State-by-state guide to the taxability of digital products

• States define digital goods differently. Some states don’t tax digital products because they’re not tangible; other states tax intangible products like their physical counterparts. 
• Streamlined Sales Tax (SST) states use standardized definitions for digital products, but SST states don’t all tax digital products the same.  
• Sourcing sales tax for digital products can be difficult. Many states use destination sourcing, but sellers may not collect the buyer’s address. Also, digital products can be used in many locations simultaneously. 

When you’re selling digital products, you need to understand how states define digital goods for sales tax. Unfortunately, there’s no single governing legal definition. 

Digital content often doesn’t fit tidily into state sales tax definitions because most sales tax laws were created before such products were even conceived. All states with a sales tax apply it to most “tangible personal property” — but an ebook can’t be held like a physical book, and a streamed movie can’t be grasped like a DVD.

Nonetheless, some states have tried to make existing laws fit newer products. Some don’t tax digital products because they’re intangible, while others treat intangible goods as taxable tangible personal property because they can be seen or experienced. 

Some states use existing laws as guidelines: If a product is taxable in its tangible form, then it’s taxable in its intangible form. Other states have added new definitions to their tax laws and specified how sales tax applies to certain digital goods.  

The 24 states that are members of the Streamlined Sales and Use Tax Agreement (SSUTA, or SST states) must adhere to a standardized definition for certain electronically transferred products. “Specified digital products,” include digital audio works, digital audiovisual works, and digital books. Yet these are merely standardized definitions: SST states can tax or exempt digital products as they see fit.

Unfortunately, some states have not updated their tax laws or guidelines to address digital products sales tax; taxpayers must make the best of existing laws. 

Figuring out the taxability of a digital product typically requires scouring state statutes, department of revenue websites, and other resources. Bring your patience — you’ll need it.  

Guidance can sometimes be found in department of revenue letter rulings, in which the tax authorities answer questions from specific taxpayers. “A letter ruling is binding on the state but often only for the company that asked for the ruling,” explains Scott Peterson, Vice President of Government Relations at Avalara. “The ruling very likely would apply to any other company with identical facts, but the state gets to decide if the facts are identical.”   

Avalara Tax Research, which now includes our AI-powered research assistant Avi, can save time and reduce frustration. Meanwhile, consider this blog post as a cheat sheet to help you determine the taxability of the digital goods you sell. Since it’s not possible to cover the taxability of every different electronically transferred transaction here, we’re focusing on how sales and use tax applies to retail sales of: 

• Digital audio files (such as music, podcasts, and ringtones) 
• Digital books (ebooks)  
• Streaming services (such as digital audiovisual works like television shows and movies) 

Use the information below as a starting point, not tax advice. Taxability often hinges on a variety of factors, such as the identity of the consumer (e.g., B2B transactions may be taxed differently from B2C transactions), or whether a digital good is transferred in conjunction with a physical storage device. There are often exceptions to taxability rules, especially where digital goods are concerned. And, of course, sales and use tax laws are subject to change at any time. 

States that generally tax digital goods

• Alabama. Retail sales of photographs, blueprints, and similar articles are subject to sales or use tax, as is computer software. Alabama law doesn’t address other digital products, but departmental guidance states, “The form in which tangible property is delivered by the seller to the purchaser is of no consequence.”

• Arizona. “Tangible personal property” means personal property that may be seen, weighed, measured, felt, or touched or that is in any other manner perceptible to the senses. The Arizona Department of Revenue generally treats digital goods and software as taxable. 

• Arkansas. Specified digital products, including but not limited to music, reading material, ringtones, software, and video, are generally taxable when sold to a purchaser who is an end user with the right of permanent use or less than permanent use.

   

  Digital subscriptions to newspapers, journals, periodicals, and academic databases are exempt from Arkansas sales and use tax, as are computer software and video games delivered electronically or by load and leave. See Arkansas Code § 26-52-301(1)(B) and § 26-52-304. Arkansas is an SST state.

