Sales Tax on Digital Products
Project Description
At its July 28, 2021 meeting, the Uniformity Committee considered a recommendation from the Standing Subcommittee to begin drafting the outline of a white paper on state sales taxation of digital products. The committee agreed that MTC staff would begin the process by drafting a detailed outline of the issues to be included in that white paper and conducting research and stakeholder interviews. At the August 2, 2022 meeting of the Uniformity Committee, the committee reviewed the proposed draft outline and agreed that a project work group should be formed to provide ongoing input and review of the white paper, as it is developed.
On this project page, you will find:
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- information about upcoming meetings
- prior meeting agendas, materials, and notes
- whitepaper outline drafts
- research and analysis
- resolutions
- legislative reports
- background and other information on the Streamlined Sales and Use Tax Agreement
- selected information from state tax agencies on taxation of digital products
- written comments and feedback
- related federal information
For information about this or any other MTC uniformity project, contact MTC Uniformity Counsel Helen Hecht at hhecht@mtc.gov.
Upcoming Meeting Notice
Agenda
Thursday, June 6, 2024 – 11:00 a.m. Eastern
I. Welcome and opening remarks
II. Initial public comment
III. Review of notes from April 4, 2024 work group meeting
IV. Next steps
V. Adjourn
For information about this meeting, contact MTC General Counsel Nancy Prosser at nprosser@mtc.gov.
Dial-in/Log-in Information
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Project Materials
Latest Documents – By Subject
Prior Meeting Agendas, Materials, and Notes
Digital Goods Workgroup Agenda, April 4, 2024
Digital Goods Workgroup Agenda, March 7, 2024
Digital Goods Workgroup Agenda, February 1, 2024
Digital Goods Workgroup Agenda, January 11, 2024
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- Notes from November 2, 2023 work group meeting
- Draft matrix (opens in Excel)
Digital Goods Workgroup Agenda, November 2, 2023
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- Notes from October 5, 2023 work group meeting
- Draft matrix (opens in Excel)
- Presentation (PDF) from Ray Langenberg on criteria for defining the digital products tax base
Digital Goods Workgroup Agenda, October 5, 2023
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- Notes from September 7, 2023 meeting
- “Determining the Tax Base”, Ray Langenberg
- Draft matrix (opens in Excel)
Digital Goods Workgroup Agenda, September 7, 2023
Digital Goods Workgroup Agenda, August 3, 2023
Digital Goods Workgroup Agenda, July 6, 2023
Digital Goods Workgroup Agenda, June 1, 2023
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- Notes from Apr. 6, 2023 meeting
- Video from June 1 meeting – Research update from MTC Counsel Jonathan White on state treatment of digital products (links to Vimeo)
Digital Goods Workgroup Agenda, April 6, 2023
Digital Goods Workgroup Agenda, Special Meeting with Avalara Representatives, March 28, 2023
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- (no attachments)
Digital Goods Workgroup Agenda, March 2, 2023
Digital Goods Workgroup Agenda, February 2, 2023
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- MTC staff activities since Jan. 5, 2023 meeting (PowerPoint slides)
- White Paper Outline as of February 2, 2023 (Word Version)
- Notes from January 5, 2023 Meeting
Digital Goods Workgroup Agenda, January 5, 2023
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- White Paper Outline for the January 5, 2023 Meeting (Word Version)
- Notes from December 8, 2022 Meeting
- Letter from Eversheds Sutherland – Jan. 3, 2023
Digital Goods Workgroup Agenda, December 8, 2022
Digital Goods Workgroup Agenda, October 27, 2022
Digital Goods Workgroup Agenda, September 22, 2022
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- Draft Detailed Outline of White Paper – September 1, 2022 (Word Version)
- Letter from Eversheds Sutherland – Sept. 21, 2022 to the Work Group at its initial meeting.
Initial MTC Materials
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- Draft of Detailed Outline of White Paper – August 2, 2022
- Status Report to the Uniformity Committee – August 2022
- Status Report to Uniformity Committee – April 2022
- Status Report to Uniformity Committee – November 2021
- Comments of the ABA – Issues to Address Regarding the Taxation of Digital Products – Nov. 2, 2021
Project Proposal and Recommendation Presentation by the State of Washington Department of Revenue to the Uniformity Committee at its April 2021 meeting recommending that the committee consider a project to modernize state sales and use tax systems to include digital products.
