These types of sales taxes are typically levied on downloads of digital audio, video, ebooks, and ringtones, but this can vary considerably across state lines. Downloaded software or software updates are generally subject to separate, more complex rules.
States That Tax Downloads
Many states have passed laws that impose sales taxes on digital products, but “digital products” can be defined differently in each state. One state may include iTunes digital downloads, while another may tax only ebooks. Several states have adopted the Streamlined Sales Tax Governing Board (SSTGB) definition, providing some uniformity to this complex issue. Others do not define digital products in their legislation at all, and most of these do not impose a sales tax on these products.
Alabama: No specific definition of digital goods.Arizona: No specific definition of digital goods.Arkansas: Digital goods are defined by state legislation.California: No specific definition of digital goods. Does not affirmatively tax these products.Colorado: No specific definition of digital goods.Connecticut: Digital goods are defined by state legislation.District of Columbia: Digital goods are defined by District code.Florida: No specific definition of digital goods. Does not affirmatively tax these products.Georgia: Digital goods are defined by state legislation, but the state does not affirmatively tax these products.Hawaii: No specific definition of digital goods.Idaho: No specific definition of digital goods.Illinois: Digital goods are defined by state legislation, but the state does not affirmatively tax these products.Indiana: Uses the SSGTB definition.Iowa: Digital goods are defined by state legislation.Kansas: No specific definition of digital goods. Does not affirmatively tax these products.Kentucky: Uses SSGBT definition.Louisiana: Digital goods are defined by state legislation.Maine: Digital goods are defined by state legislation.Maryland: No specific definition of digital goods. Does not affirmatively tax these products.Massachusetts: No specific definition of digital goods. Does not affirmatively tax these products.Michigan: No specific definition of digital goods. Does not affirmatively tax these products.Minnesota: Digital goods are defined by state legislation.Mississippi: Digital goods are defined by state legislation.Missouri: No specific definition of digital goods.Nebraska: Uses SSGBT definition.Nevada: Uses SSGTB definition but does not affirmatively tax these products.New Jersey: Uses SSGTB definition.New Mexico: No specific definition of digital goods.New York: No specific definition of digital goods. Does not affirmatively tax these products.North Carolina: Digital goods are defined by state legislation.North Dakota: Uses SSGTB definition but does not affirmatively tax these products.Ohio: Digital goods are defined by state legislation.Oklahoma: Digital goods are defined by state legislation, but the state does not affirmatively tax these products.Pennsylvania: No specific definition of digital goods.Rhode Island: Digital goods are defined by state legislation.South Carolina: No specific definition of digital goods.South Dakota: No specific definition of digital goods.Tennessee: Uses SSGTB definition.Texas: Digital goods are defined by state legislation.Utah: No specific definition of digital goods.Vermont: Uses SSGTB definition.Virginia: No specific definition of digital goods, and the state specifically exempts sales of digital products from taxation.Washington: Uses SSGTB definition.West Virginia: Digital goods are defined by state legislation, but the state does not affirmatively tax these products.Wisconsin: Uses SSGTB definition.Wyoming: Uses SSGTB definition.
In most cases, states with unclear legislation do not tax all, if any, digital downloads. States that have adopted SSGTB guidelines generally tax these products.
Why Didn’t They Charge Me for the Tax?
Even if your state made the list for affirmatively charging a sales tax on digital downloads, you may not see a sales tax charge on your electronic receipt. Some online retailers do not have to collect out-of-state sales taxes if their principal location is in a state where they must abide by only their own tax rules, not those in the states where their customers reside. These retailers must only charge sales tax if they’re subject to a legal concept called nexus, meaning they have a physical presence or affiliate in your state. Although your state may require retailers to charge sales tax on digital products, remote sellers like iTunes may only be required to collect and remit sales taxes there if they have nexus.