• Colorado. Digital products are generally taxable, though electronically delivered software is exempt. The enactment of HB 26-1223 repeals the exemption for downloaded software effective January 1, 2027; all software available for repeated sale and license qualifies as tangible property as of that date and is subject to sales and use tax.

   

  However, HB 26-1223 exempts downloaded software governed by a negotiable license agreement or developed for use by a particular user. 

• Connecticut. Digital goods and electronically accessed or transferred canned or prewritten software sold for personal use are subject to the standard 6.35% rate as of October 1, 2019; electronically accessed or transferred canned or prewritten software sold to a business for business use is subject to a reduced rate of 1%.

• Georgia. Sales of specified digital products, other digital goods, and digital codes sold to an end user in the state are subject to Georgia sales and use tax as of January 1, 2024, provided the end user receives the right of permanent use of the products and the transaction isn’t conditioned upon continued payment by the end user. See Rule 560-12-2-.118. Georgia is an SST state.

• Hawaii. Digital products are subject to Hawaii’s general excise tax, or GET.

• Idaho. Digital books, digital games, digital music, and digital videos are taxable regardless of the delivery or access method, but only if the buyer has a permanent right to use them. Leases or rentals of these digital products are not taxable, nor are digital subscriptions. Other information stored in an electronic medium is taxable tangible personal property only if transferred to the user on storage media that’s retained by the user.

   

  Digital subscriptions and charges to access remotely accessed computer software are not taxable in Idaho. Sales of digital photographs are taxable when sold and delivered to the buyer on storage media and not taxable when sold and delivered to the buyer electronically. 

• Indiana. Specified digital products are taxable when the end user has the right of permanent use that’s not conditioned upon continued payment. A digital code that may be used to obtain a product transferred electronically is taxed in the same manner as the product. Because digital photographs aren’t included in the definition of specified digital products, they are exempt. Indiana is an SST state.

• Iowa. Specified digital products are generally taxable unless purchased by a commercial enterprise and used exclusively by or furnished to that commercial enterprise. Specified digital products include: digital audio-visual works; digital audio works; digital visual works (e.g., images and clip art); e-books and other digital written works, including academic articles, magazines, and catalogues; other forms of digital products, such as greeting cards, images, video or electronic games, or entertainment, news or information products; and computer software applications.

Fun fact: When Iowa lawmakers grant an exemption for an entity, they also need to establish an exemption for digital goods sold to that entity. Iowa is an SST state.

• Kentucky. Digital property is generally subject to Kentucky sales tax unless specifically excluded or exempted. Per KRS 139.010(4)-(9), digital property includes digital audio works, digital books, finished artwork, digital photographs, periodicals, newspapers, magazines, video greeting cards, audio greeting cards, video games, electronic games, and any digital code related to this property.

   

  Kentucky sales tax also applies to prewritten computer software, including AI-powered applications, whether delivered as a download or accessed remotely as Software as a Service (SaaS). Kentucky is an SST state.

• Louisiana. Effective January 1, 2025, Louisiana taxes digital audio and audiovisual works, digital books, digital codes, digital apps and games, and digital periodicals and discussion forums.

   

  Taxable digital products include any otherwise taxable tangible personal property that is transferred electronically, including prewritten computer access services, and information services (collectively referred to as “digital products and services”). See the Louisiana Department of Revenue, Sales and Use Tax on Digital Products and Related Services.

• Maine. Sales tax applies to products transferred electronically, which means electronically transferred products that would be taxable when sold in “nondigital physical form.” See Me. Rev. Stat. Ann. §1752(9-E).

• Maryland. Digital products and digital codes are subject to Maryland sales and use tax as of March 14, 2021. Digital advertising services are taxed as of January 1, 2022. And effective July 1, 2025, Maryland applies a 3% sales and use tax to data or information technology services, and system software or application software publishing services. See the Maryland Comptroller for more details.

• Minnesota. Specified digital products, other digital products (including online video and computer gaming), and digital codes are taxable. However, digital photographs and drawings are exempt, as are charts and graphs, data or financial reports, and access to digital news articles. Minnesota is an SST state.

• Mississippi. Specified digital products (including digital photographs) are generally subject to Mississippi sales and use tax. Digital codes that allow the purchaser to obtain a digital product are taxed in the same manner as the digital product.

