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Indiana: Taxability of Electronically Transferred Products


 How to tax electronic books.

In Indiana, electronically transferred products are subject to sales tax “only if the products meet the definition of specified digital products, ancillary services, prewritten computer software, or telecommunication services,” as defined by the Streamlined Sales and Use Tax Agreement (SSUTA).

Indiana sales tax applies to specified digital products when a retail merchant:

  • “Electronically transfers specified digital products to an end user; and
  • Grants to the end user the right of permanent use of the specified digital products that is not conditioned upon continued payment by the purchaser.”

As of this writing, specified digital products include:

  • Digital audio works
  • Digital audiovisual works
  • Digital books

According to a notice recently updated by the Indiana Department of Revenue,

“To achieve conformity with the SSUTA, Indiana may no longer impose sales tax on a product transferred electronically by basing the product's taxability on inclusion of the product in the definition of tangible personal property. It is important to note that ‘ancillary services,’ ‘computer software,’ and ‘telecommunication services’ are not restricted by the phrase ‘product transferred electronically’” [emphasis mine].

As a result, “the Department will impose sales and use tax on products transferred electronically only if the products meet the definition of specified digital products, ancillary services, prewritten computer software, or telecommunication services.”

The taxation of digital goods and services is one of them most challenging aspects of sales tax compliance, particularly for businesses selling into multiple states. Automated sales tax software as a service simplifies and facilitates compliance. Learn more.

photo credit: skuds via photopin cc


Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.