Questions

Do companies in the U.S. have to charge a sales tax on digital products, e.g. Info products?

3answers

There are a lot of moving parts to this question.

First, you need to determine in which states you have "nexus" and then determine do those states require you to charge sales tax, as each state has different rules.

As an example, MA requires salesforce.com to charge sales tax to MA customers but does not require newyorktimes.com to charge sales tax. The difference is that users can manipulate data on salesforce.com vs. neworktimes.com is read only. This example can only be applied to MA, Arizona, Illinois, New York, Texas, Pennsylvania and Washington State (as of now).

There are also "click-through" and "affiliate" nexus rules that need to be considered.

Be careful, as state and local taxation has become a very hot due diligence issue in M&A transactions. So, if you plan to sell your business in the next few years, you want to get this right. Also, the Officers and Directors are personally responsible for uncollected Sales tax.

You are best to get an expert to review your sales tax compliance, as it is a very specialized area and changing constantly. I am not an expert, but know of some firms that offer this service at a very reasonable rate.

Feel free to call me.

Thank you,

Joe Faris
Accountalent Management Corp.
45 Prospect Street
Cambridge, MA 02139

Tel (978) 621-0759
Fax (978) 278-1517

Website: www.accountalent.com
LinkedIn: www.linkedin.com/in/farisjoe/
Twitter: @accountalent


Answered 7 years ago

Sales Tax is a state-by-state question, but generally sales taxes are collected by sellers of almost any good (and quite a few services).


Answered 7 years ago

The sales tax laws have been updated to include digital goods and services in different ways across the different US states, and the application of these laws has been troublesome for most state and local governments. There are 28 states that tax digital products. There are 23 states that do not tax digital products., you are only required to collect sales tax in states where you have “sales tax nexus”. If you have nexus in a state, then you must apply sales tax to buyers in that state.
In general, digital products, or digital goods, are defined as intangible goods that exist in electronic or digital format. They are delivered to the end customer electronically, such as through email or online download. States using their own definition – In addition to the general categories listed above, many states have their own definition of digital goods and services. States not using any definition at all – There are 18 states that do not specifically define digital goods.
In 2011, the US Congress enacted The Digital Goods and Services Tax Fairness Act. This law provided a federal framework for digital taxes but did not go far enough in providing guidance and direction for the individual states. More recently, there have been several attempts by federal and state legislators to create a more homogenous digital tax, but there has been fierce resistance. The Federation of Tax Administrators is an organization of state tax authorities and administrators’ which surveys sales tax rates and provides regularly updated reports.
Besides if you do have any questions give me a call: https://clarity.fm/joy-brotonath


Answered 2 years ago

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