California Clarifies Applicability of Sales Tax to eBooks and Apps
California is starting to catch on to this whole internet thing.
The California State Board of Equalization (SBE) has revised Publication 109, “Internet Sales,” to state that the sales of electronic data products such as software, data, digital books (eBooks), mobile applications, and digital images are not taxable when transmitted to customers over the Internet or “by modem.” Note that such sales remain taxable when the sale is accompanied by a physical storage medium or product such as a CD-ROM.
According to California, an eBook is an electronic version of a traditional print book that can be read by using a tablet computer or an eBook reader. A mobile application, also known as a “mobile app,” is computer software designed for use on a smartphone or tablet computer. The transfer of a downloadable file such as an eBook or an “app” without purchasing any physical storage medium is not a taxable transaction.
As a reminder, in California, sales of software programs which are downloaded without any tangible property exchanging hands are not subject to sales tax. However, if you also provide your customers with a backup copy on a CD-ROM, the entire transaction is taxable.