HOUSE BILL WOULD BAN TAXES ON DIGITAL GOODS

By: Brooks Boliek Measure Would Cover Online Delivery Only


WASHINGTON -- (The Hollywood Reporter) State and local governments would be
banned from taxing movies, music, and other entertainment
products delivered online under a House bill introduced late last
week.

Legislation sponsored by Rep. Cliff Stearns, R-Fla., would
prevent the imposition of a tax as long as the product was
digitally delivered. While Stearns' measure would exempt a
digital movie, song, or piece of software bought and delivered
via the Internet; a videotape, or CD ordered via the Internet and
delivered in the mail could be subject to a state or local tax.

"It is not in the public interest to have thousands of disparate
and inconsistent regulations, including taxation, apply to
transactions in digital goods and digital services carried out
entirely online," Stearns said.

The nation's governors and some retailers have been agitating for
a tax on Internet-delivered services. They argue that it is
unfair for a store that is physically located in a state to be
taxed while the same goods delivered via the Internet escape
taxation. Most state and local governments are funded through the
collection of sales and property taxes.

Sterns contends that the value of the products traded is a small
fraction of the total value of products sold via the Internet.

Digital services and goods, such as e-books, software, and
downloadable entertainment and information, represent only 0.8%
of total sales online, he said.

"This bill captures a very small sliver of e-commerce," Stearns
said. "The number and value of these online transactions are
extremely small."

While that might be so, more entertainment products are
forthcoming as copyright and security issues get worked out. Most
entertainment companies expect online-delivered content to become
a cornerstone of their business.

Stearns said he hopes that preventing the imposition of a tax on
digital products would make that happen faster.

"It is important to inject jurisdictional certainty with respect
to commercial transaction in digital goods and services," Stearns
said. "Having 50-plus separate -- and, at times, incongruent --
regulations governing interstate commercial transactions poses a
substantial burden to interstate commerce in general and to e-
commerce specifically."



Copyright 2001, Editor & Publisher.