Department of Revenue says digital taxation bill will cost Arizona millions

By Jeremy Duda | Arizona Mirror

The Arizona Department of Revenue determined that legislation to exempt certain digital goods and services from sales taxes could cost the state at least $33 million in 2020, an analysis that could help the bill’s opponents keep it from moving forward in the Senate.

Currently, the state collects sales taxes on a host of digital services under a policy that some critics say is vague and unclear about which goods and services should be subject to taxation. Senate Bill 1460 would explicitly outline which of those digital goods can be taxed.

The legislation, sponsored by Sen. Michelle Ugenti-Rita, R-Scottsdale, would apply sales taxes to downloaded software; digital books, movies and music; and streaming services such as Netflix and Amazon Prime.

A handful of services that the Department of Revenue currently taxes would be exempted under the bill. Exempted items would include things like cloud computing and storage, and services that provide users with access to software or other programs, but don’t give them exclusive control of the programs, such as the accounting program Quickbooks Online or the web conference program Citrix GoToMeeting. Such programs are often known by the acronym SaaS, which stands for “software-as-a-service.”

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