Understanding the taxability of digital goods is a challenge for many businesses. With more of our activities moving online—whether it’s using software, reading e-books, or streaming media—states still differ on how they apply sales and use tax to digital products. Some states tax digital products as tangible property, while others exempt them entirely, and the rules are constantly changing.
Defining Digital Products for Sales Tax
When selling digital products, it’s important to understand how each state defines these goods for tax purposes. Unfortunately, there is no universal definition. States that have sales tax typically apply it to “tangible personal property,” but digital goods, like e-books or streamed media, don’t fit this category easily. Since we can’t cover every possible scenario for electronically transferred goods, we’re focusing on how sales and use tax applies to retail sales of the following:
- Digital audio files (e.g., music, podcasts, ringtones)
- Digital books (e-books, magazines, newspapers)
- Streaming services (e.g., movies, TV shows)
Please use the information below as a general guide, not formal tax advice. The taxability of digital goods can vary depending on factors such as the type of consumer (e.g., B2B vs. B2C) or whether a digital product is sold alongside a physical medium. Also, keep in mind that tax laws are subject to change, so it’s always important to stay informed.
Some states treat digital products as taxable because they can be seen or experienced, while others exclude them because they are intangible.
Some states have adjusted their laws to fit new products, while others rely on outdated guidelines. For example, the 24 states in the Streamlined Sales and Use Tax Agreement (SSUTA) use standardized definitions for digital products like audio works, e-books, and streaming media, but their taxability varies from state to state.
Staying Compliant with Changing Rules
Figuring out the taxability of digital products can require hours of research through state statutes and tax department rulings. As laws evolve, staying up to date is critical to avoid penalties or missed tax obligations.
Instead of trying to interpret ever-changing regulations on your own, use TaxDo. Our platform simplifies the complexities of digital product sales taxability, ensuring your business remains compliant no matter where you operate.
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This blog serves as a helpful reference point for determining the taxability of the digital products you sell.
Now, let’s explore the sales tax on digital goods by state.
Alabama–Sales tax applies to digital products in Alabama. This includes items like software, streaming services, e-books, and similar digital goods. Businesses selling these products must collect sales tax. View the official Alabama sales tax guidelines.
Arizona-Arizona requires sales tax to be collected on digital products such as software, streaming services, and e-books. Sellers are responsible for ensuring they collect the correct amount. See Arizona’s guidance on digital products.
Arkansas-Digital products like software, streaming services, and e-books are subject to sales tax in Arkansas. The state provides specific guidelines on the taxation of digital goods. Access Arkansas’ digital product tax regulations.
California-Digital products are generally tax-exempt in California. Businesses selling these products should refer to state guidance for more detailed information. Consult California’s digital product tax rules.
Colorado-Sales tax is imposed on digital products in Colorado. If you sell items like software or streaming services, you must ensure sales tax is collected. Refer to Colorado’s digital goods tax guidelines.
Connecticut-In Connecticut, digital products are subject to sales tax. Businesses selling software, streaming services, or e-books must collect sales tax accordingly. Get more details on Connecticut’s digital tax policies.
Delaware-Delaware does not impose sales tax on any products, including digital goods.
Florida-Digital products in Florida are not subject to sales or use tax, as they are not considered tangible property. However, digital goods in tangible form may still be taxed. Find out more about Florida’s digital tax guidelines.
Georgia-Digital products are subject to sales tax in Georgia. Businesses selling software, streaming services, or e-books are required to collect sales tax. Learn about Georgia’s digital product tax rules.
Hawaii-Hawaii applies its General Excise Tax (GET) to digital products, including software and streaming services. Sellers must collect the appropriate tax. See Hawaii’s tax advisory on digital products.
Idaho-Idaho charges sales tax on digital products, such as software, streaming services, and e-books. Sellers are responsible for tax collection. Access Idaho’s digital product sales tax information.
Illinois-In Illinois, digital products such as software and e-books are subject to sales tax. Ensure you collect the appropriate sales tax when selling these items. View Illinois’ digital product tax guidelines.
Indiana-Digital products sold in Indiana, such as software and streaming services, are subject to sales tax. Sellers must collect sales tax accordingly. Read Indiana’s official guidance on digital goods.
Iowa-Iowa charges sales tax on digital products like software, e-books, and streaming services. Make sure to collect the required sales tax. Check Iowa’s digital product tax rules.
Kansas-Kansas does not charge sales tax on digital products. Businesses selling software, e-books, or streaming services are not required to collect sales tax. Learn more about Kansas’ tax exemptions for digital products.
Kentucky-Sales tax applies to digital products in Kentucky, such as software, streaming services, and e-books. Businesses must ensure compliance. Find official guidance for Kentucky’s digital sales tax.