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- Washington Presentation 2021 (PowerPoint Slides)
- Washington Presentation on Sales Taxes on Digital Products 2021 (Video)
Recommendation by the Standing Subcommittee to the Uniformity Committee that the committee begin a project.
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- Final Recommendation – Project on Sales Taxation of Digital Products – as Approved June 17, 2021
Whitepaper Outline Drafts
- Draft of Detailed Outline of White Paper – August 2, 2022
- Draft Detailed Outline of White Paper – September 1, 2022 (Word Version)
- White Paper Outline as of October 17, 2022 (Word Version)
- White Paper Outline for the December 8, 2022 Meeting
- White Paper Outline for the January 5, 2023 Meeting (Word Version)
- White Paper Outline as of February 2, 2023 (Word Version)
Research and Analysis
- Taxing Digital Is Hard, Former State Tax Chief Says (Podcast) Source – BLW (Bloomberg Law) Time – 2024-02-21 16:35:58 (links to external website)
- Jennifer Carr, “Gil Brewer: Consensus Builder,” Tax Notes State, December 18, 2023
- Audio from November 14, 2023 Uniformity Committee ITFA Panel and Discussion and Status Report (links to MP3)
- Powerpoint from ITFA Panel and Discussion
- External links to articles referenced in Ray Langenberg’s “Determining the Tax Base”
- Young Ran (Christine) Kim & Darien Shanske, State Digital Services Taxes: A Good and Permissible Idea
(Despite What You Might Have Heard), 98 Notre Dame Law Review 741 (2022). - Tax Foundation Fiscal Fact No. 563, Oct. 2017, “Sales Tax Base Broadening: Right-Sizing a State Sales Tax”
- Agrawal, David R.; Fox, William F. (2020): Taxing Goods and Services in a Digital Era, CESifo Working Paper, No. 8708, Center for Economic Studies and Ifo Institute (CESifo), Munich
- Annette Nellen, “Now Is a Good Time to Start Fixing the Sales Tax Base,” Tax Notes State, September 7, 2020 (posted here with permission from State Tax Notes and Prof. Nellen).
- Young Ran (Christine) Kim & Darien Shanske, State Digital Services Taxes: A Good and Permissible Idea
- Video from July 25, 2023 Uniformity Committee Panel and Discussion of Tax on Business Inputs (links to Vimeo)
- State Digital Services Taxes (Frieden and Lindholm)
- Down the Rabbit Hole (Frieden, Nicely, and Nair)
- Effect on State Revenue (Texas) (PDF)
- ITEP Slides (Ettlinger) (PDF)
- Tax Pyramiding and Business Inputs – MTC Staff Paper
- Video from June 1 meeting of Project Workgroup – Research update from MTC Counsel Jonathan White on state treatment of digital products (links to Vimeo)
- Video – Streamlined Sales Tax on Digital Products – Craig Johnson (Streamlined), Tim Jennrich (Washington), and Deborah Bierbaum (Multistate Associates), presenting at MTC’s Uniformity Committee meeting, April 25, 2023. (links to Vimeo)
- Article by Adam Thimmesch, “The Scope of Digital Sales Tax Reform,” Tax Analysts, Tax Notes State, March 27, 2023.
- Article by Natalia Garrett and Grant Nülle, “Digital Goods and Services: How States Define, Tax, and Exempt These Items,” Tax Analysts, Tax Notes State, May 18, 2020.
- Slides of Natalia Garrett – Digital Goods: How States Define, Tax and/or Exempt
- Louisiana Research – Digital Products (2021) – State Chart and State Breakdown
- National Tax Association Paper (Hecht – 2014) – Sourcing of Digital Goods and Services for Sales Tax – The Evolution of a Federal Legislative Proposal
- Report to the MTC Uniformity Committee (Hamer – 2019) – Sourcing Digital Goods and Services
- Avalara – State-by-state guide to the taxability of digital products – Gail Cole, Dec. 4, 2020
- Presentation to the Arizona State Legislature – Ad Hoc Joint Committee on the Tax Treatment of Digital Goods and Services – Tax Treatment of Digital Goods and Services: Overview and Cross-State Comparison – 2017
- Center on Budget Policy and Priorities (Mazerov – 2012) – States Should Embrace 21st Century Economy by Extending Sales Taxes to Digital Goods and Services
- New York City Independent Budget Office – Fiscal Brief (2015) – To Tax or Not To Tax the New Economy: Digital Goods and Sales Tax in New York
- SSTP: Out of the Great Swamp, But Whither? A Plea to Rationalize the State Sales Tax – Charles E. McLure (2002)
- “Sales Taxation of Electronic Commerce: What John Due Knew All Along,” Charles E. McLure and Walter A. Hellerstein, Proceedings Annual Conf. on Taxation of the Nat’l Tax Assoc., Vol 93 (2000), pp 216-222.
