Product Taxability

Are clothing and apparel items taxable?

Most states tax clothing at the standard rate. A handful (New York, Pennsylvania, New Jersey, Minnesota) provide exemptions, with specific carve-outs for accessories and athletic gear.

Are dietary supplements and vitamins taxable?

Dietary supplements and vitamins are taxable in most states. They are typically excluded from food exemptions and not treated as prescription medications. A minority of states exempt supplements, and some use label-based tests. State-by-state configuration is essential for supplement sellers.

Are digital downloads taxable?

Digital downloads (ebooks, music files, software, PDFs) are taxable in many states that have extended their sales tax base to digital goods. They are not taxable in states that haven't adopted digital goods legislation or that exempt digital content. Treatment varies by product type, downloaded software is taxed more broadly than ebooks.

Are digital products and SaaS taxable?

Digital products and SaaS face a patchwork of state rules, some states tax both, some exempt both, many are still evolving. Here's the current state-by-state picture and how to manage it.

Are food items taxable? What's the difference between grocery and prepared food?

Most states exempt unprepared food (groceries) from sales tax but tax prepared food. The line between the two, and what counts as 'grocery' — varies significantly by state. Candy, soft drinks, and dietary supplements are commonly excluded from food exemptions.

Are gift cards taxable?

Gift cards are not taxable at the time of purchase, they're treated as the exchange of cash for a stored-value instrument. Sales tax applies when the gift card is redeemed and used to purchase taxable goods or services. Taxability follows the product being purchased, not the gift card itself.

Are installation and assembly charges taxable?

Installation and assembly charges may or may not be taxable depending on the state and how the charge is structured. Separately stated installation charges are often exempt as a service, but charges bundled with the product price or charged as part of a lump sum may take on the taxability of the product. State rules vary significantly.

Are medical devices taxable?

Durable medical equipment and FDA-classified medical devices are exempt from sales tax in most states when sold by or for a practitioner's prescription or for use by a patient with a specific medical condition. Over-the-counter health products (bandages, reading glasses, blood pressure cuffs) have more variable treatment.

Are services taxable? Which services are subject to sales tax?

Most states do not tax services by default: the traditional sales tax base covers tangible personal property. However, a growing number of states tax specific service categories: data processing, information services, amusement and entertainment, telecommunications, and more. A few states (HI, NM, SD, WA) tax services broadly.

Are subscription memberships taxable?

Subscription membership taxability depends on what the membership provides access to. Memberships that grant access to taxable physical goods, digital content, or services may be fully or partially taxable. Pure membership access fees (clubs, associations) are generally not taxable. The content and benefits of the membership determine the tax treatment.

Does taxability change by state for the same product?

Yes: the same product can be taxable in one state and exempt in another. Clothing, food, dietary supplements, digital products, and SaaS all have state-specific taxability rules. A product tax code applied nationally won't handle this correctly without state-level configuration.

How are bundled products taxed when some items are taxable and some aren't?

When a bundle contains both taxable and non-taxable items, states apply different rules: some tax the full bundle price, some allow allocation between taxable and non-taxable components, and some use a true object test to determine the dominant purpose. How you price and structure the bundle affects the tax outcome.

How are subscription boxes taxed when they contain both taxable and non-taxable items?

Subscription boxes containing both taxable and non-taxable items must allocate sales tax to the taxable portion. The exact allocation method and what qualifies as non-taxable depends on the destination state. Boxes containing food, supplements, or other state-variable products require per-state configuration, not a single national taxability setting.

How do I determine whether my product is taxable in a given state?

To determine product taxability in a specific state: identify the correct product tax code, look up the state's treatment for that category, and check for carve-outs or exemption definitions. For complex categories (food, supplements, digital products, SaaS), state-specific guidance is essential. A tax engine with current product tax codes handles this automatically.

How do I set the correct product tax code in Shopify for different product categories?

Shopify uses product tax codes to apply the correct taxability rules by state. Here's how to find the right code, where to set it, and what to do when Shopify's native options aren't enough.

Is ammunition taxable?

Ammunition is taxable in most US states as general tangible personal property. There are no broad ammunition exemptions comparable to food or clothing exemptions. Some states have enacted or proposed ammunition-specific excise taxes on top of standard sales tax.

Is my product taxable?

Most physical goods are taxable by default. The question is whether your product falls into one of the specific exempt categories (food, clothing, medicine, or digital goods) which vary by state.

Is Route shipping insurance (package protection) taxable?

Route package protection fees are generally not taxable in most states, insurance premiums are commonly exempt from sales tax. However, how Route's fee is characterized (insurance vs. service vs. part of the sale) matters, and some states may treat it differently. Sellers using Route or similar tools should verify treatment in high-volume states.

Is sales tax charged on shipping if I list it separately on the invoice?

In many states, separately listing shipping on an invoice exempts it from sales tax. But a meaningful list of states tax shipping regardless. Here's which rule applies where.

Is shipping taxable?

About half of US states tax shipping charges. Whether yours does often depends on how you list it on the invoice. Here's the rule, the state breakdown, and how to configure it correctly.

Is streaming content taxable? (video, music, games)

Streaming services (Netflix, Spotify, gaming subscriptions) are taxable in a growing number of states that have enacted digital goods or streaming-specific legislation. Streaming is generally taxed less broadly than downloaded software, but the list of states taxing streaming content is expanding. Treatment varies by content type.

Which states tax SaaS and which don't?

SaaS is taxable in roughly half of US states. Key states taxing SaaS include TX, NY, WA, CT, KY (2023), IN, and MN. Key states not taxing SaaS include CA, FL, AZ, CO, and GA. The line between 'SaaS' and 'data processing service' is blurry in several states, and product tax code selection matters significantly.