If you regularly download tunes to your iPod or another device (or if you work in the music industry), you’ll probably cheer a recently introduced bill. The Digital Goods and Services Tax Fairness Act of 2011 (S. 971 and H.R. 1860) would ensure that digital goods are not taxed at a higher rate than their tangible counterparts. For example, the legislation prevents taxation of mp3 and software downloads at a higher rate than the tax on music and software CDs, according to an announcement by the bill’s sponsors, Senators Ron Wyden (D-Ore.) and John Thune (R-S.D.) Co-sponsors from the House were Representatives Howard Coble (R-N.C.) and Alcee Hastings (D-Fla.).

The bill “is an effort to ensure that states and political subdivisions thereof do not discriminate against providers and consumers of digital goods and digital services by imposing multiple, excessive and discriminatory taxes and other burdens on such providers and consumers.”

H.R. 1860 has gained support from industry groups, such as CTIA-The Wireless Association, which stated, “CTIA and the wireless industry appreciate the leadership of Senators Wyden and Thune and Congressmen Smith and Cohen for introducing this legislation as a way to stop the discriminatory taxes and fees on consumers who purchase items via the Internet. It makes no sense to levy additional, and sometimes hidden, state and local taxes against items that consumers purchase via the Internet and not in stores.”

Groups that advocate for lower taxes, such as Americans for Tax Reform and the National Taxpayers Union, also have – not surprisingly – thrown their support behind the bill. “This is a critically important piece of legislation to prevent states and local governments from taxing downloads multiple times or at high and discriminatory rates,” said Kelly William Cobb, government affairs manager of Americans for Tax Reform and executive director of StopETaxes.com, in a release.

Of course, while the bill’s supporters argue (correctly, I believe) that electronic downloads should not be subject to higher taxes than their real-world counterparts, they neglect to mention the many instances in which items purchased online are not subject to taxes. In fact, this legislation is the latest in the ongoing saga to determine just what taxes, if any, should apply to goods (both digital and otherwise) purchased online.

In a 1992 ruling, the Supreme Court said out-of-state sellers can only be required to collect sales tax if they have a store or other physical presence in the customer’s state, as this backgrounder by the National Retail Federation explains. At that time, however, Internet sales were a fraction of their current level. According to the U.S. Census’ Quarterly Retail E-Commerce Sales report, e-commerce sales are on track to top $184 billion in 2011, accounting for 4.5 percent of all retail sales.

“Today, brick-and-mortar retailers are required to collect sales taxes while many online and catalog retailers are not. This difference is not only unfair to brick-and-mortar retailers, who create jobs in the community, but it is also costing states and localities, which are already facing severe budget crises, billions of dollars in lost revenue that could benefit vital public services,” writes Joe Rinzel, vice president, state government affairs, with the Retail Industry Leaders Association.

Those states are taking action. In March, Illinois governor Pat Quinn signed HB3659, which allows the sate to collect taxes on affiliates of Internet retailer, Amazon. The bill allows Illinois to collect sales taxes on affiliate businesses of Amazon.

Amazon responded to Quinn’s actions by shuttering its Illinois-based affiliates.

However, Amazon’s move might be short-lived, given the financial straits of many states. According to the Center on Budget and Policy Priorities, 44 states and the District of Columbia expect budget shortfalls for fiscal year 2012. Not surprisingly, legislation similar to the Illinois bill is under consideration in California, Hawaii, New Mexico, Minnesota and Vermont, the New York Times reports.