Washington Changes Taxation of "Digital Products"

Washington Governor signed and enacted House Bill 2075 (HB 2075) on May 20, 2009 which imposes sales or use tax on digital products ranging from downloaded music to streaming video beginning July 26, 2009.

HB 2075 clarifies how taxes apply to products that exist only as computer bits and bytes. Specifically, it:

1. Defines digital products as goods and services transferred electronically.
2. Includes certain exemptions for businesses and end consumers.
3. Requires sellers of digital products to electronically file their tax returns.
4. Provides amnesty to those who didn’t collect or pay sales or use tax on digital products that were taxed before July 26, 2009.

What digital products are subject to tax?

While downloaded digital goods (music and movies, etc.) have always been subject to sales or use tax, the new law applies sales or use tax to all digital products, regardless of how they are accessed (downloaded, streamed, subscription service, networking, etc.).

Digital products subject to sales or use tax include:

1. Downloaded digital goods (music and movies, etc.)
2. Streamed and accessed digital goods
3. Digital automated services (DAS)
4. The bill also covers remote access software (e.g. application service providers), which is now subject to sales and use tax too.
5. It does not matter if the purchaser obtains a permanent or nonpermanent right of use. (See sections 301(8) and 305(1)(e) of the digital products bill).

Click on the following link to access Washington's website and learn more:

http://dor.wa.gov/Content/GetAFormOrPublication/PublicationBySubject/TaxTopics/DigitalProducts.aspx

If you have questions regarding these changes, please contact me at leveragesalt@earthlink.net.