The digital economy has not only transformed how we consume services, but has also profoundly strained the traditional structures of tax law. Platforms like Airbnb, Netflix, Spotify, Amazon, and Mercado Libre operate in a dematerialized, global, and highly dynamic environment, where the classic categories of "goods" and "services" no longer fit together with the same clarity as before. In this scenario, the application of the ISS (Service Tax) to these activities has become one of the most complex and relevant topics in the contemporary tax debate in Brazil.

The central issue is not merely one of revenue collection, but also structural: how to legally frame digital operations that do not depend on physical presence, that operate through intermediaries, and that often combine multiple economic natures? The answer lies in the Constitution, complementary legislation, and, above all, the jurisprudential interpretation that has been built up in recent years.

Tax jurisdiction and the challenges of integration into the digital economy.

The starting point for the analysis is Article 156, III, of the Federal Constitution, which grants municipalities the power to establish the Tax on Services of Any Nature. This power, however, is not absolute, being conditional upon the definition of services through a complementary law, currently represented by Complementary Law No. 116/2003.

The list of services foreseen in Supplementary Law 116 is formally exhaustive, but materially interpretable in an extensive manner, according to the consolidated understanding of the Supreme Federal Court and the Superior Court of Justice. The problem arises when attempting to apply this list to digital activities that did not exist at the time of its original conception, such as streaming, intermediary platforms, or digital marketplaces.

In this context, the challenge is not only to identify whether a service is being provided, but also to define the legal nature of the activity performed by the platform. Is it a service provision? Licensing of rights? Intermediation? Or merely the provision of technological infrastructure? The answer to these questions is crucial in determining whether or not the ISS (Service Tax) applies.

Streaming and the consolidation of ISS tax incidence.

The inclusion of item 1.09 in the list of LC 116/2003, promoted by Complementary Law No. 157/2016, represented a clear attempt by the legislator to adapt the tax system to the digital reality. By providing for the incidence of ISS (Service Tax) on the provision of content via the internet, the legislator sought to include streaming services within municipal jurisdiction.

The constitutionality of this tax was initially questioned on the grounds that such operations would involve the transfer of copyright, a situation that would preclude the application of the ISS (Service Tax). However, the jurisprudence of the Supreme Federal Court, especially in the judgment of RE 688.223 (Topic 590), has consolidated the understanding that software licensing, including in a digital environment, constitutes the provision of a service.

Although the case specifically deals with software, its reasoning was quickly expanded to other digital activities, including streaming. The logic adopted by the Supreme Federal Court (STF) prioritizes the economic analysis of the operation, recognizing that the continuous provision of content for remuneration constitutes an obligation to perform, typical of the provision of a service.

This understanding has served as a basis for legitimizing the collection of ISS (Service Tax) on digital content platforms, reinforcing municipal jurisdiction in this sector.

Intermediary platforms: Airbnb and marketplaces

While the discussion tends towards consolidation in the streaming sector, the scenario is more complex in intermediary platforms. In the case of Airbnb, for example, there is a clear distinction between the main activity (property rental, which is not subject to ISS tax) and the platform's activity, which consists of mediating the relationship between host and guest.

Case law has been moving towards recognizing that the platform's activity can be taxed by the ISS (Service Tax), as it constitutes a digital intermediation service. This reasoning also applies to marketplaces, which connect sellers and consumers in a virtual environment.

However, the difficulty lies in determining when there is an actual service provision and when there is only the provision of technology. Platforms that actively participate in the operation, managing payments, offering support, and structuring the commercial relationship, tend to be classified as service providers. Those that act more passively may give rise to more complex controversies.

This debate reveals a structural limitation of the Brazilian tax system, which still operates with rigid categories in the face of hybrid business models.

Location of incidence and federal conflicts

Another critical point concerns the location where the ISS (Service Tax) is levied. Complementary Law No. 157/2016 altered the collection system for certain services, seeking to shift the collection to the municipality of the service recipient, and no longer to the service provider.

Although this change was motivated by reasons of tax fairness, its implementation generated significant legal uncertainty. Companies began to deal with multiple municipalities, different regulations, and operational difficulties in fulfilling ancillary obligations.

Furthermore, conflicts arose between municipalities over the ownership of tax collection, highlighting weaknesses in the Brazilian federal model when applied to the digital economy.

Double taxation, legal uncertainty, and the role of the Supreme Federal Court.

The overlap between ISS (Service Tax) and ICMS (State Sales Tax) remains one of the main problems in the Brazilian tax system. Although the Supreme Federal Court (STF) has made progress in defining these jurisdictions, especially in the case of software, there are still areas of uncertainty in other digital activities.

The possibility of double taxation, coupled with operational complexity, compromises legal certainty and increases compliance costs for companies. This scenario reinforces the need for uniform interpretation and, possibly, more comprehensive legislative solutions.

The Brazilian Supreme Court (STF) has played a central role in this process, acting as the final interpreter of the boundaries between taxes. However, the absence of structural reform keeps the system in constant tension.

Conclusion

The application of the ISS tax to digital platforms is currently a consolidating reality, but it is still marked by interpretative and operational challenges. Advances in jurisprudence, especially from the Supreme Federal Court, have contributed to adapting the system to new forms of economy, but do not eliminate structural uncertainties.

The trend is toward increased municipal taxation on digital activities, especially those involving intermediation and the continuous provision of services. However, this expansion must be conducted cautiously, respecting constitutional limits and avoiding distortions that compromise innovation and legal certainty.

Ultimately, the debate about ISS (Service Tax) on digital platforms exposes a broader truth: the Brazilian tax system is still adapting to an economy that evolves faster than legislation. Until this transition is consolidated, the role of the interpreter, and especially the Supreme Federal Court (STF), will continue to be crucial.

References

BRAZIL. Constitution of the Federative Republic of Brazil of 1988.
BRAZIL. Supplementary Law No. 116/2003.
BRAZIL. Supplementary Law No. 157/2016.
FEDERAL SUPREME COURT. RE 688.223 (Theme 590).
OECD. Tax Challenges Arising from Digitalisation.
SCHOUERI, Luís Eduardo. Tax Law.
TORRES, Heleno Taveira. Constitutional Tax Law.