURISDICTION.—The 

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


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1 several States, the District of Columbia, any terri2 tory or possession of the United States, a political 

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

4 any governmental entity or person acting on behalf 

5 of such State, territory, possession, or subdivision 

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

7 collect taxes. 

8 (14) TAX.— 

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

10 any charge imposed by any State or local juris11 diction for the purpose of generating revenues 

12 for governmental purposes, including any tax, 

13 charge, or fee levied as a fixed charge or meas14 ured by gross amounts charged, regardless of 

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

16 the seller or the customer and regardless of the 

17 terminology used to describe the tax, charge, or 

18 fee. 

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

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

21 measured by capital, a tax on or measured by 

22 net income, apportioned gross income, appor23 tioned revenue, apportioned taxable margin, or 

24 apportioned gross receipts, or a State or local 

25 jurisdiction business and occupation tax imVerDate Sep 11 2014 03:13 Mar 31, 2015 Jkt 049200 PO 00000 Frm 00019 Fmt 6652 Sfmt 6201 E:\BILLS\S851.IS S851

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1 posed on a broad range of business activity in 

2 a State that enacted a State tax on gross re3 ceipts after January 1, 1932, and before Janu4 ary 1, 1936. 

5 SEC. 8. EFFECTIVE DATE; APPLICATION. 

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

7 days after the date of enactment of this Act. 

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

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

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

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

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

13 (c) APPLICATION TO LIABILITIES AND PENDING

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

15 accrued and enforced before the effective date of this Act 

16 or affect ongoing litigation relating to such taxes. 

17 SEC. 9. SAVINGS PROVISION. 

18 If any provision or part of this Act is held to be in19 valid or unenforceable by a court of competent jurisdiction 

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

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

22 unless such holding substantially limits or impairs the es23 sential elements of this Act, in which case this Act shall 

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


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

2 subject to appeal. 

Æ 


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