Our multi-state tax experts have experience with your digital products and service company’s sales and use tax, state income and franchise tax filing and reporting. We have proven experience with performing nexus analysis and providing tax strategies to mitigate hefty tax liabilities.
Whether you’re a company with digital services for gaming, music streaming or audiobooks, or marketing and advertising, companies in these areas are highly scrutinized by state tax authorities for being on the hook for both sales tax collection and potentially paying income/franchise taxes for generating revenue from resident customers in states that tax this type of activity.
Most states have enacted sales tax collection requirements after a U.S. Supreme Court ruling in favor of the state of South Dakota v. Wayfair, particularly creating a compliance headache for e-commerce businesses. The ruling allows states to require all out-of-state sellers to collect and remit sales tax on taxable goods (if sales exceed $100,000 or 200 transactions). This ruling also hit digital service providers particularly hard because their presence of online sales to anyone across the country left their business vulnerable to other state tax liabilities, like state income/franchise taxes.
Also, an international digital service tax has been enacted by taxing authorities worldwide for these types of sales, effective 2022. From foreign to domestic owned companies, exposure to digital service tax is inevitable so understanding your responsibility to these special taxes is especially important.