Digital product tax compliance

Research summary and consolidated findings for: Digital product tax compliance (US businesses, 2026) Research steps taken - Ran parallel web searches across tax-industry trackers and state DOR sources (Sales Tax Institute, TaxJar, TaxCloud, Avalara) to map national trends and recent 2025–2026 changes expanding digital tax bases. - Scraped and extracted authoritative state guidance and bulletins where available (Maine Revenue Services GIB 115; Washington Department of Revenue digital products guidance; Illinois FY 2026-12 bulletin; California CDTFA Publication 109; New York Tax Bulletin TB-ST-128; Texas Comptroller rule updates summarized by Grant Thornton; Maryland Comptroller digital advertising guidance). - Collated marketplace facilitator and economic nexus policy summaries (Avalara, TaxJar, NCSL/supplemental guides).

Key findings (concise) 1) National trend: states are expanding taxation of digital goods/services. Multiple reputable sources identify 2025–2026 as a wave of expansion: streaming/subscriptions, data processing, SaaS, digital advertising and other digital services are being revisited by states. (See TaxCloud, Sales Tax Institute, Avalara). 2) Marketplace facilitator laws are now widespread: most states require major marketplaces to collect and remit for third-party sellers (common enforcement thresholds: $100,000 in sales and/or 200 transactions, but some states have moved to revenue-only models).

Sellers must still manage non-marketplace channels, registration and often zero returns. (See TaxJar, Avalara). 3) Economic nexus thresholds and transaction tests: the dominant pattern since Wayfair is $100,000 or a $100k/200 txn combined test; some states changed rules in 2026 (e.g., Illinois removed the 200-transaction element and moved to revenue-only).

CA uses a $500,000 revenue threshold for tangible personal property. Businesses should assume thresholds can change rapidly. (See TaxCloud, Illinois bulletin, CDTFA guidance). 4) State-by-state taxability of digital products—examples and authoritative positions: - Maine: GIB 115 (P.L. 2025, c. 388) — effective Jan 1, 2026 Maine adds "digital audiovisual and digital audio services" as taxable services (5.5%) and defines digital audiovisual/audio works and subscriptions. (Maine GIB 115). - Washington: DOR guidance (Digital Products page) — effective Oct 1, 2025, many digital services and digital products are subject to retail sales tax; the page lists downloaded and streamed digital goods and digital automated services as subject to sales/use tax and discusses sourcing and exemption certificates. (WA DOR). - California: CDTFA guidance (Publication 109 and related materials) — California generally treats SaaS and similar remote access software as intangible/non-taxable (prewritten software delivered electronically is typically non-taxable absent a tangible medium), though tangible media or bundled physical items can create taxability; CA economic nexus threshold for tangible sales is $500,000. (CDTFA Pub 109). - New York: TB-ST-128 (Computer Software) — New York treats prewritten computer software as taxable tangible personal property whether delivered on physical media, electronically transmitted or via remote access; custom software designed to spec for a purchaser is nontaxable. (NY TB-ST-128). - Illinois: FY 2026-12 bulletin — Illinois updated its remote nexus rules effective Jan 1, 2026, removing the 200-transaction threshold and aligning to revenue-only nexus ($100,000) for remote sellers; the bulletin also clarifies marketplace facilitator definitions and responsibilities. (IL FY 2026-12). - Texas: rule update on data processing services (effective April 2, 2025) — Texas provided an expanded rule clarifying taxable data processing services and examples; Texas taxes many data-processing and SaaS-like services (with certain statutory exemptions/adjustments), and the rule addresses sourcing, B&O implications and marketplace provider treatment. (Texas rule summary / Grant Thornton). - Maryland: Digital Advertising Gross Revenues Tax — Maryland imposes a tax on digital advertising gross revenues for large global taxpayers (reporting, filing and payment guidance available); separate from sales tax but relevant to digital-revenue compliance for large businesses. (Maryland Comptroller guidance). 5) Practical compliance implications for US business owners/LLC founders - Product classification: map each SKU/service line to state taxability (prewritten software, custom software, SaaS/remote access, downloaded media, streamed subscriptions, digital advertising, data processing).

