Texas law applies sales tax to digital products if items would be taxable if delivered in physical form. Online shoppers must pay sales and use tax on taxable items delivered to or brought to Texas. Twenty percent of information services charge is exempt from tax. Colorado: Digital Products Are Taxable in Colorado.
Digital goods such as music, movies, e-books, magazines, etc. are considered tangible personal property because they are “perceptible by the senses and are therefore subject to taxation. Electronic delivery of “lawful publication” newspapers is exempt, as physical copies of those same newspapers are exempt. We would also like to point out that autonomy jurisdictions may have different taxation rules than those of the state.
A digital good or service is anything that is delivered electronically, such as an album downloaded from iTunes or a movie purchased on Amazon. If you assign the product tax code for digital products to the digital products you sell, the TaxJar API automatically charges your customers in any state the correct amount of sales tax under that state's applicable laws. This includes digital audiovisual works such as movies, audio works such as music and ringtones, and digital books. If the subscriber can only access and view an online version of the publication and the digital copy cannot be downloaded, the subscription is not subject to tax.
With that big warning out of the way, let's talk about some of the main ways states treat digital products when it comes to sales tax. This page describes taxation of software and digital products in Texas, including canned software (delivered on tangible media), canned software (downloaded), personalized software (delivered on tangible media), custom software (downloaded), canned software customization, and digital products. For states that consider digital products as “tangible personal property”, many of them claim that the product is tangible because it can be “perceived by the senses”. Digital downloads are generally considered tangible personal property and are subject to gross income tax (Arizona's sales tax response).
However, some states considered that the equivalent product purchased and accessed electronically was taxable, while others did not (presumably because it was not purchased in physical format). Sales or use tax applies to all digital products, regardless of how they are accessed (downloaded, transmitted, subscription service, networks, etc.) If the right to use digital music, digital books, digital videos or digital games is conditional on continuous payment by the buyer, it is not a permanent right. of use. Specific digital products where the buyer receives permanent use of the digital product are subject to tax.
Code § 47-2001 (d) defines the term “digital goods” as meaning digital audiovisual works, digital audio works, digital books, digital codes, digital applications and games, and any other tangible personal property subject to taxation delivered electronically or digitally, whether electronically or digitally. delivered, transmitted or accessed, whether purchased individually, by subscription or in any other way, including maintenance, updates and support. The term “specified digital products” means digital movies, digital television programs, digital books, digital music and related items that are transmitted or downloaded to computers, phones or other devices. Texas sellers must collect sales tax on taxable items, including shipping and delivery charges, sold online.