Intermediate Quick Answer
Are digital downloads taxable?
⚡ TL;DR
Digital downloads are taxable in states that have extended their sales tax base to digital goods — including TX, NY, WA, PA, MI, WI, IN, KY, MN, and RI — and not taxable in states that haven't, including CA, FL, AZ, CO, and IL. Downloaded software is taxed more broadly than ebooks or music files; many states that haven't addressed ebooks still tax downloaded software.
Digital downloads are taxable in states that have enacted digital goods legislation and not taxable in states that haven’t. About half of states have extended their sales tax base to cover digital goods.
Key takeaways
- States taxing digital downloads broadly: TX, NY, WA, PA, MI, WI, IN, KY (2023 expansion), MN, RI, TN, WV, NE, SD, IA, VT, downloaded software, ebooks, and digital content taxable
- States generally not taxing digital downloads: CA, FL, AZ, CO, IL, VA, NJ, GA, MA, digital content not within the taxable base
- Downloaded software: taxed more broadly than other digital content, many states that don’t tax ebooks still tax downloaded software
- Ebooks: less universally taxed than software; some states that tax software have specifically exempted ebooks or haven’t extended taxability to them
- Digital music, photos, and video files: varies by state; typically follow the same treatment as ebooks in states that have enacted digital goods legislation
- SST states: the SST program has a model definition for “specified digital products” that member states can adopt; adoption varies, not all SST states have adopted the digital goods definition
- Product tax codes matter: use digital-goods-specific PTCs in your tax engine, not physical goods codes: the state treatment will differ significantly
- Florida distinction: FL generally doesn’t tax digital downloads but does tax canned software sold on physical media: the digital delivery method matters in FL
Frequently asked questions
Are digital downloads subject to sales tax?
Digital downloads are taxable in states that have extended their sales tax base to cover digital goods and electronically delivered products. This includes TX, NY, WA, PA, MI, WI, IN, KY, MN, RI, and several others. States that have not broadly taxed digital goods (including CA, FL, AZ, CO, and IL (generally)) typically do not tax digital downloads. The product type matters: downloaded software is taxed in more states than ebooks or music files.
Does California tax digital downloads?
Generally, no. California does not impose sales tax on digital goods, including downloaded software, ebooks, or digital music files, because California has not extended its sales tax base to intangible digital products. Digital content delivered electronically is generally not subject to California sales tax.
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