Are My E-Commerce Products Taxable?

Taxability of E-Commerce Products

In the US, most “tangible personal property” is taxable. This means that if you sell a toothbrush or a treadmill to a consumer, you are required to collect sales tax on that sale.

However, there are some exceptions. For example, grocery items are non-taxable in most US states. A handful of states don’t consider clothing taxable. The same goes for textbooks.

Since there is an argument that a downloaded movie, song, or ebook isn’t truly “tangible”, some states don’t tax digital goods. On that note software-as-a-service (SaaS) based businesses are not taxable in some states, since their service is not delivered in a tangible format such as on a disc or flash drive.

But guess what? There are exceptions to the exceptions! Many states don’t consider soda and candy to be non-taxable grocery items, even though they are sold in the grocery store alongside other tax-exempt groceries.

The states that don’t require a sales tax on clothing make exceptions for things like fur, or uniforms, and other work-related gear. And sometimes clothing items that exceed a certain price (such as $110 in the state of New York) are considered taxable.

If you have any questions about the taxability of your products, we recommend a consultation with a sales tax expert to ensure that you are charging sales tax correctly. Get in touch today for your custom taxability matrix!

Meanwhile, here’s how the most common sales tax exempt products are taxed on each state.