Taxation of Digital Goods in the District of Columbia

The District of Columbia Council has passed legislation amending the sales and use tax treatment of digital goods sold or used in the District. See Internet Sales Tax Emergency Amendment Act of 2018, approved on December 31, 2018 (D.C. Bill 22-1070).

Under D.C. Code § 47-2002(a), a sales tax is imposed upon all vendors for the privilege of making a “retail sale” or “sale at retail” of tangible personal property and certain selected services. Under D.C. Code § 47-2202(a), a use tax is imposed on the use, storage, or consumption of any tangible personal property and service sold or purchased at retail.

As of January 1, 2019, D.C. Code §§ 47-2001(n)(1)(BB) and 47-2201(a)(1)(R) now include the sale of or charges for digital goods in the definition of “retail sale” and “sale at retail”. For purposes of the sales and use tax, D.C. Code § 47-2001(d-1) defines the term “digital goods” to mean digital audiovisual works, digital audio works, digital books, digital codes, digital applications and games, and any other otherwise taxable tangible personal property electronically or digitally delivered, whether electronically or digitally delivered, streamed or accessed and whether purchased singly, by subscription or in any other manner, including maintenance, updates and support.

  • Digital audiovisual works: a series of related images that, when shown in succession, impart an impression of motion, together with accompanying sounds. “Digital audiovisual works” includes motion pictures, musical, videos, news and entertainment programs, and live events.
  • Digital audio works: works that result from the fixation of a series of musical, spoken, or other sounds, that are transferred electronically, including prerecorded or live songs, music, readings of books or other written materials, speeches, ringtones, or other sound recording.
  • Digital books: works that are generally recognized in the ordinary and usual sense as books that are transferred electronically, including works of fiction, nonfiction, and short stories.
  • Digital code: a code that provides the person who holds the code a right to obtain an additional digital good and that may be obtained by any means, including tangible forms and electronic mail, regardless of whether the code is designated as song code, video code, or book code. “Digital code” includes codes used to access or obtain any specified digital goods, or any additional digital goods that have been previously purchased, and promotion cards or codes that are purchased by a retailer or other business entity or use by the retailer’s or entity’s customers.
  • Digital applications and games: any application or game, including add-ons or additional content that can be used by a computer, mobile device, or tablet notwithstanding the function performed.

Additionally, beginning January 1, 2019, D.C. Code § 47-2501.01(a), the video gross receipts tax, has been amended to exclude sales of services taxable as digital goods. As a result, as of January 1, 2019, sales of streaming video services will be subject to the sales tax, and no longer subject to the gross receipts tax under D.C. Code § 47-2501.01(a).

Below is a chart delineating the sales taxability of a variety of digital goods as of January 1, 2019:

Digital Good

Subject to Sales Tax?

Rationale

Applications Yes These sales are taxable digital goods.  D.C. Code § 47-2001(d-1).
Software – Canned Yes These sales are taxable as data processing services.  D.C. Mun. Regs. §9-474.4.
Software – Prepackaged Yes These sales are taxable as data processing services.  D.C. Mun. Regs. §9-474.4.
Software – Customized Yes These sales are taxable as data processing services.  D.C. Mun. Regs. §9-474.4.
Digital News and Digital Periodicals Yes These sales are taxable as “the furnishing of general or specialized news or current information” and as “news clipping service” under D.C. Code §47-2001(n)(1)(N)(ii).
Digital Books Yes These sales are taxable digital goods.  D.C. Code § 47-2001(d-1).
Digital Audio Books Yes These sales are taxable digital goods.  D.C. Code § 47-2001(d-1).
Digital Music Downloads and Streaming Yes These sales are taxable digital goods.  D.C. Code § 47-2001(d-1).
Digital Video Downloads Yes These sales are taxable digital goods.  D.C. Code § 47-2001(d-1).
Streaming Video Services Yes These sales are taxable digital goods.  D.C. Code § 47-2001(d-1).

Please note that the new legislation did not affect the taxation of software in the District.  Under D.C. Mun. Regs. 9 §474.4, the sale, rental, or maintenance of computer software continues to be subject to sales tax in the District whether the software is canned, prepackaged, or customized. Taxable computer software and software services include system software, application software, computer programming, software modification, or software updating. The new legislation does not affect D.C. Mun. Regs. 9 §474.4.

This Notice supersedes prior OTR Notice 2017-06.

Questions should be directed to the Office of the General Counsel at (202) 442-6500.

Click here to read South Dakota v. Wayfair, Inc.

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Need Help? Learn How to Submit a Generic Refund Request at MyTax.DC.gov

Effective October 29, taxpayers may apply for a refund of outstanding credit via the Office of Tax and Revenue’s (OTR) tax portal, MyTax.DC.gov on the following supported accounts:

  • Alcoholic Beverage
  • Ballpark Fee
  • Cigarette/Other Tobacco
  • Gross Receipts

Taxpayers will receive a paper check in the mail upon approval of the refund.

Need help submitting a generic refund request? Click on the tutorial/user guide below that provides step-by-step instructions on how to submit a generic refund request via MyTax.DC.gov.

Click here to view or download the How to Submit a Generic Refund Request User Guide

Should you have additional questions, please contact OTR’s e-Services Unit by calling (202) 759-1946 or emailing e-services.otr@dc.gov.

