Compliance for companies selling digital goods

Research steps taken and summary of findings:1) Tools used and search approach- Ran a broad web search and extraction focused on US compliance for companies selling digital goods, prioritizing authoritative sources (state departments of revenue, state statutes, NCSL, industry tax specialists, and federal regulators). Search terms included: "digital goods sales tax [state]", "marketplace facilitator law [state]", "digital product taxability [state]", "automatic renewal law [state]", "state privacy law [state]", "data breach notification law [state]", and "money transmitter license digital goods". The search returned industry analyses, state summaries, and federal/regulatory guidance.2) Key compliance areas identified (summary of findings)- Sales tax and Taxability of Digital Goods: States vary widely on whether and how they tax digital goods (ebooks, downloads, streaming, SaaS, in‑game items). Many states treat certain digitally transferred products as taxable tangible personal property or taxable services; SST (Streamlined Sales Tax) states have standardized "specified digital products" definitions but still differ on taxation. The Wayfair decision established economic nexus rules, so sellers may have collection obligations based on revenue or transaction thresholds, not physical presence. Marketplace facilitator laws in most states require marketplaces to collect and remit tax for third‑party sellers. State tax guidance, letter rulings, and updated statutes (and recent expansions through 2024–2025) must be checked per state.- Nexus and Registration: After Wayfair, states generally set economic thresholds (e.g., $100k or 200 transactions) that create nexus. Sellers should evaluate economic nexus by state, register, collect, remit, and file returns where required. Sourcing rules and how to determine the customer’s location for digital goods can vary.- Consumer protection & automatic renewals: States have laws addressing automatic renewal / negative‑option billing and refund/return disclosures; these vary by state and can trigger civil penalties or AG enforcement. Federal rules (FTC/ROSCA) also apply to online commerce.- Privacy & Data Security: Federal sectoral laws apply (e.g., COPPA for children’s data, HIPAA where applicable); comprehensive state privacy laws (CCPA/CPRA and newer state privacy laws such as Colorado, Connecticut, Virginia, Utah, Texas, and others) impose data subject rights, notice, opt‑out, and security obligations. State breach notification laws differ in timing, covered data elements, and reporting requirements.- Advertising, Unfair Practices & FTC: The FTC enforces against unfair/deceptive trade practices including misleading claims, subscription disclosures, and data/security misrepresentations. ROSCA and other federal rules govern online sales practices.- Payment and Money Transmission: Some business models—especially those that store or transmit funds, hold customer balances, or facilitate payments—may trigger money services business (MSB) or money transmitter licensing and anti‑money laundering obligations. Use of third‑party payment processors can mitigate some licensing exposure but does not eliminate regulatory risk.- Intellectual Property & Licensing: Ensure digital goods have clear licensing terms (EULA, TOS). Consider copyright, trademark, and issues with user‑generated content. Understand takedown procedures and platform liabilities (Section 230 limitations do not cover IP violations or criminal activity).- Export Controls & Sanctions: Certain digital products (software, encryption, technology) may be subject to export controls or sanctions screening; U.S. export regulations can apply even for digitally delivered products.- Accessibility (ADA): Websites and apps selling digital goods should consider accessibility obligations; while federal ADA standards are not fully codified for websites, enforcement risk exists and state/local laws or private claims can arise.3) Practical guidance & checklist for US LLC owners / business founders- Inventory and classify products: map each product (download, streamed content, SaaS, in‑app goods) and determine how each state treats that product.- Nexus analysis: calculate economic nexus by state (revenue/transaction thresholds) and register where thresholds are met.- Tax collection: implement tax automation (or consult a tax advisor) to set correct taxability and rates; factor destination sourcing and multi‑jurisdictional use.- Marketplace vs direct sales: if selling through marketplaces, confirm whether marketplace facilitator law shifts collection obligations to the marketplace; if selling direct, ensure you collect and remit.- Contracts & terms: update TOS, EULA, refund and auto‑renewal disclosures to comply with state automatic renewal laws and federal ROSCA/FTC rules.- Privacy & data security: publish privacy policy, implement data minimization and security measures consistent with FTC guidance and state laws; map data flows, vendors, and cross‑border transfers; prepare breach response plan.