Streamlined Sales Tax Governing Board Approves Digital Definitions

After years of negotiations, the Streamlined Sales Tax Governing Board approved in late September a package that outlines how digital products, including online newspapers, will be defined and how they will be treated under the Agreement.

The major issue for the business community was whether states could tax undefined digital products under their general definition of tangible personal property. The compromise that was reached addressed this issue. Effective Jan. 1, 2010, a state cannot include any product transferred electronically in its definition of tangible personal property. States will have two years (until Jan. 1, 2012) to come into compliance.

Equally important is the fact that the Agreement will be amended to add definitions for “specified digital products”. Only three definitions are included: “digital audio-visual works,” “digital audio works,” and “digital books”. Most important for newspapers is that the digital books definition contains the exemption language NAA fought to include. It states that the term “digital books does not include periodicals, magazines, newspapers, or other news or information products, chat rooms or weblogs.” This means online newspapers are exempt from sales and use tax under this provision. In order for an online newspaper to be subject to sales tax under the streamlined agreement, a state would have to approve a separate imposition statute.

First Published:
October 31, 2007