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Senators seek curb on digital download taxes

Legislation introduced today hopes to end what two senators call "discriminatory" taxes on digital media.

Some Americans would pay less for digital purchases from iTunes,, and other online stores in the future, if a bill that two U.S. senators introduced today becomes law.

The Digital Goods and Services Tax Fairness Act of 2011, written by Sens. Ron Wyden (D-Ore.) and John Thune (R-S.D.), hopes to curb taxes that single out digital goods and services.

The new bill prohibits state and local governments from taxing products that do not apply to similar tangible items, preventing unnecessary taxes on consumers for using digital products. (See CNET's earlier report on a similar "iTaxes" bill introduced last year in the House of Representatives.)

"While I understand why states and local governments are looking for new opportunities to bring in revenue, the fact of the matter is that taxes discourage both product usage and innovation," Wyden said in a press release today. "It would be a mistake to crush the U.S. growing digital goods and services industry before it has an opportunity to reach its full potential."

Thune said the bill "would provide clarity and uniformity in the taxation of digital goods" and that it would be "good for consumers and job creators alike."

Kelly William Cobb, from Americans for Tax Reform, told CNET that the new bill "ensures that if states want to tax your downloads, elected officials will be held responsible for that vote."

"No state lawmaker should be looking to raise taxes right now, but quietly behind the scenes, bureaucrats at state Departments of Revenue are enacting taxes on digital goods with zero accountability or public awareness," Cobb said. "Wyden-Thune puts a stop to it and ensures the public knows when government wants to raise their taxes."

Tax issues surrounding the Internet have been a theme of Wyden's throughout his time in Congress, starting with the Internet Tax Freedom Act of 1998, which he co-authored. The act was signed into law in an effort to endorse the commercial, educational, and informational potential of the Internet, putting a temporary moratorium on taxing access to the Internet and e-commerce.