Louisiana-Digital products in Louisiana, such as software and streaming services, are subject to sales tax. Sellers must collect the appropriate tax. Review Louisiana’s digital product tax guidelines.
Maine-Maine charges sales tax on digital products, including software and streaming services. Sellers need to collect sales tax. Read Maine’s tax advisory on digital transactions.
Maryland-In Maryland, digital products like software and streaming services are subject to sales tax. Businesses must collect the appropriate tax. Check Maryland’s digital product tax regulations.
Massachusetts-Digital products are generally tax-exempt in Massachusetts. Refer to the state’s guidelines for further information. Explore Massachusetts’ digital goods tax exemption.
Michigan-Michigan does not impose sales tax on digital products like software, streaming services, or e-books. View Michigan’s no-tax policy on digital products.
Minnesota-Minnesota requires sales tax on digital products, including software, e-books, and streaming services. Ensure that sales tax is collected. See Minnesota’s tax rules for digital products.
Mississippi-Sales tax applies to digital products in Mississippi, including software and e-books. Sellers must collect the appropriate tax. Consult Mississippi’s digital tax guidelines.
Missouri-Missouri does not charge sales tax on digital products such as software or streaming services. Learn more about Missouri’s digital tax policies.
Montana-Montana does not impose any sales tax, including on digital products.
Nebraska-Nebraska applies sales tax to digital products like software and streaming services. Sellers must collect the appropriate sales tax. See Nebraska’s guidance on taxing digital products.
Nevada-Nevada does not charge sales tax on digital products like software or streaming services. Find out more about Nevada’s digital product tax exemptions.
New Hampshire-New Hampshire does not impose sales tax on digital products or any other goods.
New Jersey-Digital products in New Jersey, such as software, e-books, and streaming services, are subject to sales tax. View New Jersey’s official digital product tax guidance.
New Mexico-New Mexico applies sales tax to digital products like software and e-books. Sellers must collect sales tax.
New York-Digital products in New York, including software and streaming services, are not subject to sales tax. Explore New York’s digital product tax exemptions.
North Carolina-Sales tax is charged on digital products in North Carolina, including software, streaming services, and e-books. Access North Carolina’s tax guidelines for digital products.
North Dakota-Generally, digital products such as software and streaming services are not subject to sales tax in North Dakota. See North Dakota’s digital product tax rules.
Ohio-Sales tax is imposed on digital products in Ohio, including software and e-books. Sellers must collect sales tax. Refer to Ohio’s sales tax rules for digital products.
Oklahoma-Digital products like software and streaming services are not subject to sales tax in Oklahoma. Read Oklahoma’s digital product tax policy.
Oregon-Oregon does not impose sales tax on digital products or any other goods.
Pennsylvania-Sales tax is applied to digital products in Pennsylvania, including software and streaming services. Learn more about Pennsylvania’s digital goods tax.
Rhode Island-Rhode Island imposes sales tax on digital products like software and streaming services. Sellers must collect the appropriate tax. Check Rhode Island’s official tax rules for digital products.
South Carolina-South Carolina generally does not impose sales tax on digital products, except for certain streaming content like TV shows and music. Review South Carolina’s tax policies on digital goods.
South Dakota-Sales tax applies to digital products in South Dakota, such as software and streaming services. Explore South Dakota’s guidelines for taxing digital products.
Tennessee-Tennessee requires sales tax on digital products, including software, e-books, and streaming services. Read Tennessee’s official digital product tax advisory.
Texas-Sales tax applies to digital products in Texas, such as software and streaming services. Sellers must collect the appropriate tax. Consult Texas’ tax rules on digital products.
Utah-Sales tax is imposed on digital products in Utah, including software and streaming services. Sellers are required to collect the tax. Learn about Utah’s digital product tax guidelines.
Vermont-Digital products, such as software and e-books, are subject to sales tax in Vermont. Access Vermont’s digital goods tax regulations.
Virginia-Virginia does not charge sales tax on digital products like software or streaming services. See Virginia’s tax policies for digital products.
Washington DC-Sales or use tax applies to all digital products in Washington DC, regardless of whether they are downloaded or streamed. Check Washington DC’s digital product tax rules.
Washington-In Washington state, sales tax applies to digital products such as software, streaming services, and e-books. Refer to Washington’s guidelines on taxing digital goods.
West Virginia-West Virginia imposes sales tax on digital products, including software and streaming services. Learn more about West Virginia’s digital product tax policies.
Wisconsin-Sales tax is applied to digital products in Wisconsin, such as software and e-books. View Wisconsin’s sales tax regulations on digital products.
Wyoming-Digital products, including software and streaming services, are subject to sales tax in Wyoming. Read Wyoming’s official tax guidance on digital products.