Figuring out how digital products are taxed shouldn’t feel like decoding a legal textbook — but for most businesses, it does. You're building, selling, and streaming in a digital-first world... yet some states are still stuck in the past with unclear or outdated sales tax rules.
So, we’re cutting through the noise. In this guide, we’ll break down what you need to know about how digital goods and services are taxed — state by state.
What counts as a digital product? Depends who you ask.
Selling digital products? Great. Now try figuring out how each state defines them. Spoiler: there’s no universal rulebook.
Most sales tax laws were written before streaming, SaaS, or ebooks were even a thing. So when it comes to digital products — the stuff you can download, stream, or access online — the legal language often falls short.
Here’s the issue: states tax tangible personal property. But digital products? You can’t hold them. You can’t ship them. You can’t stack them in a warehouse. So some states say: “intangible = exempt.” Others? They try to fit the square peg of modern digital content into the round hole of old tax rules.
Some states take the “if it’s taxable in physical form, it’s taxable in digital form” approach. Others have gone ahead and rewritten their rules entirely, adding specific categories for digital books, movies, music, and more.
There’s also a group of 24 states that follow something called the Streamlined Sales and Use Tax Agreement (or SST, if you’re into acronyms). These states stick to shared definitions for “specified digital products” — like digital audio, video, and books — but they still get to decide whether or not to tax them.
And then there are the wild cards — states that haven’t updated anything at all. In those places, businesses are left to make educated guesses based on outdated tax codes.
That’s where we come in. Yonda monitors where you're selling, how you're selling, and what you're selling — and tells you exactly where sales tax applies. Automatically.
How do you figure out sales tax on digital goods?
Simple answer: you don’t.
We do.
Because manually digging through 50 states’ tax laws, department of revenue sites, and one-off government rulings is a nightmare. You’d need time, legal stamina, and a strong cup of coffee (or twelve).
Sure, some states offer “letter rulings” — where they tell a specific business if a specific product is taxable under specific conditions. Sounds helpful, right? Not really. Those rulings only apply to the business that asked. If your facts happen to match theirs exactly, great. But if not? You’re back to square one.
That’s why we built this guide — to give you a head start. Think of it as your digital tax cheat sheet. We’re focusing on the most common digital products:
- 🎧 Digital audio (music, podcasts, ringtones)
- 📚 Digital books (ebooks, digital mags, newspapers)
- 📺 Streaming services (TV, movies, anything you binge)
But — big caveat — this is a starting point, not legal advice. Sales tax depends on lots of factors, like:
- Who you’re selling to (B2B vs. B2C)
- How the product is delivered (cloud vs. download vs. USB stick)
- And, of course, whether the law changed last week (it probably did)
The bottom line? Digital sales tax is complex. But with Yonda, you don’t have to play tax detective. We track the rules, monitor the changes, and tell you what’s taxable — automatically.
Where are digital goods taxable?
Here’s your state-by-state breakdown.
This list focuses on states where digital goods are generally taxable — including music, movies, books, software, and more. Keep in mind, it’s never just about what you sell — how it’s delivered, who you sell to, and where your customer is located can all shift the rules.
Yonda keeps tabs on all of this for you. But if you’re curious, here’s how the landscape looks:
States where digital goods are generally taxable
Alabama
If it's digital and deliverable, it’s probably taxed. Format doesn’t matter.
Arizona
If it can be perceived with the senses, it’s likely taxable — yes, that includes digital goods.
Arkansas
Digital products? Count on them being taxed.
Colorado
Digital goods are taxed. Downloaded software is exempt.
Connecticut
Personal use: full 6.35% tax
Business use: 1% reduced rate
Georgia
As of Jan 2024, if your customer gets permanent access to a digital product — it’s taxable.
Hawaii
GET (General Excise Tax) applies to digital products.
Idaho
Digital goods = taxable if the buyer gets permanent use. Subscriptions? Not taxed.
Indiana
Specified digital products are taxable if there’s permanent use. Digital codes are taxed like the product they unlock.
Iowa
Taxable unless sold to a commercial enterprise using it exclusively.
Kentucky
Digital property (music, videos, games) = taxable.
Louisiana
If it’s a digital download (music, books, games), it’s taxable.
Maine
Products delivered electronically? Subject to sales tax.
