Course Details

State Sales Tax In The Digital Economy: Navigating Electronic Taxability And The Factor Presence Rule

Webinar: ID# 1020241
Recorded CD or On-Demand
About This Course:
This webinar will provide guidance to corporate tax professionals, counsel and advisors for navigating the various and evolving standards of state taxability of digital products and services to determine what component of a company’s offering is taxable, and in which jurisdiction(s).

Sales tax advisors and IT companies providing software, bundled and cloud services face special challenges in determining how and where their products and services will be taxed. There are numerous approaches among the individual states regarding taxes on various IT services and products. Some individual states have specific statutes and rules aimed at determining what products and services each state taxes; however, these state rules may conflict with other states’ practices.

Among the challenges providers face in assessing whether they will be subject to transaction taxes in a particular state is defining what product or service they are providing in that transaction. This is particularly true where the transaction has bundled elements. If the “true object” of the item sold is included in a state’s definition of taxable products or services, then the sale is likely subject to transaction tax. In most jurisdictions, bundling an otherwise nontaxable service with a taxable product or service may render the entire transaction taxable.

Additionally, the rise of the factor presence rule adds another dimension to whether a transaction will be subject to taxation. While the MTC introduced this standard in 2002, states have been slow to adopt it. The surge of online sales, however, has caused a growing number of states to utilize it, including California, Washington, New York and now Alabama. This bright-line standard establishes nexus whenever a statutory threshold is exceeded, including sales-only thresholds, which can trigger liability for unsuspecting companies.

Listen as our experienced panel discusses the various challenges of determining the taxability of IT services and products; explains the pitfalls of the factor presence rule; and reviews best practices for structuring contracts and transactions to segregate taxable from nontaxable services and products.

  • Lack of uniformity among states
  • Elements of determining taxability
    • Character of service or product and “true nature” test
    • Services
    • Bundled services and products
    • Software
  • Factor presence rule
    • MTC
    • State implementations
  • Special sourcing rules

The panel will review these and other key issues:
  • What approaches are states taking to define the nature of IT products or services for purposes of determining taxability for sales and use tax?
  • How do various states address the question of whether installing servers or software would make otherwise nontaxable IT services subject to state sales and use tax?
  • How do the various states treat pre-written software, delivered remotely, for purposes of sales and use tax?
  • How are states incorporating the factor presence rule
Learning Objectives

After completing this course, you will have a detailed understanding of the various factors used in determining states’ approaches to taxing sales of IT services and products. You will know how to structure contracts and transactions to properly exempt nontaxable services from state sales tax. You will learn specific techniques for segregating nontaxable services and products.

Continuing Education Credits Available

This program has been approved for 2.0 CPE hours through Strafford Publications. CPE Credit is available only for the LIVE webcast. Recorded versions do not qualify for credit.

Strafford is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit.


To obtain CPE credit, attendees must participate in the live event, return an Official Record of Attendance to Strafford affirming their participation (including the CPE code announced during the program), and pay a processing fee of $35 per person.

Credit Confirmation

Strafford will mail a certificate of credit within approximately 2 weeks of receiving an attendee's completed Official Record of Attendance—provided all required conditions have been satisfied.


Handout materials and the phone number for live presentations are made available to you 1 day prior to the event via email from the presenter. Copies of the presentations are included with recorded versions.

If you order a recorded version of the webinar, CD's will be mailed out approximately 10 days after the live event. Shipping is included in the price of recorded versions.
State Sales Tax In The Digital Economy: Navigating Electronic Taxability And The Factor Presence Rule
or via CD or On-Demand
Course Details
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