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Multistate Tax Commission Digital Tax Uniformity White Paper in Progress

Tax Development Aug 10, 2022

Multistate Tax Commission Digital Tax Uniformity White Paper in Progress

The Multistate Tax Commission (MTC) approved a work group’s plan to draft a white paper to compile definitions and limitations for taxation of digital products to promote uniformity among the states. The white paper will address suggestions for the states to uniformly identify digital products for imposing a digital sales tax. 

Issues under consideration include how the taxation of digital transactions might be restricted under the federal Internet Tax Freedom Act (ITFA) and where issues in the digital industry may arise. The ITFA bars states from taxing internet access or imposing discretionary taxes on electronic commerce. In addition to definitions of digital products, exemptions and sourcing rules also need clarification. How the products are monetized, such as whether they are being sold, leased, or licensed, as well as determining if the digital products are embedded with other products in the transaction will be addressed. 

The MTC received input from interested parties such as state tax administrators, tax practitioners, business representatives in the electronic commerce industry, and the Streamlined Sales Tax Governing Board, which is pursuing its own initiative on the subject. These stakeholders are concerned about key issues such as exemptions for business-to-business transactions and transactions involving foreign sellers. 

The next steps in the project should unfold with the draft white paper release in September. 


Brian Stromen

Mary Bernard

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