The state of Washington has passed a new law changing the taxation of some digital products. This law is set to go into effect July 26, 2009. More information can be found at the DOR web site.

What does it mean for you?

The new law brings more conformity in the taxation of digital products. Historically, any downloaded product (software, video, music and others) were taxed as retail sales, subject to the Retailing B&O code and retail sales tax. However, confusion existed if similar products were used online or in a streaming format, without a download. Many businesses were reporting this income under the Services classification and avoiding retail sales tax.

The new law makes all products (with only a few exceptions) subject to retail sales tax. Products most affected include Software-as-a-Service, “cloud” computing, automated digital services (including research sites) and streamed music and video.

Categories: Tax News and Tips
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