![]() ![]() There are often exceptions to taxability rules, especially where digital goods are concerned. Taxability often hinges on a variety of factors, such as the identity of the consumer (e.g., B2B transactions may be taxed differently from B2C transactions), or whether a digital good is transferred in conjunction with a physical storage device. Use the information below as a starting point, not as tax advice. We’ve included digital games and photographs because some states tax them differently from other digital goods. Streaming services (digital audiovisual works like television shows, movies, etc.).Digital books (ebooks, magazines, newspapers).Digital audio files (music, podcasts, ringtones, etc.).Since it’s not possible to cover the taxability of every different electronically transferred transaction here, this post will focus on identifying how sales and use tax applies to the following: Though not law, a letter ruling is binding on the state just like a law binds the state.” A letter ruling is a state’s official opinion of how a law applies to a set of facts. “One taxpayer’s ruling can apply to every taxpayer with the same facts. “Generally, letter rulings apply across the board if the facts are the same,” explains Scott Peterson, Vice President of Government Relations at Avalara. Guidance can sometimes be found in department of revenue letter rulings, in which the tax authorities answer questions from specific taxpayers. In some other states, sales tax laws neither define digital products nor address their taxability. However, these are merely standardized definitions: The taxability of these digital products still varies from state to state. “Specified digital products” includes digital audio works, digital audiovisual works, and digital books. To help simplify sales and use tax compliance, the 24 states that are members of the Streamlined Sales and Use Tax Agreement (SSUTA, or SST states) have adopted a standardized definition for certain electronically transferred products. ![]() And some states use existing laws as guidelines: If a product is taxable in its tangible form, then it’s taxable in its intangible form.ĭetermining the taxability of digital products is further challenged by the variability of electronically transferred goods and the fact that technology is constantly evolving. Some don’t tax digital products because they’re intangible, while others treat intangible goods as tangible personal property because they can be seen or experienced. Nonetheless, some states have tried to make existing laws fit newer products. All states with a sales tax apply it to most “tangible personal property” - but an ebook can’t be held like a physical book, and a streamed movie can’t be grasped like a DVD. Digital products often don't fit tidily into state sales tax definitions because the sales tax laws were created before such products were even conceived. ![]()
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