What digital products are subject to sales and use tax in Georgia under the new rule?

Digital products such as digital audio-visual works, digital audio works, digital books, and digital codes are subject to sales and use tax if the end user receives a permanent right to use the product.

When does the new Georgia sales tax rule on digital products take effect?

The new sales and use tax rule on specified digital products and digital codes took effect on May 6, 2025.

Are digital subscriptions, like magazines or newspapers, subject to Georgia sales tax?

Yes, digital goods like digital magazines, newspapers, and periodicals are taxable under the new rule, whether sold individually or as part of a subscription service.

How does Georgia determine the tax location for digital product sales?

The new rule outlines how to determine the tax location (sourcing) for digital product sales, ensuring clarity on how taxes are applied based on the location of the end user.

What is considered a "permanent right to use" a digital product under Georgia's new rule?

A permanent right to use a digital product means that the end user can download and retain the product without any ongoing payments. This applies to products like e-books, digital movies, and music.

How does Georgia handle bundled sales of taxable and non-taxable items?

If a bundled transaction includes both taxable and non-taxable items, the entire transaction is subject to sales tax unless the seller can clearly allocate the price of the non-taxable items.

Georgia DOR New Rule on Sales Tax for Digital Products: Key Changes and Implications

At the beginning of May, the Georgia Department of Revenue announced that it had adopted a new administrative rule regarding the imposition of sales and use tax on certain retail purchases or retail sales of specified digital products, other digital goods, or digital codes sold to an end user in Georgia.

Implications of the New Rule

As of January 1, 2024, sales of specified digital goods, such as digital audio-visual works, digital audio works, and digital books, are taxable if the end user receives the permanent right to use them and the purchase is not tied to ongoing payments. The newly adopted rule explains that allowing an end user to download and keep a product qualifies as a permanent right to use.

The rule also clarifies how to determine the tax location, that is, sourcing, for digital product sales, describes which services and products are exempt, for example, internet access, specific software, and software as a service (SaaS), and elaborates on what constitutes a resale versus a final sale.

The rule defines digital codes as codes that give purchasers the right to obtain one or more digital products. These products are subject to sales and use tax at the time of purchase, not when the code is redeemed. Digital goods, such as digital magazines, newspapers, and periodicals, are taxable regardless of whether they are sold individually or as part of a subscription service.

Regarding the bundled transactions that include taxable and non-taxable items, the rule underlines that the whole transaction is taxable if the seller cannot determine the portion of the sale attributable to the non-taxable items.

Conclusion

The adopted rules came into effect on May 6, 2025. Therefore, taxable persons engaged in the activities relating to the supply of specified digital products, other digital goods, or digital codes to users and consumers in Georgia should allocate resources to understand the applicable regulations.

Additionally, digital businesses should pay close attention to rules relating to exemptions and exclusions, more specifically, to the specified criteria outlined in the rule.

Source: Deloitte, EY