Do you charge sales tax on digital downloads?
California – Digital products are tax exempt in California. The “sale of electronic data products such as software, data, digital books (eBooks), mobile applications and digital images is generally not taxable” (though if you provide some sort of physical copy or physical storage medium then the sale is taxable.)
Are digital subscriptions subject to sales tax?
Some don’t tax digital products because they’re considered to be intangible, while others consider them tangible because they can be seen if not held. And some states use existing laws as guidelines: If a product is taxable in its tangible form, it’s taxable in its intangible form.
Where are digital services taxable?
In California, sales of electronic products such as data, digital images, e-books, mobile applications, and software generally aren’t taxable because there’s no transfer of tangible personal property.
What states have no digital sales tax?
The following states do not have an Internet sales tax:
- Alaska.
- Delaware.
- New Hampshire.
- Montana.
- Oregon.
Is an online course a digital service?
Fully online courses, with non-matriculated learners, are classified as ‘digital services’ and their income is subject to VAT (currently 20%).
Do you have to pay sales tax on digital goods?
For the states that tax digital products, the tax rate varies from 1% to 7%, depending upon the state and the type of digital good. Please note that in the U.S., you are only required to collect sales tax in states where you have “sales tax nexus”.
How does sales tax apply to the sale of software?
States often treat the sale of software differently than the sale of digital products. With software, taxability generally depends on whether the software is canned or custom, downloaded or delivered on tangible personal property, or software as a service (SaaS). Learn more about how sales tax applies to software.
Is the sale of a digital product taxable in Illinois?
If the digital product is merely accessed for lease or rental (including digital subscriptions), the transaction is not taxable. Digital goods that are “downloaded electronically” are exempt from sales tax in Illinois. Digital goods that are sold “with rights for permanent use” are taxable in Indiana.
Are there any states that do not tax digital products?
Both Connecticut and Rhode Island amended the taxability of certain digital products in 2019. Below is a list of states that generally tax the sale and use of digital products, followed by a list of states that generally exempt them.