SB 1392: TPT; digital goods and services.

(View bill language and additional information)

Sponsor: Senator Farnsworth

Summary: This bill draws the line between pre-written software and "specified digital goods" (books, music, movies, etc.) that are "transferred electronically" meaning wholly downloaded or saved in some manner by the user and thus are considered taxable, versus the exact same products that are "remotely accessed" over the Internet ("in the cloud") without downloading a complete copy and thus are defined as exempt "specified digital services." The bill creates eight new exemptions for transactions long deemed taxable that are currently producing State and local revenues. Under the bill, in all cases where a transaction is deemed taxable, it will now fall under the Retail classification, even if the true nature of that transaction is a rental or lease. This creates additional problems by switching a large portion of the taxability from TPT to Use tax. This removes the seller's "nexus" or direct liability to pay the tax. Also, Use tax does not apply in any county and is not universally imposed by all cities and towns, causing additional direct local revenue losses. This bill takes revenues out of the Retail and TPP Rental classifications that go into the shared revenue distribution base. Those revenues are moved to Use tax which is not shared with counties, cities and towns.

League Position: OPPOSE

Updates

2/7/2018: House Bill (HB) 2461 passed out of House Local and International Affairs by a vote of 4-2. The bill now proceeds to the Rules Committee.