Sales Tax Information

During the 2009 legislative session, the Washington legislature passed and the governor signed a bill, ESHB 2075, which imposes a tax on digital products and services. The law took effect on July 26, 2009. Fortunately, the law contains a provision which provides an exemption that applies to libraries. The exemption was for "digital products or remote access software that will be made available free of charge for the use or enjoyment of others."

The Washington Department of Revenue (DOR) has provided a written response confirming that libraries qualify for this exemption. The purchaser must provide the seller with an exemption certificate, which is available from the DOR web site. Here is that response (sent via e-mail):

From: DOR Rulings [mailto:[email protected]]
Sent: Thursday, June 18, 2009 7:29 AM
To: Stuivenga, Will
Subject: Taxability Response

Dear Will Stuivenga:

Thank you for your e-mail dated June 4, 2009, requesting information on ESHB 2075.  You ask the following questions:

1. When does the bill officially take effect? I have seen the effective date listed as July 26, 2009, but would like to confirm that information.

Response:  This bill becomes effective July 26, 2009.

2. It is our understanding that the language in Sections 503 and 603 provides an exemption to the tax which would apply to libraries. Specifically, I refer to the language that provides an exemption for “making the digital good or digital automated service, including a digital good or digital automated service acquired through the use of a digital code, or service defined as a retail sale available free of charge for the use or enjoyment of others.” It would be very helpful to have an opinion or statement in writing from DOR that clearly applies this exemption to libraries that freely provide digital goods or services to their patrons, typically through their web sites.

Response:  Libraries will qualify for the exemption from sales tax or use tax of digital products or remote access software that will be made available free of charge for the use or enjoyment of others.

. . .

Additional information on digital products is available on the Department’s website.  We will also be posting a Question and Answer section on this site.

If you have additional questions, please write again.

Linda Miller Baldwin
Tax Information Specialist
Taxpayer Services

Another bill, SHB 2620, was passed during the 2010 legislative session. This bill provides clarifying language for the original legislation. The effective date of the revised law was 7/1/2010.


What constitutes a digital product or service that is covered by this law? According to the DOR's web-site:

A digital product is described as follows:

  • It is transferred electronically. (See section 201(8) of the digital products bill)
  • Digital goods (movies and music, etc.)
  • Digital automated services (services that have been automated)

The bill also covers remote access software (See section 201(7) of the digital products bill) which is now subject to sales and use tax.

Quoting from the actual law, there is this more specific definition:

(3)(a) "Digital goods," except as provided in (b) of this subsection (3), means sounds, images, data, facts, or information, or any combination thereof, transferred electronically.

And also from the bill:

(5) "Electronically transferred" or "transferred electronically" means obtained by the purchaser by means other than tangible storage media. It is not necessary that a copy of the product be physically transferred to the purchaser. So long as the purchaser may access the product, it will be considered to have been electronically transferred to the purchaser.

For more information about the law, visit the DOR’s Digital Products Page.

The newer legislation passed in 2010 changes the language of the exemption. Where the original legislation provided an exemption for "digital products or remote access software that will be made available free of charge for the use or enjoyment of others" the new legislation replaces the word "others" with the term "general public." The term "general public" is then defined as follows:

3) For purposes of this section, “general public,” means all persons and not limited or restricted to a particular class of persons, except that the general public includes:

                (a) A class of persons that is defined as all persons residing or owning property within the boundaries of a state, political subdivision of a state, or a municipal corporation; and

                (b) With respect to libraries, authorized library patrons.

Previously, in 2001, the Department of Revenue clarified that vendors should not charge sales tax for online databases licensed to Washington libraries. In 2006, SDL staff met with Dept. of Revenue staff to confirm and update details of the original ruling. On each occasion, the DOR provided written letters confirming the opnions that were issued. Copies of those letters are provided below:

Department of Revenue, Taxpayer Services Division

It would appear, however, that this new law supersedes these previous opinions. Given the broad definition provided for what constitutes a digital good or service, as quoted above, it would seem that the new law covers a wide range of digital products and services purchased by libraries, including, but not necessarily limited to:

  • Subscription databases
  • MARC records
  • Downloadable audiobooks
  • eBooks

Provided, of course, that the item is transferred electronically, and that no tangible storage media is provided or exchanged. And assuming, of course, that the library is providing free access to the digital product or service.

However, a preliminary rule promulgated by the Dept. of Revenue specifically mentioned MARC records as an example of "standard business information" for which a separate exemption is available, but NOT for government entities. So MARC records may not be exempt at least for public libraries, state agency libraries, and state-funded academic libraries.

The Department of Revenue adopted a new digital products rule, WAC 458-20-15503 "Digital Products," which was effective March 28, 2013. There are also two ETAs (Excise Tax Advisorys), one, ETA 3176 Digital Products - General Implementation, and one, ETA 3177 Digital Products - General Analysis of Tax Liability. These ETAs do not appear to make any changes to the information that applies to libraries as described here.

Cautionary Advice:

We checked with the MRSC (Municipal Research Service Center) as to the consequences should a library claim the exemption for a product or service that is later found to be ineligible for the exemption. Here is the response that we received:

Because we don’t know what the final legislation will be or the subsequent DOR rules that will be promulgated, I think you have to assume that a library would have to pay the tax retroactively, and most certainly with interest. Penalties are something that would have to be provided in the legislation or rules, so I’m not going to speculate on that.

What your libraries can do is pay the tax at the same time they claim an exemption, then if it is later allowed, they can apply for a tax refund from DOR. That would guarantee that the libraries only have to pay the tax and not interest or penalties. However, if they decide not to pay the tax and their claim is disallowed, then they should be told that there will be interest to pay and the possibility of a penalty.

Nothing on this page should be interpreted as providing a legal opinion or legal advice about this or any other legislation. Any question about a specifc product or service, or a specific library, and whether the exemption is applicable in a particular situation, should be referred to an attorney, or to a tax accountant, or another qualified expert as deemed appropriate.

Questions can also be submitted to the DOR for official rulings. Rulings may be requested via the Ruling request form. If a library plans to submit a question or ruling request directly to the DOR, the State Library would appreciate the opportunity to consult with the library in advance of that process.

The Washington State Library will continue to work with the Washington Library Association and other members of the Washington library community to clarify this law for Washington libraries. Contact Will Stuivenga, WSL Cooperative Projects Manager at [email protected] or 360.704.5217.

Last updated 09/16/2016.

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