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Last Updated: 9/13/2018

Computer Software and Digital Products

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Prewritten computer software

Prewritten computer software is the sale, lease, or license to use a canned or prewritten computer software program. Prewritten computer software is taxable.

Custom software

Custom software is a program created for the needs of a specific customer. It generally requires a consultation and analysis of the customer’s requirements. Fees charged for custom software are not taxable.

Online hosted software

Online hosted software is software where users do not take any ownership or possession of the software. Online hosted software is:

  • accessed through the Internet
  • installed at and hosted from a remote server or location
  • owned by the software manufacturer or third-party vendor

Subscriptions to use online hosted software are not taxable. Charges for maintenance or upgrades to online hosting software are not taxable, even if separately stated.

For more information, refer to Fact Sheet 134, Computer Software.

Digital Products

Digital products are products provided to a customer electronically. Usually, a customer is given access to the product through the Internet or email.

Taxable digital products include:

  • Digital audio works (music, audio books, ring tones)
  • Digital audiovisual works (movies, music videos)
  • Digital books
  • Digital codes that give a purchaser access to taxable digital products
  • E-Greeting cards
  • Online video or computer gaming

Nontaxable digital products include:

  • Access to digital news articles
  • Charts and graphs
  • Data or financial reports
  • Digital photos and drawings


< Taxable Purchases  Filing Returns and Record-keeping >
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