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A Tax Issue That’s Up in the Air

A Tax Issue That’s Up in the Air

In today’s world, it’s not uncommon that we find ourselves on an airplane – whether it’s for a business trip, a visit to family or friends, or a long-awaited vacation, flying is just another way we stay connected.

Everyone has a travel routine. Some people like to get to the airport with plenty of time to relax, while others know their home airport well enough to know how close they can cut it without missing their flight.  I find myself in both camps – I like to get to the airport with time to spare, but sometimes a busy schedule doesn’t allow for it.

But once we’re all on board the plane, we find ourselves in a similar place: everyone is looking to get back online.

Looking around a full flight of maybe 150 people, there are a handful of people with printed documents or paper books.  Guess what the rest of us are doing? We’re on laptops, tablets, kindles, and smartphones, waiting to get on the in-flight wifi at 10,000 feet.  Most people have probably downloaded music (David Bowie’s last album, perhaps), or are watching a movie, playing a game, or reading an e-book.  It’s convenient to have these digital goods right at our fingertips.

What very few people know is that the tax structures surrounding these electronic purchases is quite literally “up in the air.”  Without the structure in place, we’re leaving the door open for digital purchases to potentially be taxed multiple times by:

  • The state where the purchase was made – think about that when you’re in Michigan, buying a movie for your flight home to Virginia
  • The state where the bill is ultimately sent – perhaps you paid taxes in Michigan, but Virginia can tax you, too
  • The location where the server is located – yes, this means wherever the cloud server is physically based

 

The Digital Goods and Services Tax Fairness Act of 2015 (also known as H.R. 1643 and S. 851), awaiting action in Congress, would fix this issue by giving the authority to our home state to tax electronic purchases, if they choose.  This would safely land us in a fair place on tax rules for digital goods – it’s time for Congress to enact this simple, straightforward legislation.  Tell your Congressman and Senator today.

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