The Connecticut General Assembly’s Finance, Revenue and Bonding Committee has introduced Bill No. 400—legislation that would expand the state’s current sales tax definition of ‘sale’ to include, “the electronic transfer, for consideration, of any digital product [as further defined by the bill] that grants to a purchaser the right or license to use, retain or make a copy of such digital product.”  The bill defines “digital products” as: “digital audio visual works, digital audio works, ring tones, electronic books, and digital codes that provide purchasers with a right to obtain a product.”*

Yesterday, in an interview with Janice Posada of The Hartford Courant, Dan and I explained that Connecticut is the latest in a long string of states that have looked to electronic goods and services—which, at their inception were usually not taxable due to either the lack of a specific, enumerated statute or a lack of policy or other guidance—as a potential source of revenue.

If passed, the bill would impose Connecticut’s 6.35% sales tax on electronic purchases of books, videos, music, games—including digital codes that unlock gaming levels or provide virtual goods for use in online and social media games—and ring tones.

Posada spoke with Committee Chair and State Representative Patricia Wildlitz, who said the purpose of Bill No. 400 is to “level the playing field for the state’s brick-and-mortar retailers.”  Notably, Connecticut’s legislature passed affiliate nexus legislation just last year.  This bill may be the latest effort to accommodate the “level-the-playing-field” argument that is often raised by in-state, brick-and-mortar retailers in the affiliate nexus debate.  Wildlitz also told Posada that the Committee was “focusing on jobs and businesses” and that “what [the Committee] want[s] to do is give [Connecticut] retailers the chance to compete with online service.”

Next stop for Bill No. 400 is a public hearing scheduled for tomorrow at 10 AM in Hartford.  Stay tuned (or, should we say, “iTuned”) for continuing developments.

*[Note: Although this definition is similar to the definitions of digital goods per the Streamlined Sales and Use Tax Agreement, Connecticut is an advisory member state—not a full member (read: conforming) state—of the Streamlined Sales Tax Project.]