Online Digital Products for Sale Subject to Sales Tax in Washington State

According to the Washington State Department of Revenue's Tax Facts newsletter of June 2009, beginning on July 26, 2009, digital products including remote access software (RAS) and digital auto services (DAS) like photos sold using file sharing, Carfax and search engines for legal research done for specific clients will now be subject to sales or use tax. This will be on top of the existing requirements covering streaming video and downloaded music. The new legislation also includes some subscription and newsletter services.

Engrossed Substitute House Bill 2075 clarifies the definition of digital products including all the bytes and bits. Basically, the new Washington State legislation covers digital goods for sale like movies and music and digital information, remote access software for sale and other digitally streamed and accessed goods including subscription and automated services plus networking and newsletters.

There are certain exemptions under this new tax legislation. Television and radio stations (except possibly pay-per-views), personal email or business related emails which are not intended for sale or profit, digital information created for internal business audiences and some nonprofit legal services for low income individuals (HB 1579 also new). A nonprofit means an organization exempt from federal income tax under Title 26 USC Sec. 501(c) of the Federal Internal Revenue Code (effective July 26, 2009). To find out more about these changes with definitions and detailed Q and A you can go to dor.wa.gov/digitalproducts Washington's Department of Revenue website.

The new law also requires efiling of state taxes by retailers. It allows for amnesty to those who did not collect or pay sales or use taxes on music and movies prior to July 26, 2009, which have always been subject to sales or use taxes in Washington State.

The DOR's Telephone Information Center is open Monday through Friday 8am to 5pm at 1-800-647-7706.