Organization of the Digital Outline

The digital outline includes general topic areas or categories of issues and information as summarized below. You can access current information and resources on these topics using the buttons on the left. 

General Topic Areas:

NOTE: Because some issues are closely related to each other, information may be included in more than one topic section of the digital outline. Also, included on each topic page are links to a summary of the history of state sales taxes and to other critical information.

• Purpose – Includes information on the purpose of the white paper and essential considerations impacting taxation of digital products including critical federal laws, state legislative studies, and stakeholder general issues and concerns. 
• Imposition – Includes information on how states approach taxation of digital products currently–using a broad, medium, or narrow approach, and information on definitions. 
• Issues of Sale – Includes information on the different types of transactions by which digital products may be provided to customers (i.e., sale, lease, license, subscription or limited access, etc.)
• Exemptions and Exclusions – Includes policy and administration related issues on exemptions and exclusions that might be applied to digital products. 
• Mixed and Bundled Products – Includes information on the Streamlined bundling rules and from stakeholder interviews on this subject as well as the results of a bundling exercise study group. 
• Sourcing – Includes information from the Streamlined sourcing rules as well as information on other sourcing issues including multiple points of use. 
• Alternative Taxes – Includes information on taxes other than sales and use taxes that may be imposed on digital products. 
• Federal Law – Includes information on relevant federal constitutional and statutory law.  
• Other Related Issues – Includes direct pay rules and general enforcement issues. 
• Appendix – Contains links to various resources for all topic areas.

Background on the Project

At the April 28, 2021 MTC Uniformity Committee meeting, the Washington Department of Revenue gave a presentation on their state’s experience with including digital products in their sales tax base as well as the alternatives they considered. They proposed that the Committee take up a project to help states develop a simpler and more adaptable approach. 

– Washington Presentation 2021 (PowerPoint Slides)

– Washington Presentation on Sales Taxes on Digital Products 2021 (Video)

The Committee asked the Standing Subcommittee to review the project proposal. It recommended that a work group be formed to draft a white paper.

– Final Recommendation – Project on Sales Taxation of Digital Products – as Approved June 17, 2021​

The Uniformity Committee then asked MTC staff to conduct stakeholders interviews and prepare a detailed outline of the white paper. During 2021 and 2022, MTC staff conducted 43 separate interviews with individuals or groups representing particular taxpayers, states, or other organizations, as well as practitioners and academics. (See a summary of the issues they identified in the Appendix to this outline). Staff also surveyed other relevant research, much of which also is cited throughout this outline. 

After hearing the staff report and reviewing the outline, the Uniformity Committee established a work group to begin discussing the topics and obtaining information to prepare the white paper.