Italy Digital Services Tax Ruling: Milan Tax Court Clarifies DST Scope for Direct Sales

The judges of the Tax Court of the First Instance of Milan(Court) had before them a very interesting case to discuss concerning the scope of applicability of Italy’s Digital Services tax(so-called Web Tax). On January 20, 2026, the Court issued its decision on appeal  No. 4308/2025 filed on October 17, 2025. 

Appellant filed a Digital Services Tax(DST) refund request on September 25, 2023,  from the Lombardy Regional Office of the Italian Revenue Agency, seeking the refund for overpaid DST for the tax period between 2020 and 2022, in the amount above EUR 1 million.

The  Lombardy Regional Office of the Italian Revenue Agency dismissed the complaint. 

The Appellant filed an appeal No. 4308/2025 filed on October 17, 2025.

Background 

The appellant in this case is an online vendor of clothes, accessories, and design goods that have set in place different selling models. The online vendor operates as a digital marketplace for some types of sales, where it facilitates the supplies between its “partners” and customers, earning a commission fee for the successful sale. 

Besides being a sales intermediary, the online vendor also makes direct sales to its customers, where some of those supplies are a result of the previously established consignment agreements between the online seller(appellant) and its suppliers. 

The appellant based his refund request on the merits that the DST was not due with respect to the sales of goods(claimed to be direct sales) based on the consignment agreements with “his” suppliers. The appellant paid the DST duly and fully, going “beyond” the provisions of Web Tax, which state that the DST is due for the supplies of goods or services involving the marketplace model. 

The appellant paid the tax not only for the sales where it acted as an intermediary, but also for direct sales of goods to customers based on the consignment model, and after careful consideration, it concluded that these supplies are out of the scope of the revenue taxed under the Italian DST Law(Law 145/2018).

The appellant didn’t dispute the applicability of the Italian DST Law to itself from a subjective point of view; it firmly argued that the imposition of the DST shouldn’t be extended to “direct sales” based on the consignment model, as the appellant hasn’t made the “multilateral digital interfaces” available to users. 

For these supplies, customers interacted only with the appellant, and not with the appellant’s suppliers. The buyers in this sales model haven’t had any way to communicate with one another or with the consignor. 

Digital Services Tax 

Framework 

The Digital Services Tax was introduced in the Italian tax framework by Law 145/2018, and later on strengthened by a Legislative Decree 174/2024, which implemented the original legislation without any substantial change. The DST applies at the rate of 3% to income that derives from “the provision of a multilateral digital interface that allows users to connect and interact with each other, also for the purpose of facilitating the direct supply of goods or services”.

The tax is levied only if the company(or the group to which it belongs) achieves a global turnover of more than EUR 750 million and revenues from digital services in Italy of at least EUR 5.5 million. The tax is calculated based on the calendar year. 

The 3% tax is calculated on total gross revenues (net of VAT) earned in Italy, not on net profits.

Digital services tax is a levy that is specifically designed to tax revenues from the marketplaces that provide “digital intermediation”. The tax is designed to tax the intermediary platforms that connect users(sellers and buyers) and collect commissions or fees on these transactions. 

Direct online sellers that make direct supplies, without acting as intermediaries between third parties, shouldn’t be subject to tax. 

Ruling 

The Court in its ruling clarified that the consignment transactions(that derive from the original consignment agreements) where the ownership of the goods remains with the consignor until the third person purchases the goods from the appellant, exclude the “existence of the intermediary criteria”. 

Under the consignment agreements, the appellant hasn’t acted as an intermediary, it hasn’t connected third parties, and it hasn’t received any “fee” for the “claimed intermediation” by the Revenue Agency. 

The Court ruled that without the “intermediation” criteria, the digital services tax cannot be levied. 

The appellant in the end got a ruling in its favor, as the Court granted the appeal. The refund request stands, and the Revenue Agency needs to refund the appellant for an amount above EUR 1 million for overpayment of the DST for the period between 2020 and 2022. 

Ruling and Broader Impact 

Frequently Asked Questions