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Reminder: OTR Will Host a QHTC Filers Certification Webinar on Tuesday, December 11

As a reminder, the Office and Tax and Revenue (OTR) will be hosting a QHTC filers certification webinar tomorrow December 11 from 2:00 p.m. to 4:00 p.m. The purpose of this webinar is to educate Qualified High Technology Companies (QHTC) taxpayers on the new annual self-certification process via OTR’s tax portal, MyTax.DC.gov.

Effective January 1, 2019, existing and new taxpayers seeking QHTC-related benefits will be required to complete an online application annually to fulfill the self-certification requirement via MyTax.DC.gov. The annual self-certification process will replace the existing requirement of filing individual QHTC certifications with tax returns filed as “Certified QHTC.”

We greatly value your opinions and insights. There will be an opportunity to ask questions and give feedback.

We look forward to your participation on December 11.

Join by phone

1-650-479-3208 Call-in toll number (US/Canada)

Meeting Number (access code): 730 260 434

Meeting Password: 1234

Please register via WebEx: QHTC Webinar Registration Link

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Learn How to Request an Exemption Certificate at MyTax.DC.gov

Effective October 29, organizations who wish to apply for an exemption from the District of Columbia Income and Franchise Tax, Sales and Use Tax, and Personal Property Tax must submit their application via OTR’s online tax portal, MyTax.DC.gov. If the exemption is approved, OTR will issue an official certificate which will include an expiration date.

Organizations must re-certify for the Exemption to File (FR-164) every 5 years from the issuance date of the exemption certificate. Failure to re-certify the FR-164 prior to the expiration date, will result in the organization being placed in a fully taxable status.

MyTax.DC.gov makes it simple, fast, and safe to re-certify and request an exemption certificate online. Need help requesting an exemption certificate? Click on the tutorial/user guide below that provides step-by-step instructions on how to request an Exemption to File (FR-164) certificate via MyTax.DC.gov.

Click here to view or download the Exemption to File (FR-164) User Guide

Should you have additional questions, please contact OTR’s e-Services Unit by calling (202) 759-1946 or emailing e-services.otr@dc.gov.

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OTR to Host QHTC Filers Certification Webinar on Tuesday, December 11

The District of Columbia Office of Tax and Revenue (OTR) will be hosting a webinar on Tuesday, December 11 from 2:00 p.m. to 4:00 p.m. to educate Qualified High Technology Companies (QHTC) taxpayers on the annual self-certification process.

Effective January 1, 2019, existing and new taxpayers seeking QHTC-related benefits will be required to complete an online application annually to fulfill the self-certification requirement via OTR’s tax portal, MyTax.DC.gov. The annual self-certification process will replace the existing requirement of filing individual QHTC certifications with tax returns filed as “Certified QHTC.”

We greatly value your opinions and insights. There will be an opportunity to ask questions and give feedback.

We look forward to your participation on December 11.

Join by phone

1-650-479-3208 Call-in toll number (US/Canada)

Meeting Number (access code): 730 260 434

Meeting Password: 1234

Please register via WebEx: QHTC Webinar Registration Link

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Need Help? Learn How to Apply for a Cigarette Stamp Redemption at MyTax.DC.gov.

As a reminder, effective October 29, any licensed wholesaler selling cigarettes, as well as licensed wholesalers and retailers who sell vapor products in the District of Columbia, must file and submit payments via the Office of Tax and Revenue’s (OTR) online tax portal, MyTax.DC.gov.

Additionally, licensed wholesalers who wish to apply for a cigarette stamp redemption, must apply online at MyTax.DC.gov. Taxpayers must provide the required information and documentation in the case of destroyed, damaged or unneeded stamps.

Need help applying for a cigarette stamp redemption? Click on the tutorial/user guide below that provides step-by-step instructions on how to apply for a cigarette stamp redemption via MyTax.DC.gov.

Click here to view or download the How to Apply for a Cigarette Stamp Redemption User Guide

Should you have additional questions, please contact OTR’s e-Services Unit by calling (202) 759-1946 or emailing e-services.otr@dc.gov.

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Need to Register a New Business in the District? Learn How to Complete the FR-500 Business Registration Application

Taxpayers who wish to register a new business in the District of Columbia can conveniently complete the “Register a New Business: Form FR-500” application online via the Office of Tax and Revenue’s (OTR) tax portal, MyTax.DC.gov.

To register a new business at MyTax.DC.gov, the following information is required:

  • Federal Employer Identification Number and/or Social Security Number
  • Legal form of business (e.g. partnership, corporation, sole proprietor)
  • Business address
  • Names, titles, home address, and Social Security number of the proprietor, partners, or principal officers (mandatory)
  • Former Entity Information, if previously registered with the District
  • Addresses for all locations where sales tax will be collected in the District of Columbia

Need help completing the FR-500? Click on the tutorial/user guide below that provides step-by-step instructions on how to register a new business with OTR via MyTax.DC.gov.

Click here to view or download the How to Register a New Business (Form FR-500) User Guide

For taxpayers who need to register a business and apply for a business license in the District of Columbia, please visit Department of Consumer and Regulatory Affairs’s website to get more information about corporate registration and business licensing requirements.

Should you have additional questions, please contact OTR’s e-Services Unit by calling (202) 759-1946 or emailing e-services.otr@dc.gov.

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