The Wyoming House Revenue Committee heard testimony February 15 on HB 29, which would tax “specified digital products,” including music, movies and digital books.

Stephen Kranz testified that the bill would have a detrimental impact on Wyoming’s economy and its ability to attract high-technology businesses. 

The bill harms existing in-state businesses by subjecting them to a collection requirement that is not imposed on out-of-state companies.  HB 29 would only impose sales and use tax collection requirements on Wyoming companies selling to Wyoming customers.  Wyoming consumers will be incentivized to purchase digital products from companies located outside the state – and thus cannot be required to collect the state’s tax.  Thus, HB 29 would punish companies located here and reward companies located outside the state.  

The approach recommended by HB 29 has been rejected in other states.  Iowa specifically exempts from tax all sales “delivered to the purchaser digitally electronically, or utilizing cable, or by radio waves, microwaves, satellites, fiber optics.”  Iowa also enacted a special sales tax refund for businesses that establish new data centers within the state in an attempt to attract a significant data center investment by Google.  Subsequently, Google announced that it would build a $600 million data center in Council Bluffs, Iowa and create 200 local high-tech jobs. 

Several other states have rejected this kind of new tax because of the adverse impact it would have on both their in-state businesses and their ability to attract new business investment:

• North Dakota recently enacted legislation that would affirmatively exempt any item transferred electronically in order to lure digital businesses from states like Kentucky that are imposing tax on electronically delivered products and services. 

• In California, legislation was unable to garner sufficient support to make it out of the Assembly Revenue and Taxation Committee after California businesses expressed concern that their products would be subject to tax while the products of out-of-state companies would not.

• The New York Governor removed a proposed tax on digital products from his 2009-2010 budget bills after New Yorkers opposed the new tax.

The competition among states trying to attract technology business investment is intense.  While some states are sending a clear signal to the business community that they are ready to do business with technology companies, other states are hanging a “closed for business” sign by imposing a tax on digital products and services.