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.
Is your business prepared to tax sales of digital goods in more states? Automated sales tax software as a service (SaaS) helps businesses accurately and efficient remit sales tax in multiple locations. Learn how it works.
