Specified Digital Products and Digital Codes are Subject to Arkansas Sales Tax, Effective January 1, 2018

Effective January 1, 2018, Arkansas sales and use tax is imposed on sales of specified digital products and digital codes. Arkansas sales and use tax applies to specified digital products sold to a purchaser who is an end user with the right of permanent use or less than permanent use granted by the seller regardless of whether the use is conditioned on continued payment by the purchaser. Per the legislation, “specified digital products” are defined as digital audio works, digital audio-visual works, and digital books, when transferred electronically. “Digital code” is defined as a code that provides a purchaser with a right to obtain one or more specified digital products and may be obtained by any means, including email or tangible means, regardless of its designation as a song code, video code, or book code. The provisions are in compliance with the Streamlined Sales Tax Agreement and tax is separately imposed on these items. The definition of tangible personal property has been amended to exclude specified digital products or digital codes. The sales tax exemption for textbooks and instructional materials for public schools has been amended to include specified digital products. If none of the standard sourcing rules apply as the seller does not have information regarding the customer’s location, the sale will be sourced to the location from which the specified digital product or digital code was first available for transmission by the seller. (Act 141 (H.B. 1162), Laws 2017, effective January 1, 2018)

Posted on March 13, 2017