- “Digital Taxation Around the World,” Daniel Bunn, Elke Asen, Cristina and Enache, Tax Foundation (2020)
- “The Current State of Sales Tax on Digital Products,” Joyce Beebe, Ph.D., Rice University’s Baker Institute for Public Policy, Aug. 7, 2019.
- Presentation on the Taxation of Digital Products – SEATA – 2020 – Steven Kranz, Douglas, Lindholm, Nancy Prosser
- “A Global Perspective on U.S. State Sales Tax Systems as a Revenue Source: Inefficient, Ineffective, and Obsolete.” by Karl Frieden and Douglas Lindholm, Council On State Taxation, November, 2021
Resolutions
Legislative Reports
Streamlined Sales Tax Information
- Streamlined Sales and Use Tax Agreement – May 20, 2021
- Streamlined Rules and Procedures for States – October 5, 2021
- Streamlined Taxability Matrix – Access to Streamlined State Responses to What Taxes are Imposed on Specified Digital Goods
State Tax Agency Information
Note: Links are to external websites.
- Arizona – PLR 21-003 – Data on an Electronic Spreadsheet is Tangible Personal Property and H. 2204 on Virtual Currency and NFTs
- Arkansas – Candy, Soft Drinks, and Digital Products
- California – Graphic Design, Printing, and Publishing (with info on when digital items are taxed)
- Colorado – Definition of “tangible personal property” inclusive of digital goods
- Connecticut – Sales and Use Taxes on Digital Goods and Canned or Prewritten Software
- District of Columbia – Digital Goods Sales Taxability Chart
- Florida – Communications Services Tax
- Idaho – Idaho Sales & Use Tax Administrative Rules
- Illinois – ST-23-0011-GIL – Taxability of Computer Software
- Indiana – Application of Sales Tax to the Sale, Lease, or Use of Computer Hardware, Computer Software, and Digital Goods, Advertising Agency Digital Sales Tax Rules
- Iowa – Taxation of Specified Digital Products, Software, and Related Services, Notice of Intended Action, Updated Sourcing Rules
- Kentucky – Imposition of Sales Tax
- Louisiana – Definition of Tangible Personal Property
- Maine – Instructional Bulletin No. 56 – Telecommunications
- Maryland – Business Tax Tip #29 Sales of Digital Products and Digital Codes
- Michigan – Guidance for when sales and use tax applies to sales of software and digital goods, Sales Taxability of Transactions Involving Sale of Computer Software as Service
- Minnesota – Computer Software and Digital Products
- Mississippi – Notice to purchasers of computer software and/or computer software services
- Missouri – Letter Ruling – Digital Copies of Medical Records Sent Electronically are not subject to Sales Tax
- Nebraska – Revenue Ruling – Retail Sales of Digital Media
- New Jersey – Specified Digital Products & New Jersey Sales Tax and TAM on Convertible Virtual Currency
- New Mexico – Digital Advertising Gross Receipts Tax Rule
- North Carolina – Certain Digital Property
- Ohio – Sales and Use Tax – Digital Products
- Pennsylvania – Tax on Digital Products
- Tennessee – SUT-65 – Specified Digital Products
- Texas – Guidance on the taxability of electronic games and associated content
- Washington – taxation of digital entertainment subscription fees and Interim Statement on NFTs
- Wisconsin – General Information on Digital Goods
Written Comments and Feedback
- Comments of the ABA – Issues to Address Regarding the Taxation of Digital Products – Nov. 2, 2021
- Letter from Eversheds Sutherland – Sept. 21, 2022 to the Work Group at its initial meeting.
- Letter from Eversheds Sutherland – Jan. 3, 2023
- Multistate Tax Group Needs Expertise to Form Digital Definitions, by Kelvin M. Lawrence, published by Bloomberg Tax June 13, 2023, and posted with permission
- Comments from Jeff Friedman and Charlie Kearns, Eversheds Sutherland, “The MTC’s Digital Products Work Group Should Adopt Our Three Guiding Principles” Aug. 9, 2023.