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Washington’s Digital Products Law A Legislator’s Perspective

Washington’s Digital Products Law A Legislator’s Perspective. Representative Ross Hunter. How Did This Begin. WA addressed the larger issue of taxing digital transactions (not just cloud computing) Washington and taxpayers disagreed about the taxability of digital goods.

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Washington’s Digital Products Law A Legislator’s Perspective

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  1. Washington’s Digital Products LawA Legislator’s Perspective Representative Ross Hunter

  2. How Did This Begin • WA addressed the larger issue of taxing digital transactions (not just cloud computing) • Washington and taxpayers disagreed about the taxability of digital goods. • Taxpayer sought an exemption for standard financial information delivered electronically in 2007. • Raised the question of whether other digital information is subject to tax.

  3. Initial Investigation • The DOR was directed, with the assistance of a committee, to study the taxation of digital products. • Committee included legislators, as well as industry, academic, and government reps. • Committee directed to review: • Current treatment of digital goods in WA, other states, and countries. • Treatment under SSUTA

  4. General Challenges Identified • Antiquated laws: uncertainty in application of law • Does existing law cover digital goods? • Erosion of tax base as items move to digital • E.g. books, music and video moving into digital world • SSUTA requirements for taxing digital products • Cannot tax digital goods as TPP

  5. Guiding Principles 1 • Simplicity • Must be administrable • Conformity (with SSUTA). • Create specific categories • Technology Neutral • industry, delivery method, etc. • E.g. must treat online and offline transactions the same

  6. Guiding Principles 2 • Revenue Impact • Up, down or neutral? • Competitiveness • Compare other states and countries • Long term solution • Solution must be durable • Address evolution away from tangible equivalents

  7. Legislative Alternatives • Don’t tax digital products • Simplicity but lost revenue • Advantage for online products • Tax digital products • Specific approach • Repeated legislative amendments? • General approach • Avoid repeated amendments • Follow tradition of taxing all TPP with taxing all digital products unless exempted.

  8. Where are We Now? • The initial digital products legislation was enacted in 2009 • We knew there would be more. • Clarifying legislation was passed in 2010 • We now have a working framework for taxing digital products

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