Christine Kim (Utah; Google Scholar) presents Taxing Digital Platforms (with Darien Shanske (UC-Davis; Google Scholar)) at Duke at this time as a part of its Tax Coverage Seminar hosted by Lawrence Zelenak:
Tax techniques have been struggling to adapt to the digitalization of the economic system. On the heart of the struggles is taxing digital platforms, resembling Google or Fb. These immensely worthwhile corporations have a enterprise mannequin that offers away “free” companies, resembling looking out the online. The service is just not actually free; it’s paid for by having the customers watch adverts and tender information. Conventional tax techniques will not be designed to tax such barter transactions, leaving a niche in taxation.
One response, pioneered in Europe, has been the creation of an entirely new tax to focus on digital platforms: The Digital Companies Tax (DST). Although controversial, ten states have entertained imposing a DST, and Maryland truly did so. Maryland’s tax was instantly challenged, with the strongest argument in opposition to the tax being that it’s preempted by the Web Tax Freedom Act. There may be appreciable consensus that Maryland’s tax is in deep trouble. We contend that this consensus is mistaken and that states mustn’t abandon a promising resolution to a set of urgent issues.
A DST is a tax on consumption from the barter facet of platforms that isn’t presently taxed. With this coverage objective in thoughts, the principle authorized objections to DSTs seem fairly weak as a result of these claims depend on the notion that the tax is discriminatory in opposition to web exercise. In actual fact, there isn’t any discrimination; DSTs are only a completely different tax used to seize untaxed digital buy in response to completely different enterprise fashions. We additional provide different normative arguments for DSTs, together with as a way of taxing digital platforms that take pleasure in supranormal returns whereas producing social hurt. Lastly, we reply to coverage objections as to potential tax pyramiding, regressive tax incidence, administrative difficulties, and using gross sales tax and company earnings tax.