Guide to the Taxability of Digital Products in the US
What are digital products from a US sales tax perspective?
Determining the taxability of digital products in US sales tax is not always easy. These products were created long after most US sales tax frameworks were established, and do not fall neatly within traditional sales tax definitions.
Some states consider digital products to be tangible personal property, treating them similarly to physical goods. We may not normally think of a music or movie download as tangible since they are not something you can physically hold. However the definition of tangible personal property in many states is quite broad, and includes products that are “perceptible to the senses”.
On the other hand, some states classify digital products as services. In such states, digital products may be subject to sales tax if the state imposes sales tax on services.
Additionally, some states have enacted specific legislation or regulations to address the tax treatment of digital products, which may include defining digital products as a separate category for tax purposes.
Are all digital products classified in the same way within a particular state?
Not always.
It is important to note that the classification can depend on the specific nature of the digital product. For example, a state may consider a digital subscription to a streaming service as a service subject to sales tax, while a one-time purchase of a digital video game could be treated as tangible personal property subject to sales tax.
Some states also make distinctions based on how the product is used. For example, some states only tax certain digital products when there is a permanent right to use transferred - if the right to use is only for a fixed period or renewed based on continued payment then the supply is not taxable.
Which states require sales tax to be charged on digital products?
The taxability of digital products varies widely by state.
Digital products include a wide scope of possible products, but we have targeted the following for our guide:
- Downloaded video games
- Digital newspapers / magazines
- Digital photographs / images
- Digital artwork
- Digital greeting cards
- Streaming video
- Digital audio work
- Digital audio visual work
- Digital book
Alabama
Digital products are generally taxable, including all aforementioned products.
Alaska
Digital products are generally taxable in local jurisdictions that have instituted a sales tax, including all aforementioned products.
Arizona
Digital products are generally taxable, including all aforementioned products.
Arkansas
Streaming video, digital audio work, digital audio visual work, and digital books are taxable.
Downloaded video games, digital newspapers / magazines, digital photographs / images, digital artwork, and digital greeting cards are not taxable.
California
Digital products are generally NOT taxable, including all of the aforementioned products.
Colorado
Digital products are generally taxable, including all of the aforementioned products.
Connecticut
Digital products are generally taxable, including all of the aforementioned products.
DC
Digital products are generally taxable, including all of the aforementioned products.
Delaware
No sales tax
Florida
Digital products are generally NOT taxable, including all of the aforementioned products.
Georgia
Digital products are generally NOT taxable, including all of the aforementioned products.
Note: New rules taxing certain digital products will come into effect on 1 January, 2024.
Hawaii
Digital products are generally taxable, including all of the aforementioned products.
Idaho
Downloaded video games, streaming video, digital audio work, digital audio visual work, and digital books are taxable when sold with a permanent right of use.
Digital newspapers / magazines, digital photographs / images, digital artwork, and digital greeting cards are not taxable.
Illinois
Digital products are generally NOT taxable, including all of the aforementioned products.
Indiana
Digital audio work, digital audio visual work, and digital books are taxable when sold with a permanent right of use.
Iowa
Digital products are generally taxable, including all of the aforementioned products.
Note: Sales of digital products to “commercial enterprises” are exempt under certain conditions.
Kansas
Digital products are generally NOT taxable.
Streaming video subscriptions are taxable as a television and radio subscriber services delivered over the Internet.
Downloaded video games are taxable as downloaded prewritten computer software.
Kentucky
Digital products are generally taxable, however digital audio visual work are not taxable.
Louisiana
Digital products are generally taxable, including all of the aforementioned products.
Maine
Digital products are generally taxable, including all of the aforementioned products.
Maryland
Digital products are generally taxable, including all of the aforementioned products.
Massachusetts
Digital products are generally NOT taxable.
Downloaded video games are taxable as downloaded prewritten computer software.
Michigan
Digital products are generally NOT taxable.
Downloaded video games are taxable as downloaded prewritten computer software.
Minnesota
Downloaded video games, digital audio works, digital audio visual works, digital books, streaming video, and digital greeting cards are taxable.
Digital newspapers / magazines, digital photographs / images, and digital artwork are not taxable.
Mississippi
Digital products are generally taxable, including all of the aforementioned products.
Missouri
Digital products are generally NOT taxable, including all of the aforementioned products.
Montana
No sales tax
Nebraska
Digital downloaded video games, digital audio works, digital audio visual works, digital books, and streaming videos are taxable.
Digital newspapers / magazines, digital photographs / images, digital artwork, and digital greeting cards are not taxable.
Nevada
Digital products are generally NOT taxable, including all of the aforementioned products.
New Hampshire
No sales tax
New Jersey
Digital downloaded video games, digital audio works, digital audio visual works, and digital books are taxable.
Digital newspapers / magazines, digital photographs / images, digital artwork, streaming video, and digital greeting cards are not taxable.
New Mexico
Digital products are generally taxable, including all of the aforementioned products.
New York
Digital products are generally NOT taxable, however downloaded video games are taxable as downloaded prewritten computer software.
North Carolina
Digital products are generally taxable, however digital artwork is not taxable.
North Dakota
Digital products are generally NOT taxable, including all of the aforementioned products.
Ohio
Downloaded video games, digital audio works, digital audio visual works, digital books, and streaming video are taxable.
Digital newspapers / magazines, digital photographs / images, digital artwork, and digital greeting cards are not taxable.
Oklahoma
Digital products are generally NOT taxable, including all of the aforementioned products.
Oregon
No sales tax
Pennsylvania
Digital products are generally taxable, however newspaper and magazine subscriptions are exempt.
Puerto Rico
Digital products are generally taxable, including all of the aforementioned products.
Rhode Island
Downloaded video games, digital audio works, digital audio visual works, and digital books are taxable.
Digital newspapers / magazines, digital photographs / images, digital artwork, streaming video, and digital greeting cards are not taxable.
South Carolina
Digital products are generally NOT taxable, except for streaming video which is taxable as a communication service.
South Dakota
Digital products are generally taxable, including all of the aforementioned products.
Tennessee
Downloaded video games, digital audio works, digital audio visual works, digital books, and streaming video are taxable.
Digital newspapers / magazines, digital photographs / images, digital artwork, and digital greeting cards are not taxable.
Texas
Digital products are generally taxable, including all of the aforementioned products.
Utah
Digital products are generally taxable, including all of the aforementioned products.
Vermont
Downloaded video games, digital audio works, digital audio visual works, digital books, and streaming video are taxable.
Digital newspapers / magazines, digital photographs / images, digital artwork, and digital greeting cards are not taxable.
Virginia
Digital products are generally NOT taxable, including all of the aforementioned products.
Washington
Digital products are generally taxable, including all of the aforementioned products.
Note: Sales of digital products for “business purposes” are exempt under certain conditions.
West Virginia
Digital products are generally NOT taxable, except for streaming video which is taxable.
Wisconsin
Digital products are generally taxable, including all of the aforementioned products.
Wyoming
Digital products are generally taxable, including all of the aforementioned products, when sold with a permanent right of use.
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