Taxing the Digital Economy

Stephen T. Black, Taxing the Digital Economy, 25 Wake Forest J. Bus. & Intell. Prop. L. 1 (2024).

The digital economy, fueled by sales of streaming movies, music, podcasts, and video games, captures the attention of every nation in the world. Who wouldn’t want a piece of a multitrillion-dollar industry that accounts for more than 15% of global GDP?  

Every nation wants to tax digital transactions, but do they get to? Gigavast, a hypothetical online retailer whose headquarters are in State A, sells a $100 widget to Bob, a resident of State B. Is the $100 revenue properly taxed in State A or in State B?

In a physical, bricks and mortar world, we could ask where the sale took place, and assign that place as the situs for tax purposes. For example, if Bob walks into the Gigavast store located at its headquarters, then the sale occurs in State A and the right to tax also exists in A. On the other hand, if the widget is shipping to Bob’s home in State B, the tax should be paid to B. However, the issue gets thornier when the widget is intangible.

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