Sell Digital Products? Watch Out for These 27 States!


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Sales tax laws are written and passed by states. That’s an important thing to notes as we move more clearly toward a potential national requirement to collect sales tax on sales across the country

What may not be subject to sales tax in one state may be subject to sales tax in another state.

One of the biggest changes we’ve seen is with digital products. Even the definition of what a digital product actually is has changed.

Digital products, as we’re discussing here, include video, written material, music, ringtones, audio recordings, magazines and newspaper subscriptions. For this definition, we are not discussing computer software including SaaS because states generally treat that separately from digital products.

Downloaded electronically or accessed electronically?

Some states differentiate between digital products that you download to your own device and digital products that you access online but don’t download. These could be taxed differently.

STRATEGY: Make sure you have researched where your particular product would fit with these different definitions.

Following are the 27 states that have some form of sales tax on digital products. At this moment (March 2018), you only have to collect and pay sales tax if you otherwise have nexus in that state. Each state gets to define what constitutes nexus.

The US Supreme Court will hear a case April 2018 that may change how states determine nexus. Their decision is expected June 2018.

Alabama

Arizona

Arkansas

Colorado

Connecticut

Hawaii

Idaho

Indiana

Kentucky

Maine

Minnesota

Mississippi

Nebraska

New Jersey

New Mexico

North Carolina

Ohio

Pennsylvania

South Dakota

Tennessee

Texas

Utah

Vermont

Washington

Washington DC

Wisconsin

Wyoming

If you make any form of digital sales in the above states, make sure you don’t also have nexus (connection) that requires you to collect and pay. And, you’ll want to pay special attention to the US Supreme Court decision.



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