Statement of Principles on State Taxation of Digital Advertising and Data Usage
Statement of Principles
Opposition to Discriminatory Tax Treatment
Well-crafted tax policy should not favor one form of commerce over another. Policies that target digital goods and services for taxation that their traditional counterparts do not face arbitrarily favor the latter, creating a competitive imbalance. Tax policy should be carefully structured to raise necessary revenue to support legitimate functions of government, not to address other policy concerns. When winners and losers in the market are decided by anything other than open competition, it is consumers who suffer.
Opposition to Multiple Taxation
The American Legislative Exchange Council has a long history of opposition to policies that result in multiple taxation. Should states impose new digital advertising or data taxes, businesses would face an overlapping system of multiple taxation on the same income.
Recognition of Legal Barriers to Taxation of Digital Advertising and Data Usage
Discriminatory taxation of digital goods and services potentially violates the U.S. Constitution, federal statute, international agreements, and state constitutions. Any such tax puts a state at risk of expensive litigation in state and federal courts.
Recognition of Administrative Burdens of Digital Advertising and Data Taxes
The complexity of the digital economy means that any attempt to impose new layers of taxation on top of existing business income taxes will entail enormous administrative difficulty. Small businesses in particular would be harmed by a system that requires expensive attorneys and accountants to decipher, putting them at a competitive disadvantage compared to large, established companies.
Recognition of the Potential Benefits Offered By the Digital Economy
Discriminatory tax policies targeting digital advertising and data usage threaten to hamstring the growth of the 21st century economy by preventing consumers, workers, and businesses from fully realizing their potential. Internet-based services have empowered millions of Americans, and consumers are best-served by a climate of low taxes and light-touch regulation that applies to all types of businesses.