It is Critical to Remember to Protect Digital Consumers During National Consumer Protection Week

Many people may not know it but this week (March 4 through March 10) is National Consumer Protection Week (NCPW).  According to the official website, NCPW   “is a coordinated campaign that encourages consumers nationwide to take full advantage of their consumer rights and make better-informed decisions.”  There is no better to protect consumers than to safeguard them from the deluge of new and confusing taxes that confront consumers every single day.

With many states mandated to balance their budgets and many state legislatures reluctant to cut wasteful government spending, states and localities have recently begun going after the popular and fast-growing digital goods industry (“apps”, song and movie downloads, and eBooks) as a source of new tax-revenue for their coffers.  States have core responsibilities to fund such as education, public safety (firefighters and police) and transportation, but states risk damaging the growing digital industry with confusing and excessive taxation of digital goods to pay for those services.  Before any new taxes are proposed states must first cut wasteful spending to ensure that essential government functions are funded.

Another problem is that states have not been proposing nor implementing their digital tax regimes in any sort of uniform or coordinated fashion. This creates the very real and troubling prospect of consumers being taxed multiple times for the same purchase, or inadvertently breaking tax laws due to the sheer complexity of the system.

If left unchecked, states across the nation could continue to implement a confusing assortment of digital tax laws, creating a situation where a taxpayer, who bought an Angry Birds app during a trip to Maryland, from an Indiana-purchased iPhone, using Florida-based servers, could face tax liabilities in all three states.  This would make for some very Angry Taxpayers.

Fortunately, there is a solution to this problem. In a bipartisan moment of commonsense, several members of the House of Representatives and Senate recently introduced the Digital Goods and Services Tax Fairness Act of 2011 (H.R. 1860 / S. 971). This bill would provide consumers with protection from an onslaught of multiple duplicative, confusing, and burdensome taxes on their digital purchases. Not only does this help consumers, but it helps remove the roadblocks currently being set up right in front of a thriving industry that has created nearly half a million jobs during one of the most severe economic environments this nation has ever faced.

If Congress and the federal government are truly serious and sincere about consumer protection, passage of the Digital Goods Services Tax Fairness Act would go a long way in accomplishing that goal.  Passage of this legislation would also prevent states from treating taxation of digital goods like the Wild West where anything goes.