Digital Goods and Services Tax Fairness Resolution

Policy Status

  • Type: Model Policy
  • Status: Final
  • Date Introduced: December 4, 2025
  • Date Finalized: January 6, 2026
  • Date Amended: January 6, 2026

Task Forces

  • Tax and Fiscal Policy
  • Communications and Technology

    • Tags

  • SNPS 2025

    • Summary

    State lawmakers are increasingly aware of the tremendous promise of a 21st century digital economy. In search of sustainable sources of revenue, states have begun to aggressively tax transactions involving digital goods and services, whether under a general sales and use tax, a gross receipts tax, or other transaction- tax. Since 2007, nearly all state legislatures considered bills intending to tax some aspects of digital commerce. Currently, 26 states and the District of Columbia have enacted statutes taxing some form of digital goods or services, while at least nine other states (and localities in Illinois and California) tax digital goods or services through administrative guidance. Thus far, only North Dakota and Virginia have enacted laws specifically exempting digital goods and services from taxation. Federal, state and local governments should coordinate with relevant stakeholders to develop sound state and local tax policies that ultimately benefit consumers of digital goods and services. In so doing, these policies will encourage broadband investment in all regions of all states, thereby promoting affordable broadband access, ensuring fairness in taxation of digital commerce, and facilitating the development of sustainable state tax systems with minimal distortions. This resolution signals support for a consistent, nondiscriminatory, and legislatively-driven tax framework that provides greater clarity and certainty with respect to the sale of digital goods and services, and also supports the principle that, to avoid multiple taxation, any tax on digital goods and services should be sourced to the state and local jurisdiction whose territorial limits encompass the customer's tax address.
    Draft

    Digital Goods and Services Tax Fairness Resolution

    WHEREAS, digital goods and services include, but are not limited to: downloaded, streaming, or remotely-accessed consumer content, such as music, video; books, software, and video games; cloud-based services; and certain business-to-business products provided or accessed over the Internet; and

    WHEREAS, states define “digital products” or similar term, which includes a variety of goods and services electronically delivered or accessed in diverse – and sometimes arbitrary – manners, if at all, resulting in inconsistent tax treatment, excessive taxation, administrative and compliance difficulties and the additional threat of sweeping in a variety of electronically delivered or accessed services that would not be taxed if delivered by other means, thereby creating multiple or discriminatory taxes on electronic commerce in violation of the federal Internet Tax Freedom Act (47 U.S.C. § 151, note); and

    WHEREAS, most states have considered legislation that specifically taxes electronically delivered or accessed products, including under their sales taxes, while other states tax the same products under telecommunications tax statutes as tangible personal property, or under entirely new taxes, thereby creating compliance difficulties as well as potentially excessive and discriminatory tax rates; and

    WHEREAS, tax imposition decisions regarding digital products should be made by legislators, and not through administrative rulings;

    WHEREAS, some tax proposals considered by legislators nonetheless raise serious U.S. Constitutional issues under the Commerce Clause, Due Process Clause, and First Amendment, or other federal law such as the Internet Tax Freedom Act

    WHEREAS, states have acknowledged the importance of broadband investment, the tremendous economic growth, entrepreneurial and employment opportunities made available to the citizenry by the availability of broadband and resultant expansion of economic vitality through the provision of goods and services over the Internet, especially since the U.S. Supreme Court’s South Dakota v. Wayfair decision in 2018 that authorized states to collect sales or use tax on remote sales under certain conditions; and

    WHEREAS, existing state laws governing sales and use, gross receipts and other transaction taxes are outdated and ill-equipped for today’s international digital ecosystem that operates over global communications networks, impeding broadband investment and adoption; and

    WHEREAS, digital products can be accessed and downloaded in a mobile environment with substantial risk that, without a national governing framework, multiple states and localities will claim they have authority to tax the same digital transaction; and

    WHEREAS, cloud-based services cover a broad range of services and new employment opportunities, any taxes placed on cloud-based services should provide clear and consistent rules to govern bundled transactions and any tax decisions should be based on the service rendered and not the type of provider;

    WHEREAS, a consistent framework for taxation is needed that will not impede electronic commerce and the provision of digital products by preventing multiple taxation, and providing greater certainty and simplicity; and

    WHEREAS, transactions involving electronically delivered or accessed, products and services should not be subject to discriminatory taxes, such as those imposed at a higher rate or under a broader base than taxes generally imposed on transactions involving tangible personal property or “offline” service; and

    WHEREAS, state legislatures should preserve their inherent authority to tax or exempt transactions involving electronically delivered or accessed products through the legislative process, under a fair tax regime, while ensuring that their states can participate in the 21st century digital economy; and

    WHEREAS, sound state and local tax policies for digital products will provide clarity and certainty for consumers, for state and local governments and for businesses that are asked to collect taxes on behalf of states and localities; and

    WHEREAS, if a state taxes digital goods and/or services, to avoid tax pyramiding, the state should expand its sale-for-resale and component part exemptions to cover digital goods and services products; and

    WHEREAS, transactions involving digital products provide a specific example of a limited situation where Congress can exercise its Commerce Clause authority to provide a national framework.

    NOW THEREFORE BE IT RESOLVED, the [LEGISLATIVE BODY] supports congressional authority to “regulate commerce among the several states” through passage of a federal-state framework that will ensure (1) consumers of new, innovative forms of commerce are not subject to multiple or discriminatory taxes, consistent with the Internet Tax Freedom Act, imposed under inconsistent state and local tax laws and (2) the authority of states is clarified to enable states to establish their own sustainable sources of revenue.