   

  Computer software and related services are also taxable unless the software is maintained on a server located outside the state and accessible for use only via the internet. See Title 35 Mississippi State Tax Commission Part IV Sales and Use Tax.

• Nebraska. Digital audio works, digital audiovisual works, digital books, and digital codes are generally taxable if the products are taxable when delivered on tangible storage media. Digital codes that provide rights to obtain taxable digital products are also taxable.

   

  Products not included in the definition of digital audio works, digital audiovisual works, or digital books — including digital audio files not stored on the purchaser’s communication device, audio or video greeting cards, electronic or video games, and digital magazines, newspapers, and periodicals — are not taxable (see Revenue Ruling 01-11-3). Nebraska is an SST state. 

• New Jersey. Specified digital products are generally subject to New Jersey sales and use tax, as are receipts for installing, maintaining, servicing, or repairing specified digital products. Information services are also taxable.

   

  Other types of property delivered electronically, such as digital photographs, digital newspapers, and digital magazines and periodicals sold by subscription, are not subject to tax. See also Publication ANJ-21. New Jersey is an SST state.

• New Mexico. Digital goods are generally subject to New Mexico gross receipts tax. See additional information on New Mexico’s sales tax sourcing rules.

• North Carolina. Sales and use tax applies to digital audio works, audiovisual works, books, greeting cards, photographs, and publications (e.g., magazines, newspapers, newsletters, reports). The tax applies whether the purchaser has the right to use the digital goods permanently or to use it without making continued payments. North Carolina is an SST state. 

• Ohio. Specified digital products are taxable whether rented or owned. Prewritten software and streaming services are taxable, for example, but digital photographs and newspapers are exempt. See also R.C. 5739.01(B)(12). Ohio is an SST state.

• Pennsylvania. The commonwealth’s 6% sales and use tax applies to the purchase of digital products delivered to a customer electronically, digitally, or by streaming. Taxable digital products include apps, books, canned software, electronic greeting cards, games, music, photographs, and video. 

Electronically delivered newspaper and magazine subscriptions are exempt. See the Pennsylvania Department of Revenue for more details. 

• Puerto Rico. Electronically transferred digital audio works, digital audiovisual works, digital codes, or other digital works are generally subject to Puerto Rico sales tax. “Other digital products” may include greeting cards, images, video or electronic games or entertainment, electronic group memberships to obtain exclusive electronic or audiovisual data, news or information products, digital storage products, computer software applications, or any other digital products.

• Rhode Island. Specified digital products are subject to Rhode Island sales and use tax as of October 1, 2019. Taxable products include digital books, digital movies and TV shows, digital music, and related items that are streamed or downloaded to computers, phones, or other devices, as well as subscriptions to streaming audio and streaming visual products. 

   

  Products that fall outside the definition of “specified digital products,” like electronically delivered greeting cards, magazines, newspapers, and photographs, are typically exempt. Rhode Island is an SST state.

• South Dakota. Any product transferred electronically is subject to sales and use tax in South Dakota. A digital code that may be used to obtain an electronically transferred product is taxed in the same manner as the product transferred. See SDCL Chapter 10-45. South Dakota is an SST state.

• Tennessee. The sale, lease, licensing, and use of specified digital products (digital audio works, audiovisual works, and books) are subject to Tennessee sales tax, as is final artwork delivered in digital form. Tennessee sales and use tax also applies to any charges for the permanent or temporary right to access video game digital products.

   

  Digital magazines and newspapers; digital photographs; and data processing and information services are typically exempt from Tennessee sales and use tax. Tennessee is an associate member of SST.

• Texas. Digital goods are taxable in Texas if the items would be taxable when delivered in physical form. Per Texas Code Sec. 151.010, the sale or use of a taxable item in electronic form instead of on physical media does not alter the item’s tax status. 

   

  Data processing services are also subject to Texas sales tax, but 20% of the total amount charged for data processing services is exempt from tax. If the data processing service is also taxable as another type of taxable service other than an information service, the 20% exemption does not apply. 

