Georgia Latest State to Tax Digital Goods

With more and more people consuming content digitally, Georgia is now one of the many states taking advantage of taxable revenue opportunities in this space. Georgia Senate Bill 56, signed on May 2, 2023, requires digital products, goods, services and codes downloaded in Georgia to be subject to Georgia sales and use tax beginning January 1, 2024. More specifically, tax will also apply to the retail sale of specified digital products and “other” digital goods.

What Makes Digital Purchases Taxable in Georgia?

There are two requirements that will make your digital purchase taxable in Georgia:

1. The end user/customer must be able to permanently access/use the digital goods or services.

2. The purchase cannot be a subscription, meaning there are no continued payments. 

For example, purchasing an eBook on Amazon, something you will have lifetime access to, will be taxed under Georgia law if you are in Georgia when you purchase it.

What Digital Products and Goods Are Taxed Under Georgia Law?

At a high level, the new law impacts digital goods purchased, including: 

• Artwork

• Audio works

• Books

• Magazines

• Newspapers

• Pictures

• Periodicals

• Ringtones

• Video or audio greeting cards

• Video games or electronic entertainment

Specifically, the law states any digital good that fits the following descriptions will be taxed:

1. Any series of related images together with accompanying sounds, if any, when shown in succession impart an impression of motion. This would be an item such as a video game or other electronic entertainment.

2. Any digitized work that results from the fixation of a series of musical, spoken or other sounds. This includes digitized sound files — such as a song or ringtone — downloaded onto a device and used as an alert that you’ve received a text or message.

3. A key, activation or enabling code that gives you the right to obtain one or more digital goods, such as a code to download a video game or other electronic entertainment. This stipulation excludes gift cards or certificates that entitle you to select certain digital goods or other digital goods of a specific cash value.

Georgia estimates this law will increase revenue by $80 million in the inaugural year of the tax. Georgia is not the first state to begin taxing digital goods and most certainly will not be the last, so keep an eye out for more to follow suit. As the world continues to shift to a more digital way of life, it is important to recognize how these and similar changes will affect your business, such as now having to evaluate what customer location data is available to properly comply with this new tax.

If your business has substantial revenue from digital products, be aware of this decision, talk to your advisers and continue to monitor legal developments for changes in other states as well.

Contact Nick Longo at nlongo@cohenco.com, Mike Fink at mfink@cohenco.com or a member of your service team to discuss this topic further.

Cohen & Co is not rendering legal, accounting or other professional advice. Information contained in this post is considered accurate as of the date of publishing. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts, circumstances and current law.