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US digital products sales tax review

Proposal to harmonisation of sales tax classifications on digital goods and services

The US Multistate Tax Commission (MTC) working group is to produce a white paper proposing pan-US harmonisation on the definitions and classifications for the sales tax rules on digital goods and services. This would seek to sync taxability across the 45 states that have sales tax.

Only some of the 45 fully or partially tax digital services, and use the old categories of tangible personal property and services.

MTC is an intergovernmental state tax agency whose mission is to promote uniform and consistent tax policy and administration among the states.

US Digital goods and services complexity

The proposal covers:

  • Current rules – Includes information on how states approach taxation of digital products currently–using a broad, medium, or narrow approach, and information on definitions.
  • Issues of Sale – Includes information on the different types of transactions by which digital products may be provided to customers (i.e., sale, lease, license, subscription or limited access, etc.)
  • Exemptions and Exclusions – Includes policy and administration related issues on exemptions and exclusions that might be applied to digital products.
  • Mixed and Bundled Products – Includes information on the Streamlined bundling rules and from stakeholder interviews on this subject as well as the results of a bundling exercise study group.
  • Sourcing – Includes information from the Streamlined sourcing rules as well as information on other sourcing issues including multiple points of use.
  • Alternative Taxes – Includes information on taxes other than sales and use taxes that may be imposed on digital products.
  • Federal Law – Includes information on relevant federal constitutional and statutory law.
  • Other Related Issues – Includes direct pay rules and general enforcement issues.

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