• Utah. Products transferred electronically are subject to Utah sales tax. See the Utah State Tax Commission. Utah is an SST state.

   

  The enactment of Senate Bill 162 in March 2026, clarifies that effective July 1, 2026, sales and use tax applies to amounts paid or charged to access digital audio-visual works, digital audio works, digital books, or gaming services, including streaming and subscription-based access services, regardless of how the content is delivered. The bill also clarifies that tax applies to prewritten computer sofware delivered electronically or by load and leave, or seller-hosted prewritten computer software.

• Vermont. Specified digital products, including music, reading materials, ringtones, and remotely accessed prewritten software, are generally taxable. Digital videos are also taxable, but digital photographs and newspapers are exempt. Vermont is an SST state.

• Washington. Sales and use tax applies to all digital products, regardless of how they’re accessed or whether the purchaser obtains a permanent or nonpermanent right of use. Taxable digital goods include data, facts, images, information, (movies, pictures), and sounds (music).

   

  Effective October 1, 2025, Washington sales tax also applies to custom software, the customization of prewritten software, and information technology services. Washington is an SST state.

• Wisconsin. Wisconsin sales and use tax generally applies to the sales of and the storage, use, or other consumption in Wisconsin of “specified digital goods,” “additional digital goods,” and “digital codes.” However, specified digital goods are exempt if the sale of such goods in tangible form is exempt. 

   

  Examples of taxable “additional digital goods” include electronic greeting cards, finished artwork, other news or information products, periodicals (though certain subscriptions to electronically transferred magazines are exempt), and video or electronic games. Newspapers are exempt whether transferred electronically or in paper form. Wisconsin is an SST state.

• Wyoming. Digital products and digital codes delivered electronically are subject to Wyoming sales tax when transferred to the purchaser for permanent use. Digital products include but aren’t limited to software, music, video, reading materials, or ringtones. Wyoming is an SST state.

• Washington, D.C. Sales tax applies to digital audiovisual works, digital audio works, digital books, digital codes, digital applications and games, digital news and periodicals, and any other otherwise taxable tangible personal property whether electronically or digitally delivered, streamed, or accessed, and whether purchased singly, by subscription, or in any other manner, including maintenance, updates, and support. See the Office of Tax and Revenue for additional details.     

• Alaska. There is no state sales tax in Alaska. Local taxes may apply to digital goods and services in some jurisdictions.

• California. Electronic data products such as software, data, ebooks, mobile applications, and digital images are generally not subject to California sales and use tax when the data is transmitted to customers over the internet. However, if the sale includes a printed copy of the electronically transferred information or a backup data copy on a physical storage medium, such as a flash drive, the entire sale is usually taxable. A local utility user tax may apply to streaming services.

   

  Starting January 1, 2027, California sales and use tax will apply to digital prewritten software and SaaS. Read this blog post for more details.

• Delaware. There is no general sales tax in Delaware.

• Florida. Digital goods are not considered “tangible personal property” and are therefore not subject to Florida sales or use tax. However, video, direct-to-home satellite, and related services (including voice, data, audio, or any other information or signals transmitted by any medium) are subject to Florida communications services tax, or CST. 

• Illinois. Per 86 Ill. Adm. Code 130.2105(a)(3), information or data that’s downloaded electronically (e.g., downloaded books, musical recordings, newspapers, or magazines) do not constitute the transfer of tangible personal property and are not subject to Illinois sales and use tax.

   

  However, the Chicago amusement tax applies to streaming services in Chicago. And as of January 1, 2026, Chicago imposes a Social Media Amusement Tax (SMAT).

• Kansas. Kansas does not tax specified digital products and has not adopted any of the SST-specified digital products definitions, but prewritten computer software delivered electronically is generally taxable. Kansas is an SST state.

• Massachusetts. Other digital products, such as music, video, and reading material, are not subject to tax when delivered electronically. However, standardized software and video games are generally taxable. See Regulation 830 CMR 64H.1.3 and Regulation 830 CMR 64H.1.3.

