FCC Broadband Plan: Commission Wants Federal Approach To Taxing Digital Goods, Services

Recommends establishing "national framework" for taxing digital goods and services

The FCC wants the federal government to look into establishing a "national framework" for taxing digital goods and services.

That was one of the recommendations in the national broadband plan, a copy of which was made available to B&C March 15.

According to the commission, one of the impediments to increasing the benefits of broadband, and in particular e-commerce, is the "current patchwork" of state and local laws and regulations on taxes of services like ringtones and digital music.

It says that patchwork quilt of requirements is no comforter to entrepreneurs, who may lack the resources to "understand and comply" with the various tax regimes.

"Recognizing that state and local governments pursue varying approaches to raising tax revenues, a national framework for digital goods and services taxation would reduce uncertainty and remove one barrier to online entrepreneurship and investment," the FCC says.

The plan, being officially unveiled Tuesday, is described as a "compass" and a living document with likely course corrections as new data comes in. It is also a report to Congress, which will have some say in the timing and extent of the recommendations implementation, according to FCC officials.

One veteran ad industry executive said it was unclear whether he should be worried or pleased by the proposal. "The devil is in the details," he said, adding that the point about the balkanized tax situation is a good one, but adding that there can be problems with a unitary system as well. "You can be nibbled to death by piranhas," he said, adding that you can also be "squeezed to death by a python."