Sales Tax on Digital Products by State (2026)

Sales tax on digital products depends entirely on the state: some tax nearly every ebook, download, stream and software subscription, some tax only software, and a handful tax none of them. The list is also moving quickly. Louisiana broadened its digital tax base in 2025, Utah expanded in July 2026, and California and Colorado have changes taking effect on January 1, 2027. If you sell templates, ebooks, courses, apps or SaaS to US customers, you need to know where you have nexus and how each of those states classifies your product.

This guide groups the states, explains the 2026 and 2027 changes, walks through a worked example for a digital creator, and shows how to put sales tax on a digital product invoice correctly. It is general information, not tax advice, and taxability depends on facts; check the state revenue department or a sales tax adviser before relying on it.

What counts as a digital product for sales tax?

States use different labels, but they usually sort digital sales into a few buckets:

• Specified digital products: digital audio (music, audiobooks), audio-visual works (movies, video) and digital books. This term comes from the Streamlined Sales and Use Tax Agreement.
• Prewritten (canned) software: downloaded or accessed remotely, including apps and games.
• SaaS and cloud services: software you use online without downloading.
• Other digital goods: templates, fonts, stock photos, printables, digital codes.
• Digital services: data processing, information services and similar.

The same file can be taxed differently depending on whether the buyer gets a permanent right to use it or a subscription, and whether the buyer is a business or consumer.

Digital product taxability by state: the main groups

The groupings below summarize the July 2026 Avalara state-by-state guide to digital products. Rules have many exceptions, so treat this as a starting map, not a final answer.

Group	Example states	Typical treatment
Broadly taxable	Washington, Pennsylvania, South Dakota, Utah, Louisiana, Kentucky, Ohio, Minnesota, New Jersey, Wisconsin, Washington D.C.	Most digital goods taxable; several also tax streaming and subscriptions
Taxable with conditions	Georgia, Idaho, Indiana, Wyoming, North Carolina, Tennessee	Often only when the buyer gets permanent use; rules on subscriptions vary
Software taxable, other digital goods generally not	New York, Massachusetts, Michigan, North Dakota, Kansas	Ebooks and music usually exempt; prewritten software taxable
Generally not taxable (for now)	Florida, Nevada, Illinois (state level), Oklahoma, Virginia	Electronically delivered goods largely exempt; local taxes may differ
Changing on January 1, 2027	California (software and SaaS), Colorado (downloaded software exemption repealed, with exceptions)	Prepare billing and registration now
No statewide sales tax	Alaska, Delaware, Montana, New Hampshire, Oregon	No state sales tax; some Alaska localities tax remote sales

Notable details

• Texas: digital goods are taxable if the physical version would be, and data processing services are taxable on 80% of the charge because of a 20% exemption.
• Maryland: has taxed digital products since 2021 and added a 3% tax on certain data, IT and software publishing services from July 1, 2025.
• Washington: taxes digital products regardless of access method, and from October 1, 2025 also taxes custom software and many IT services.
• Connecticut: digital goods are taxed at 6.35% for personal use, while electronically delivered software for business use is taxed at 1%.
• Chicago: streaming is subject to the city amusement tax even though Illinois does not tax digital downloads at the state level.

California's 2027 digital product tax

California has long exempted electronically delivered software. That ends on January 1, 2027. SB 122, signed June 29, 2026, taxes prewritten computer software transferred on tangible media, transferred electronically or accessed remotely. According to an analysis by Forvis Mazars, digital books, movies, music, video games and cryptocurrency are excluded, the $500,000 remote seller threshold is unchanged, and sales are sourced to the purchaser's address in your records, with billing address taking priority. A seller of more than $5 million of taxable digital products to a single purchaser in a year stops collecting from that purchaser, who pays use tax instead.

If you sell software or SaaS to California customers and your California sales exceed $500,000, plan now: register, update checkout to collect billing addresses, and adjust invoice templates.

