On June 17, 2021, the Standing Subcommittee of the Multistate Tax Commission’s (“MTC”) Uniformity Committee discussed a potential new project recommendation for the Uniformity Committee. During the meeting, MTC staff presented a draft memo outlining the pros and cons of creating a uniform model statute for the taxation of digital products. Ultimately, however, the Committee voted to recommend a survey of the taxation of digital products in the form of a white paper rather than a uniform law.
The scope of the proposed project is fairly broad and will survey states on a number of issues including:
- How the state defines and describes a “digital product” and other applicable terms,
- What specific types of digital products the state currently taxes,
- How the state addresses a bundled transaction, and
- How the state sources digital products, particularly where digital products have multiple points of use.
Citing its prior work on the market based sourcing regulations for income tax purposes, MTC staff asserted the MTC was particularly well suited to provide important thought leadership on sourcing of digital products. The Committee did, however, recognize the Streamlined Sales States Governing Board’s (“SSTGB”) long history of working on these issues, and MTC Staff committed to working closely with the SSTGB as it develops the white paper. Importantly, both MTC and SSTGB staff recognized the importance of including the business community in the development of the white paper.
The Committee also voted to narrow the scope of the proposed project and it will not consider the state taxation of cryptocurrency or non-fungible tokens as part of this project—both of which will be dealt with in a separate undertaking.
The development of the white paper will be an ongoing effort, and Eversheds Sutherland attorneys plan to participate in the development of the white paper and provide timely updates.