Maryland
Digital goods and codes are taxed. This kicked in March 2021.
Minnesota
Most digital content is taxed (games, videos, etc.). Digital photos, charts, and news? Exempt.
Mississippi
Digital goods = taxable. Codes that unlock digital content? Also taxable.
Nebraska
If it’s a digital book, song, video, or code — it’s taxable.
New Jersey
Tax applies to digital products and services like installation and maintenance.
New Mexico
Digital goods fall under gross receipts tax.
North Carolina
Audio, video, books, even digital greeting cards — all taxed, no matter the access model.
Ohio
Ownership or rental? Doesn’t matter — digital goods are taxed either way.
Pennsylvania
6% sales tax on all digital products — streamed, downloaded, or otherwise.
Rhode Island
As of Oct 2019: movies, books, music, and streaming subscriptions are taxed.
South Dakota
Everything delivered electronically is taxable. No delivery address? Tax based on point of access.
Tennessee
Digital audio/video/books are taxed. Digital artwork is taxed. Photos? Exempt.
Texas
If it’s taxable physically, it’s taxable digitally. Format doesn’t change taxability.
Utah
If it’s delivered electronically, it’s taxable.
Vermont
Downloads and prewritten software = taxable. Videos too. Photos? Exempt.
Washington
All digital products are taxable — no exceptions based on access or ownership.
Wisconsin
Digital goods and codes are taxed unless their physical version would be exempt.
Wyoming
If the buyer gets permanent access, digital products (music, videos, software, etc.) are taxable.
Washington, D.C.
Audiobooks, movies, games, apps, codes — if it’s digital and sold, streamed, or supported, it’s taxed.
States that generally exempt digital goods
- Alaska. There is no state sales tax in Alaska. Local taxes may apply in some jurisdictions.
- California. The sale of electronic data products such as software, data, ebooks, mobile applications, and digital images are generally not taxable 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 users tax may apply to streaming services.
- Delaware. There is no general sales tax in Delaware.
- Florida. Digital goods are not considered “tangible personal property” and so are 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.
- Kansas. Kansas does not tax specified digital products and has not adopted any of the SST-specified digital products definitions.
- Massachusetts. Other than software, digital products such as music, video, and reading material are not subject to tax when delivered electronically.
- Michigan. A digital good that doesn’t fall within the definition of “prewritten computer software” is not subject to sales tax or use tax regardless of whether it’s downloaded, streamed, or accessed through a subscription service. Digital games are considered software and generally taxable if downloaded or otherwise installed onto electronic devices.
- 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.
- Montana. There’s no general sales tax in Montana.
- Nevada. Specified digital products are not considered tangible personal property in Nevada and are not subject to sales and use tax.
- 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., ebooks, 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 57-39.2-04: Exemptions).
- 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).
- Oregon. There’s no general sales tax in Oregon.
- South Carolina. 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, cloud-based services and streaming services are subject to South Carolina sales tax.
- Virginia. Digital products delivered electronically (e.g., software, downloaded music, ringtones, and reading materials) are exempt from Virginia sales and use tax. In 2024, a bill seeking to tax digital goods failed to become law.
- West Virginia. Specified digital products are not subject to West Virginia sales and use tax. However, streaming services are taxable. See also the West Virginia Tax Division, TSD 445.
Where’s your customer, really?
When it comes to sales tax on digital products, it’s not just what you sell that matters — it’s where you sell it. And that’s where things get tricky.
Unlike shipping a physical product to a doorstep, digital goods don’t leave a breadcrumb trail. Someone in Texas can buy and download an ebook while on a beach in Hawaii. A Washington-based customer can stream a movie from a hotel in Chicago or a coworking space in Boston. So... where’s the sale actually happening?
Most states use destination-based sourcing — meaning you tax the sale based on where the buyer uses the product or where they’re billed. Sounds simple… until it’s not. What if you don’t know where the product was used? What if the billing address isn’t tied to the real user? What if multiple people use the same account from different states?
Digital creates grey areas. And grey areas don’t play well with tax rules written in the dial-up era.
So, what do you do?
You automate. Yonda uses real-time logic to source digital transactions correctly — tracking what states require, even when the guidance is fuzzy.
You sell from anywhere.
We figure out where the tax belongs.