Step by step: deciding whether to charge tax

1. Classify your product in each state: specified digital product, software, SaaS, digital service or other.
2. Find your nexus states. Track sales by state against economic thresholds; see our sales tax nexus guide.
3. Check marketplace coverage. If an app store or download platform acts as a marketplace facilitator, it may collect for you; read our post on marketplace facilitator laws.
4. Look up taxability on each nexus state's revenue site.
5. Register and collect in states where you have nexus and the product is taxable.
6. Collect exemption or resale certificates from business buyers who qualify; see sales tax exemption certificates.
7. File returns on the schedule each state assigns.

Worked example: a template shop selling to three states

Illustrative figures. A designer sells Notion and spreadsheet templates (permanent downloads) and a $15 per month SaaS invoicing add-on directly from her own website. She has crossed economic nexus in Washington and Pennsylvania and has a physical presence in Florida.

State	Template download ($40)	SaaS subscription ($15/mo)
Washington	Taxable	Taxable (remote access taxed)
Pennsylvania	Taxable at 6% plus any local	Check Pennsylvania guidance for software access
Florida	Not taxable (digital goods exempt)	Generally not taxable as a digital good

For a Washington customer buying one template, she adds Washington state and local tax at the customer's address. Her invoice shows the $40 price, the tax rate, the tax amount and the customer's location. A Florida customer pays $40 with no sales tax. The sales tax calculator helps check the math.

Online courses, memberships and bundles

Creators rarely sell a single clean product. The way you package an offer can change its tax treatment:

Offer	How states often view it	What to check
Prerecorded video course	Digital audio-visual work or digital good	Whether the state taxes video downloads or streaming
Live online class or coaching	Service, often nontaxable	Whether the state taxes personal or educational services
Membership with library plus community	Mixed; may be taxed in full or split	State bundling rules and whether you itemize components
Digital product plus printed workbook	Bundle with tangible goods; can make the whole sale taxable	Separately stated pricing on the invoice
License for business use of templates or fonts	Software or digital good, sometimes at a business rate	Business-use rates, such as Connecticut's 1% for business software

When an offer combines taxable and nontaxable parts, listing each part with its own price on the invoice often lets you tax only the taxable part, but only where the state allows it. If you sell to buyers outside the US, separate rules apply: many countries charge VAT or GST on digital services sold to consumers, often with registration obligations for foreign sellers.

Recordkeeping for digital sales

Digital sales leave fewer physical clues, so keep the data states ask for in an audit: customer billing address, the evidence used to locate the customer, the tax charged, exemption certificates for business buyers, and platform reports for marketplace sales. Export these monthly from your checkout or payment processor rather than relying on access later.

What to do before January 1, 2027

If you sell software, apps or SaaS, the California and Colorado changes make the next few weeks a good time to prepare. Check your California sales against the $500,000 threshold for the current and prior year, confirm your checkout collects a billing address for every customer, and decide whether your payment platform or tax software can calculate California tax on subscriptions automatically. Update your invoice template to show the tax line and your permit number. If renewals are billed annually in advance, ask a tax adviser how invoices issued before January 1 for service periods after that date will be treated, since rules on timing can differ.

Common mistakes with digital product sales tax

• Assuming digital means tax-free. Dozens of states tax at least some digital goods.
• Applying the seller's home state rate. Digital sales are generally sourced to the buyer.
• Ignoring bundles. Shipping a physical workbook with a digital course can make the whole sale taxable in some states, as California's current rules show.
• Treating every subscription the same. Several states tax permanent downloads but not subscriptions, and vice versa.
• Not watching 2027. California and Colorado changes apply to sales from January 1, 2027.

Invoicing digital products correctly

A good digital product invoice lists the product type (download, subscription period or license), the customer's billing address, the tax rate and amount for that jurisdiction, and your registration number where states require it. Recurring SaaS charges benefit from a clear template; see our SaaS subscription invoice template. If you sell services alongside products, compare with our guide to sales tax on services by state, and for the basics of showing tax on invoices read sales tax on US invoices. Creators selling through KDP or TikTok should also read Amazon KDP royalties for how platform sales are taxed.

Whatever you sell digitally, a clean invoice with the right tax line protects you in an audit. Create one with our free invoice generator, with no sign-up, and download it as a PDF to send with every order or subscription renewal.