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Our laws needed to be updated to let the economy grow

It’s not too difficult to predict what the President’s main focus will be at tomorrow’s State of the Union address — the economy. As the economy continues to takes small steps forward and Washington, DC looks for ways to continue to encourage economic growth – tax policy must likewise evolve, encouraging activities and establishing frameworks for decisions.

 

One part of the new economy that continues to evolve is the digital world. Sales of digital goods have skyrocketed. As a result, states are looking at the new economy and how best to address state taxation of digital goods transactions. Today, there is no concrete framework regarding the taxation of digital downloads, it is unclear as to exactly which entity has jurisdiction over those types purchases – consumers may get taxed where they hit a button, where they live, or where the digital merchant’s servers are located; or maybe 2 or 3 jurisdictions.

 

Duplicative taxes on digital products impedes the marketplace, adding more cost to the transaction. No one wins in that situation – whether it is the app designer, the consumer or the system used to buy the app. According to some estimates, there were over 50 billion digital purchases in 2011 alone. That number is expected to double by 2013. Considering these statistics, it seems to make little sense that the government would try to do anything to stifle growth and innovation in the digital goods industry.

 

Something needs to be done to fix the economy- that’s for sure.

 

The Digital Goods and Services Tax Fairness Act (DGSTA), a bipartisan piece of legislation which clearly identifies which state has the right to tax digital goods and prevents multiple jurisdictions from taxing the same transaction, is now being reviewed in Congress. The President should follow their lead and make this piece of legislation a priority in the upcoming year. America’s economy has the ability to grow and thrive in the digital world, but our laws must be updated as we hit buttons and receive digital goods on a minute by minute basis.

 

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