New York Does Not Tax Digital Goods

New York does not apply tax to sales of electronically delivered products such as downloaded music, videos and e-books. According to an Independent Budget Office Fiscal Brief, this is eroding the state’s sales tax base.

More than two-thirds of all music sales in 2014 were in digital format. Digital home entertainment such as streaming subscription services (Netflix) and on-demand services accounted for 42% of the market in 2014, while e-books accounted for approximately 20% of the book market. In New York City alone, sales of tangible media goods (books, CDs, DVDs, etc.) dropped $10 million in five years, from 2009 to 2014.

Already, the state has missed out on millions in uncollected sales tax revenue ($38 million in 2014 alone). Likewise, New York City did not collect $21 million in sales tax in 2014 because it exempts digital goods. The brief posits that “the taxation of digital goods will become a more pressing issue over time as more newly developed goods and services — such as cloud computing — will be intangible and therefore not automatically included in the sales tax base.” It also notes that “most states with a sales tax have extended their sales tax base to include digital goods.”

Learn more about the taxability of digital goods.

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