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UPDATE: Proposed Bill Addresses Taxation of Downloaded Video

12 Jul, 2001 By: John Jimenez

As America delves deeper into the digital age, traditional video retailers are keeping a close eye on new forms of content delivery, particularly the Internet.

Congressman Cliff Stearns (R-Fla.) acknowledged the new medium with a bill introduced June 28 in the House of Representatives that would exempt downloaded video from state and local taxes.

The bill, HR 2421, dubbed the Jurisdictional Certainty Over Digital Commerce Act, addresses all forms of content delivery that are totally online from order to delivery; it does not pertain to packaged media ordered online.

“State regulation of digital commercial transactions in digital goods and digital services will seriouslyimpede the growth of such transactions,” according to the bill.

That would be fine with most traditional retailers, but the bill does not exempt downloaded video from any form of taxation. What it does is address the issue of jurisdiction.

Stearns believes such content delivery is interstate commerce and therefore should be under federal jurisdiction. Though the bill doesn’t specifically call for federal taxation, it would be a viable option under the proposed conditions.

“It is important to inject jurisdictional certainty with respect to commercial transaction in digital goods and services. Having 50-plus separate and at times incongruent regulations governing interstate commercial transactions poses a substantial burden to interstate commerce in general, and to e-commerce specifically,” stated Stearns.

Sean Bersell, v.p. of government affairs and member communications at the Video Software Dealers Association (VSDA), says though the issue of jurisdiction is ultimately in the hands of the courts, “[Stearns’] interpretation doesn’t seem unreasonable.”

Bersell says there is not consensus within the VSDA over the taxation of e-commerce and as to thisparticular bill, the VSDA is “looking at it closely but we haven’t taken a position on it yet.”

Bersell says it is important that there be universal regulation of e-commerce, whether that means federal regulation or 50 uniform state laws.

Any legislation, Bersell says, must also “maintain the historical rights of retailers to compete, upholdconsumer choice and protect customer privacy.”

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