In addition, states will continue to expand their sales tax base to include sales of digital products and streaming services. Our current work with an online training company highlights this. For this company, they historically sent representatives into states to conduct training seminars live and on-site. While this historically may have created physical presence nexus, most states do not impose sales tax on live seminar and training session fees. During COVID, the company pivoted to online training sessions, both live and pre-recorded. Once we determined where the company had physical and/or economic nexus, we researched and sought informal guidance from states regarding the taxability of the pre-recorded training sessions that had a live, interactive chat component. The results of our inquiries were quite interesting - Some states determined that even though the pre-recorded sessions had elements of digital products, given that there was a live, interactive chat feature, these were nontaxable services. Other states ignored this feature and determined that this was taxable, as a digital product, an information service, and even access to an online platform (i.e., SAAS). This exercise highlights that states – even though they may not have changed their sales tax laws or rules to specifically impose tax on such online products – are eager to impose the sales tax on digital products and streaming services, and will often interpret their laws to do so.
So much has happened in the world of sales tax nexus over the past three years, that many other areas of sales tax – particularly the sales tax base – often get overlooked. It is imperative that companies proactively seek the regular guidance and input of experienced sales tax professionals, not only to ensure that they are registered in each state in which they have nexus, but also to ensure that they are compliant with the every changing sales tax laws, particularly as relates to sales of digital products and streaming services.