- Age‑targeted content: implement measures for COPPA where services target or collect from children under 13; include parental consent and data minimization.- Payment & custody risk: evaluate whether your product or platform creates money‑transmission risk; use reputable payment processors and get legal advice on licensing if you hold/transfer customer funds.- Export controls: screen software and technology for encryption/export restrictions; consult export counsel if needed.- Accessibility: follow WCAG and document accessibility efforts.- Ongoing monitoring: track state legislative changes (digital taxation and privacy laws are evolving) and subscribe to specialist updates.4) Limitations and recommended next steps- State rules change frequently and often hinge on narrow statutory definitions or administrative letter rulings; while this research identified general patterns and high‑quality sources, a state‑by‑state definitive determination requires reviewing the latest statutes/regulations or revenue department guidance for each state in which you do business.- Recommended next steps: (a) run state‑by‑state taxability checks for each product in the company’s catalog; (b) consult a tax advisor for nexus and registration; (c) retain privacy/security counsel for program design; (d) evaluate payments/money‑transmission risk with counsel.5) Representative sources found (verbatim excerpts tied to each source)- https://www.avalara.com/blog/en/north-america/2019/02/state-by-state-guide-to-digital-products-and-sales-tax.html Excerpts: • "States define digital goods differently. Some states don’t tax digital products because they’re not tangible; other states tax intangible products like their physical counterparts." • "The 24 states that are members of the Streamlined Sales and Use Tax Agreement (SSUTA) must adhere to a standardized definition for certain electronically transferred products. 'Specified digital products' include digital audio works, digital audiovisual works, and digital books."- https://iclg.com/practice-areas/digital-business-laws-and-regulations/usa Excerpts: • "State data privacy and security requirements are found in many different federal and state laws, which are changing every year... Since the enactment of the CCPA, 19 other US states have enacted consumer privacy laws (eight of these laws are effective in 2025, with additional laws becoming effective in 2026)." • "Section 5 of the FTC Act provides a loose framework for cybersecurity applicable to e‑commerce businesses... The FTC’s enforcement actions have generally focused on data minimisation, access controls, multi‑factor authentication, encryption, testing, training, vendor management, and incident response."- https://www.salestaxinstitute.com/resources/expanding-digital-tax-net-digital-goods-services-2025 Excerpt: • "States are expanding digital goods & services taxation in 2025... New York lawmakers have introduced bills targeting both digital advertising and data collection services... the sales tax landscape is poised to become even more complex, requiring companies to adapt quickly to stay compliant."- https://www.numeral.com/blog/sales-tax-on-digital-goods Excerpts: • "Sales of digital goods are taxed in most states and jurisdictions... This guide covers what defines a digital good, how they’re taxed across US states, and some best practices you can put in place to avoid hefty penalties." • "The Wayfair decision allowed states to enforce sales tax on businesses based solely on economic activity—like a certain number of transactions or revenue thresholds—regardless of where the seller is physically located."- https://www.ncsl.org/fiscal/taxation-of-digital-products Excerpt: • "When expanding a state’s sales tax regime to reach digital products, clarity about what is (and is not) taxable is essential... Taxpayers need to understand their obligations, especially since most states impose sales tax on customers while requiring that sellers collect and remit tax to the state taxing authorities."- https://www.fonoa.com/resources/blog/guide-to-the-taxability-of-digital-products-in-the-us Excerpt: • "Determining the taxability of digital products in US sales tax is not always easy... Some states consider digital products to be tangible personal property, treating them similarly to physical goods... additional guidance or legislation may define digital products as a separate category for tax purposes."Final note: this research provides a comprehensive high‑level framework and authoritative starting points for creating the requested blog/newsletter content for US business owners and LLC founders. Because state-by‑state tax and privacy treatment of digital products is highly granular and changes frequently, I recommend the next step be a targeted state‑by‑state extraction for the specific states where your audience most commonly does business (if you can provide a prioritized list of states or sales footprint). That will allow drafting a detailed blog with accurate, state‑specific compliance guidance and citations.