States differ — treat CA, NY, WA, ME, TX, IL as priority review states based on recent changes. - Nexus monitoring: track both physical and economic nexus (use automated nexus-tracking tools). Don’t assume marketplace facilitators relieve all obligations — keep registrations and file returns for non-marketplace sales; some states require sellers to maintain active permits or file zero returns even when a marketplace collects. - Registration and collection: once nexus is met in a state, register promptly for a sales tax permit and begin collecting; check the state’s required collection start date (some require immediate collection after exceeding threshold; others allow next-month/quarter). - Sourcing & invoicing: apply state sourcing rules for digital products (SSUTA destination/origin nuances); many states source to the customer’s address or point of first use/access. - Bundled transactions and exemptions: if you bundle taxable tangible items with non-taxable services, states may tax the entire bundle unless properly itemized; maintain exemption certificate management for resale/exempt customers. - Filing cadence & records: nexus growth may trigger more frequent filing (monthly) — prepare bookkeeping and tax-engine integrations.

Maintain supporting records for product taxability, billing, and any marketplace-collected transactions. - Voluntary disclosure and remediation: several states (example: Washington VDA program) run voluntary disclosure programs that may limit lookback and penalties — consider VDA if past noncompliance exposure exists. - Use tax exposure: if you purchase taxable digital products without being charged tax, you may owe use tax; track inbound purchases and claim credits where allowed. - Seek expertise and automation: use a tax automation engine (rates + product taxability + nexus monitoring + filing) and get a multistate SALT advisor for complex offerings (SaaS + data processing + advertising revenue).

Recommended authoritative resources (quick links) - Maine GIB 115 (2025): https://www.maine.gov/revenue/sites/maine.gov.revenue/files/inline-files/GIB%20115_FINAL_2025_10_17_0.pdf - Washington DOR — Digital Products: https://dor.wa.gov/forms-publications/publications-subject/tax-topics/digital-products-including-digital-goods - Illinois FY 2026-12 bulletin: https://tax.illinois.gov/research/publications/bulletins/fy-2026-12.html - California CDTFA Publication 109 (Internet Sales): https://cdtfa.ca.gov/formspubs/pub109/ - New York TB-ST-128 (Computer Software): https://www.tax.ny.gov/pubs_and_bulls/tg_bulletins/st/computer_software.htm - Texas data processing rule summary (Grant Thornton): https://www.grantthornton.com/insights/alerts/tax/2025/salt/p-t/tx-updates-data-processing-services-tax-rule-04-11 - Maryland Digital Advertising guidance: https://www.marylandtaxes.gov/business/digital-ad/ - Industry/state-change trackers: TaxJar, TaxCloud, Avalara, Sales Tax Institute. (See links in citations below.) Immediate next steps for content creation (what to include in the blog/newsletter draft) - Short explainer of the national landscape and Wayfair legacy. - State-by-state highlight panel with 6–8 priority states (CA, NY, WA, ME, IL, TX, MD) summarizing current positions and effective dates. - Practical checklist for LLC owners: classify offerings, run nexus review, register where required, confirm marketplace facilitator responsibilities, update checkout/tax engine mapping, maintain exemption certificates, prepare for filing frequency changes. - Examples and mini-case studies: (a) SaaS-only seller based in CA selling nationwide; (b) streaming subscription seller with customers in Maine and Washington; (c) marketplace seller on Amazon — steps to verify marketplace coverage and file zero returns. - Links to primary source guidance and recommended vendor tools & advisors.

If you want, I can now: (A) draft the full blog post (1,200–1,800 words) tailored to US LLC founders with state-callouts for CA, NY, WA, ME, IL, TX and MD, including SEO meta, headings, checklist and sample wording for registration and invoice changes; or (B) produce a shorter newsletter-ready summary and CTA to book compliance help.

Tell me which deliverable you want and I’ll produce it with citations and state-specific excerpts.

