Podcast: Sales and Use Taxes in Digital Services

In this Weaver: Beyond the Numbers episode, Shane Stewart, Brandon Hayes and Blake Fuqua examine the world of sales and use taxes in digital products and services. With digital goods and services becoming an integral part of the economy, understanding how state tax laws apply is essential for businesses operating in this space.

Key Points:

• Digital products and services are broadly defined, with taxability varying by state.
• States have different rules for taxing digital goods, software and services, requiring careful consideration.
• Tax planning opportunities exist for companies operating across multiple states, such as the multistate benefit exemption.

Fuqua and Hayes dive into the evolving landscape of sales and use taxes on digital products and services. As the economy shifts toward digitization, the definition of taxable digital goods has expanded, now encompassing everything from software to downloadable media. Fuqua and Hayes explain how each state’s approach varies, creating challenges for businesses selling or purchasing digital services across state lines.

“It’s crucial to understand how each state defines digital products and services,” Hayes said. “A transaction that is tax-exempt in one state could be taxable in another, depending on the nature of the product or service and how it’s delivered.” For instance, in Texas, digital products could fall under data processing services or tangible property depending on interpretations of the law.

In the world of cloud computing where tax legislature is struggling to keep up, there’s a need for businesses to stay ahead. Understanding state-specific regulations on digital products and services can be the key to identifying tax exposures and savings.

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