Are Software and Digital Products subject to sales tax?
While New Jersey'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 New Jersey, 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 New Jersey.
Canned Software - Delivered on Tangible Media
Sales of canned software - delivered on tangible media are subject to sales tax in New Jersey.
Canned Software - Downloaded
In the state of New Jersey, any downloaded software is exempt only if it is utilized directly and exclusively in the process of the purchaser's business, trade, or occupation.
Custom Software - Delivered on Tangible Media
In the state of New Jersey, so long as a purchaser receives custom software in some sort of physical, tangible medium, such as the transfer of the disc or CD to the buyer, is deemed to be an incidental part of the sale of any exempt software development and design services.
Custom Software - Downloaded
Sales of custom software - downloaded are exempt from the sales tax in New Jersey.
Customization of Canned Software
In the state of New Jersey, it is considered to be exempt so long as it was separately stated, reasonable charge for the professionally done service of modifying canned software for a specific customer.
In the state of New Jersey, there is an imposed tax on certain digital products. In North Carolina, these digital products refer to a digital audio-visual work which is transferred electronically.
Back to New Jersey Sales Tax Handbook