Research summary and consolidated findings for: Digital product tax compliance (US businesses, 2026) Research steps taken - Ran parallel web searches across tax-industry trackers and state DOR sources (Sales Tax Institute, TaxJar, TaxCloud, Avalara) to map national trends and recent 2025–2026 changes expanding digital tax bases. - Scraped and extracted authoritative state guidance and bulletins where available (Maine Revenue Services GIB 115; Washington Department of Revenue digital products guidance; Illinois FY 2026-12 bulletin; California CDTFA Publication 109; New York Tax Bulletin TB-ST-128; Texas Comptroller rule updates summarized by Grant Thornton; Maryland Comptroller digital advertising guidance).

1) National trend: states are expanding taxation of digital goods/services. Multiple reputable sources identify 2025–2026 as a wave of expansion: streaming/subscriptions, data processing, SaaS, digital advertising and other digital services are being revisited by states. (See TaxCloud, Sales Tax Institute, Avalara). 2) Marketplace facilitator laws are now widespread: most states require major marketplaces to collect and remit for third-party sellers (common enforcement thresholds: $100,000 in sales and/or 200 transactions, but some states have moved to revenue-only models).

Sellers must still manage non-marketplace channels, registration and often zero returns. (See TaxJar, Avalara). 3) Economic nexus thresholds and transaction tests: the dominant pattern since Wayfair is $100,000 or a $100k/200 txn combined test; some states changed rules in 2026 (e.g., Illinois removed the 200-transaction element and moved to revenue-only).

CA uses a $500,000 revenue threshold for tangible personal property. Businesses should assume thresholds can change rapidly. (See TaxCloud, Illinois bulletin, CDTFA guidance). 4) State-by-state taxability of digital products—examples and authoritative positions: - Maine: GIB 115 (P.L. 2025, c. 388) — effective Jan 1, 2026 Maine adds "digital audiovisual and digital audio services" as taxable services (5.5%) and defines digital audiovisual/audio works and subscriptions. (Maine GIB 115). - Washington: DOR guidance (Digital Products page) — effective Oct 1, 2025, many digital services and digital products are subject to retail sales tax; the page lists downloaded and streamed digital goods and digital automated services as subject to sales/use tax and discusses sourcing and exemption certificates. (WA DOR). - California: CDTFA guidance (Publication 109 and related materials) — California generally treats SaaS and similar remote access software as intangible/non-taxable (prewritten software delivered electronically is typically non-taxable absent a tangible medium), though tangible media or bundled physical items can create taxability; CA economic nexus threshold for tangible sales is $500,000. (CDTFA Pub 109). - New York: TB-ST-128 (Computer Software) — New York treats prewritten computer software as taxable tangible personal property whether delivered on physical media, electronically transmitted or via remote access; custom software designed to spec for a purchaser is nontaxable. (NY TB-ST-128). - Illinois: FY 2026-12 bulletin — Illinois updated its remote nexus rules effective Jan 1, 2026, removing the 200-transaction threshold and aligning to revenue-only nexus ($100,000) for remote sellers; the bulletin also clarifies marketplace facilitator definitions and responsibilities. (IL FY 2026-12). - Texas: rule update on data processing services (effective April 2, 2025) — Texas provided an expanded rule clarifying taxable data processing services and examples; Texas taxes many data-processing and SaaS-like services (with certain statutory exemptions/adjustments), and the rule addresses sourcing, B&O implications and marketplace provider treatment. (Texas rule summary / Grant Thornton).

5) Practical compliance implications for US business owners/LLC founders

- Maine GIB 115 (2025): https://www.maine.gov/revenue/sites/maine.gov.revenue/files/inline-files/GIB%20115_FINAL_2025_10_17_0.pdf

- Illinois FY 2026-12 bulletin: https://tax.illinois.gov/research/publications/bulletins/fy-2026-12.html - California CDTFA Publication 109 (Internet Sales): https://cdtfa.ca.gov/formspubs/pub109/ - New York TB-ST-128 (Computer Software): https://www.tax.ny.gov/pubs_and_bulls/tg_bulletins/st/computer_software.htm - Texas data processing rule summary (Grant Thornton): https://www.grantthornton.com/insights/alerts/tax/2025/salt/p-t/tx-updates-data-processing-services-tax-rule-04-11

- State-by-state highlight panel with 6–8 priority states (CA, NY, WA, ME, IL, TX, MD) summarizing current positions and effective dates.

