Do digital games get taxed?

Do Digital Games Get Taxed?

The increasing popularity of digital games has led to a question on many gamers’ minds: Do digital games get taxed? The answer is yes, but it’s more complicated than that. Some digital games are taxable, while others are not.

Are digital purchases taxed?

Many digital products, including digital games, are considered intangible goods. Almost all US states levy sales taxes on digital goods, with the exception of five states: Alaska, Delaware, Montana, New Hampshire, and Oregon. This means that if you buy a digital game in a state that has a sales tax, you’ll likely need to pay sales tax on that purchase.

States with no sales tax on digital games:

• Alaska
• Delaware
• Montana
• New Hampshire
• Oregon

Digital games with varying tax rates:

What determines whether digital games are taxable?

The answer to this question lies in state-specific laws and regulations. In the United States, digital games are considered tangible personal property if they meet certain criteria, such as being:

• Perceptible by the senses
• Tangible and having an physical existence
• Designed to be used in conjunction with physical goods or services

Examples of digital games that are taxable:

• Digital copies of console games
• Online game subscriptions (e.g. MMORPGs, FPS games)
• Downloadable content (DLC) for games
• Digital versions of tabletop games (e.g. D&D)

Examples of digital games that are not taxable:

• Esports events and streaming platforms
• Online games with free-to-play models (F2P)
• Social media games (e.g. Facebook games, mobile games)

Who collects digital game taxes?

The responsibility for collecting taxes on digital games usually falls on the seller. In the case of console games, the platform holders (e.g. Xbox, PlayStation) collect the tax and pass it on to the state. In the case of PC games, the developer or publisher is responsible for collecting taxes.

Case study: Roblox

Roblox, a popular online game platform, has stated that it does collect state sales tax on purchases. This means that players who buy digital goods, such as items, clothing, or accessories, on the platform will have the applicable state sales tax added to their purchase.

Blizzard Entertainment’s approach

Blizzard Entertainment, the developer of popular PC games such as World of Warcraft and StarCraft, has a similar policy regarding state sales tax. When you purchase a digital copy of one of their games, you will see the applicable state sales tax added to your bill.

Conclusion

While some digital games are not taxed, many others are. The key factors in determining whether a digital game is taxable are:

• State laws and regulations
• Perceptibility by the senses
• Physical existence

As a gamer, it’s essential to be aware of these rules to ensure you’re aware of any taxes owed on your digital game purchases. Check with your state or platform holder for more information on digital game taxation policies.