• Michigan. Digital goods generally are not subject to Michigan sales and use tax, but “prewritten computer software” is taxable. Digital games are considered software and generally are taxable if downloaded or otherwise installed onto electronic devices. Michigan is an SST state. 

• Missouri. The state hasn’t specifically addressed the taxability of digital products, but a letter ruling issued by the Missouri Department of Revenue in June 2023 explains that digital music, interactive computer services, and signature subscription services are not taxable. Canned software that’s delivered digitally is also exempt, as is any custom software.

• Montana. There’s no general sales tax in Montana.

• Nevada. Products delivered electronically, such as clip art, electronic magazines, program code, and software, are not considered tangible personal property in Nevada and are not subject to sales and use tax. Nevada is an SST state.

• New Hampshire. There’s no general sales tax in New Hampshire. 

• New York. Digital products that are taxable when sold in tangible form (e.g., books, games, movies, and music) are not subject to New York sales and use tax when transmitted electronically. Yet prewritten computer software, including downloadable prewritten computer gaming software, is generally taxable.

• North Dakota. Specified digital products are generally exempt from North Dakota sales tax (see also 57-39.2-04: Exemptions). Prewritten software delivered electronically or by load and leave is subject to tax. North Dakota is an SST state.

• Oklahoma. Sales of digital products delivered electronically including music, video, ringtones, and books, are not subject to Oklahoma sales and use tax (see Okla. Admin. Code § 710:65-19-156). Oklahoma is an SST state.

• Oregon. There’s no general sales tax in Oregon. 

• South Carolina. Digital products generally aren’t taxable. Software delivered by electronic means is not subject to tax in South Carolina provided no part of the software is delivered by tangible means.

   

  However, communication services are subject to South Carolina sales tax. Per Revenue Ruling #16-5, “Charges paid by a customer for streaming television programs, movies, music, and other similar content are charges for communication services and are therefore subject to South Carolina sales and use tax whether paid for as part of a subscription service, per item, or per event.

• Virginia. Digital products delivered electronically (e.g., software, downloaded music, ringtones, and reading materials) are exempt from Virginia sales and use tax. A bill seeking to tax digital goods was introduced in January 2026. 

• West Virginia. Specified digital products are not subject to West Virginia sales and use tax. Custom software and streaming services are taxable, but rentals and similar nonpermanent use of digital audio works, digital audiovisual works, or digital books are not taxable. See the West Virginia Taxability Matrix and also the West Virginia Tax Division, TSD 445. West Virginia is an SST state.

Where digital goods and services are subject to sales tax, retailers and digital goods marketplaces need to know how to source each transaction.

Sourcing sales of electronically transferred products can be more complicated than sourcing sales of tangible goods because of the nature of digital goods. A resident of Texas can easily purchase and download a digital book while vacationing in Hawaii or Maine. A resident of Washington state may stream a movie from a hotel in Chicago or an apartment in Massachusetts.

For the most part, sales of digital products follow destination sourcing rules, either the location where the buyer first makes use of a product or the buyer’s billing address. Yet this presumes the seller knows the location of first use or the billing address of the buyer, which isn’t always the case with digital products. The fact that multiple users can access a digital product simultaneously is another challenge.

The Streamlined Sales and Use Tax Agreement has standard sales tax sourcing rules for digital products, digital codes, and remote access software (RAS). This is the hierarchy:  

• The seller’s place of business (if where the purchaser receives the digital product, code, or RAS)
• The location where the purchaser receives the digital product, code, or RAS (if not the seller’s place of business)
• The purchaser’s address according to the seller’s business records (if the location where the purchaser receives the digital product, digital code, or RAS isn’t known)
• The purchaser’s address as obtained at the time of sale (if no address is in the seller’s business records)
• The address where the digital product, code, or RAS is first made available for transmission by the seller (if no address is obtained at the time of sale)

Technology is constantly evolving, and products sold today don’t always fit neatly into laws made yesterday. To determine the actual taxability of products you sell or lease, consult with a tax professional or the state tax authorities. 

Avalara Agentic Tax and Compliance™ solutions can also help you streamline compliance and collect and remit sales and use tax as required.