Virginia: Sales Tax Handbook
Are Software and Digital Products subject to sales tax?
While Virginia's sales tax generally applies to most transactions, certain items have special treatment in many states when it comes to sales taxes. This page describes the taxability of software and digital products in Virginia, including canned software - delivered on tangible media, canned software - downloaded, custom software - delivered on tangible media, custom software - downloaded, customization of canned software and digital products. To learn more, see a full list of taxable and tax-exempt items in Virginia.
Canned Software - Delivered on Tangible Media
TAXABLE
In the state of Virginia, any software which was used directly and exclusively in the process of exempt research and development activities may be qualified for an exemption.
Canned Software - Downloaded
EXEMPT
In the state of Virginia, it is considered to be exempt so long as the transaction does not include any sort of transfer of a tangible personal property.
Custom Software - Delivered on Tangible Media
EXEMPT
In the state of Virginia, it is considered to be exempt so long as the true objective of the sale is to provide the exempt custom programming service and tangible personal property transferred is not critical to the transaction; separately stated charges for tangible personal property are taxable. Taxable if true object of sale is to provide tangible personal property. Information conveyed via tangible means (e.g., diskette, computer tape, report, etc.) generally is taxable except for information customized to a particular customer's needs and sold to that particular customer.
Custom Software - Downloaded
EXEMPT
In the state of Virginia, it is considered to be exempt so long as the transaction does not include the transfer of any tangible personal property.
Customization of Canned Software
TAXABLE
In the state of Virginia, any canned software which has been modified to any degree at all is not considered to be exempt custom software.
Digital Products
EXEMPT
Sales of digital products are exempt from the sales tax in Virginia.
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