- Links to primary source guidance and recommended vendor tools & advisors. If you want, I can now: (A) draft the full blog post (1,200–1,800 words) tailored to US LLC founders with state-callouts for CA, NY, WA, ME, IL, TX and MD, including SEO meta, headings, checklist and sample wording for registration and invoice changes; or (B) produce a shorter newsletter-ready summary and CTA to book compliance help.

Tell me which deliverable you want and I’ll produce it with citations and state-specific excerpts.

• Collated marketplace facilitator and economic nexus policy summaries (Avalara, TaxJar, NCSL/supplemental guides). Key findings (concise)
• Maryland: Digital Advertising Gross Revenues Tax — Maryland imposes a tax on digital advertising gross revenues for large global taxpayers (reporting, filing and payment guidance available); separate from sales tax but relevant to digital-revenue compliance for large businesses. (Maryland Comptroller guidance).
• Product classification: map each SKU/service line to state taxability (prewritten software, custom software, SaaS/remote access, downloaded media, streamed subscriptions, digital advertising, data processing). States differ — treat CA, NY, WA, ME, TX, IL as priority review states based on recent changes.
• Nexus monitoring: track both physical and economic nexus (use automated nexus-tracking tools). Don’t assume marketplace facilitators relieve all obligations — keep registrations and file returns for non-marketplace sales; some states require sellers to maintain active permits or file zero returns even when a marketplace collects.
• Registration and collection: once nexus is met in a state, register promptly for a sales tax permit and begin collecting; check the state’s required collection start date (some require immediate collection after exceeding threshold; others allow next-month/quarter).
• Sourcing & invoicing: apply state sourcing rules for digital products (SSUTA destination/origin nuances); many states source to the customer’s address or point of first use/access.
• Bundled transactions and exemptions: if you bundle taxable tangible items with non-taxable services, states may tax the entire bundle unless properly itemized; maintain exemption certificate management for resale/exempt customers.
• Filing cadence & records: nexus growth may trigger more frequent filing (monthly) — prepare bookkeeping and tax-engine integrations. Maintain supporting records for product taxability, billing, and any marketplace-collected transactions.
• Voluntary disclosure and remediation: several states (example: Washington VDA program) run voluntary disclosure programs that may limit lookback and penalties — consider VDA if past noncompliance exposure exists.
• Use tax exposure: if you purchase taxable digital products without being charged tax, you may owe use tax; track inbound purchases and claim credits where allowed.
• Seek expertise and automation: use a tax automation engine (rates + product taxability + nexus monitoring + filing) and get a multistate SALT advisor for complex offerings (SaaS + data processing + advertising revenue). Recommended authoritative resources (quick links)
• Washington DOR — Digital Products: https://dor.wa.gov/forms-publications/publications-subject/tax-topics/digital-products-including-digital-goods
• Maryland Digital Advertising guidance: https://www.marylandtaxes.gov/business/digital-ad/
• Industry/state-change trackers: TaxJar, TaxCloud, Avalara, Sales Tax Institute. (See links in citations below.) Immediate next steps for content creation (what to include in the blog/newsletter draft)
• Short explainer of the national landscape and Wayfair legacy.
• Practical checklist for LLC owners: classify offerings, run nexus review, register where required, confirm marketplace facilitator responsibilities, update checkout/tax engine mapping, maintain exemption certificates, prepare for filing frequency changes.
• Examples and mini-case studies: (a) SaaS-only seller based in CA selling nationwide; (b) streaming subscription seller with customers in Maine and Washington; (c) marketplace seller on Amazon — steps to verify marketplace coverage and file zero returns.