About The Tax/Finance Program

The ITAA Tax Program offers International, Federal and State Tax initiatives, activities and services to help members track developments in the area of taxation of IT goods and services, and to represent the IT industry in these tax policy debates. Many government bodies – looking for opportunities to increase revenue – have been expanding existing taxation definitions to include the new services and transactions generated by the IT industry. At other times, elected officials seek to spur the growth of the IT industry through a moratorium on new taxes or the introduction of tax incentives.

ITAA’s International, Federal and State Tax Committees share information and strategize regarding these emerging tax policies, such as the moratorium on Internet taxation and the extension of the research and experimentation tax credit, through regular teleconferences and listserv exchanges. The committees also coordinate numerous lobbying efforts.

ITAA has made taxation issues a high priority in the overall agenda. The following is just a sampling of the taxation issues ITAA finds most important.

R&D Tax Credit Permanency
Long a proponent of making the R&D tax credit permanent, ITAA believes that a permanent research and development tax credit is key to long term planning and budgeting for every information technology business. A permanent R&D credit will enable companies to continue their rigorous programs of experimentation, and allow the IT industry to continue its rapid pace of innovation.

Internet Taxation
The ITAA believes that the moratorium on discriminatory taxes and on Internet access should be made permanent. In addition, telecommunications taxes must be rationalized with sales and use tax simplification. Finally, some standards for simplification of the complex state and local taxes on sales should be included to benchmark the progress of the states in trying to meet the standards to overcome legal hurdles.

Taxation of Benefits
The IRS has continued to indicate a desire to make employee stock purchase plans (ESPP) subject to withholding. ESPP have been an important piece of compensation packages in the IT industry. With the favorable tax treatment of ESPPs in jeopardy so too is one of the best means of compensation. Taxes should not be imposed on amounts that are not subject to current income tax. Reasonable tax policy supports encouraging companies to continue employee plans, and argues against actions that weaken incentives for participation by rank-and-file employees.

Services Taxation
Several states already tax services and several more are looking to expand the definition of their "taxable base" by beginning to include services and digitized goods for purposes of sales tax. Services and digitized goods pose particular difficulty for the application of a sales tax when delivered electronically. ITAA opposes the broadening of sales tax definitions to include services and resists efforts whether online or otherwise.

Corporate Tax Rate Cut
As businesses contribute a significant amount in taxes, so too should corporations share in tax cuts. ITAA supports the notion of a responsible across the board tax cut for corporations. These sorts of cuts promote economic efficiency and drive productivity.

With a full agenda of tax activity, recent accomplishments of the ITAA Tax Program include:

• Conducted symposium on Streamlined Sales Tax Agreement to apprise industry of critical state sales tax issues
• Developed SSTP Multiple Points of Use white paper to address industry concerns with proposed imposition of use tax on business software buyers
• Worked with industry groups to define the broadest possible qualification for the IRS Section 199 deduction for domestic production of activities.