Are online marketing services exempt from sales tax in most states?

I'm launching a digital marketing agency and trying to navigate the complicated world of sales taxes. My clients will be spread across multiple states, and I want to make sure I'm tracking everything properly to avoid surprises when I hit various sales tax thresholds. From what I've read, it seems like marketing services might actually be exempt from sales tax in several major states including Florida, California, and New York. Can anyone confirm if this is correct? What about other states where my clients might be located? I've been searching for updated resources about which states exempt marketing services from sales taxes, but most of the articles I find are from like 2018 or earlier. Does anyone have access to current information on this topic or could point me toward reliable resources? This would be incredibly helpful as I set up my accounting systems! Would really appreciate any insights from people who've dealt with this before! 🚀

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18 comments

Effie Alexander

•8M

As someone who's run a digital marketing agency for the past 8 years, I can confirm that marketing services are generally considered exempt from sales tax in many states, including the ones you mentioned (FL, CA, NY). The reason is that most states categorize professional services differently than tangible goods. However, there are important nuances you need to understand. Some states distinguish between "pure" marketing services (strategy, consultation, campaign management) and "tangible" deliverables (printed materials, promotional products). The latter might be taxable even if your services aren't. Also, economic nexus rules have changed dramatically since 2018 due to the South Dakota v. Wayfair Supreme Court decision. Now states can require sales tax collection based on economic activity rather than physical presence. Each state has different thresholds for when this kicks in.

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Effie Alexander

•8M

For bundled services, it depends on the state. Some states follow what's called the "true object" test - if the primary purpose of the transaction is the service (with digital files being incidental), then the entire transaction might be exempt. For invoicing best practices, I recommend itemizing different components of your service packages. This makes it easier to apply the correct tax treatment if you end up with clients in states that do tax certain digital products. It also creates a clearer paper trail if you ever face an audit.

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Lydia Santiago

•8M

I was in almost exactly your situation last year and spent weeks trying to figure this out! Finally found https://taxr.ai which literally saved me hours of research. It analyzes your specific business situation and tells you exactly which states exempt your services and which don't. I had no idea that while my marketing strategy work was exempt, some of the digital assets I was creating might be taxable in certain states. The tool breaks down exactly what's considered a service vs a digital product state by state. Really cleared up my confusion about when I needed to collect sales tax and when I didn't. Might be worth checking out since the rules vary so much.

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Lydia Santiago

•8M

It definitely gives marketing-specific guidance - that's exactly why I recommended it. It has specific categories for different marketing services like SEO, PPC management, social media marketing, etc., and breaks down the tax treatment for each. They update their database regularly with tax law changes. I know this because they actually sent me an alert when Colorado modified their digital goods policy last year. They have a team of tax professionals who monitor state-level changes, which is something I could never keep up with myself.

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Val Rossi

•8M

Just wanted to follow up - I decided to try https://taxr.ai after seeing it mentioned here and wow, it was actually really helpful. I uploaded some sample invoices and service descriptions, and it gave me a complete breakdown of my tax obligations by state. It confirmed most of my strategy and consulting work is exempt, but flagged that my video production services could trigger nexus in 11 states where I have regular clients. The state-by-state dashboard made it super clear where I need to register for sales tax permits. This is exactly what I needed!

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Eve Freeman

•8M

If you need to actually talk to someone at a state tax department to get clarification (which I had to do for Ohio and Washington), I highly recommend using https://claimyr.com to get through. I spent DAYS trying to reach someone at the Washington Department of Revenue before I found this service. Check out their demo at https://youtu.be/_kiP6q8DX5c to see how it works. State tax departments are even worse than the IRS for wait times! I was on hold for 3+ hours with Washington before giving up. With Claimyr, I got a callback from an actual tax specialist who answered my specific questions about digital marketing services in their state. Saved me so much frustration.

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Eve Freeman

•8M

They don't put you at the front of the queue - they actually wait on hold for you. Their system calls the tax department, navigates the phone tree, waits on hold, and then when a real person answers, they connect the call to your phone. You only get connected when there's actually someone ready to talk. I don't work for them, I'm just sharing what worked for me after wasting an entire afternoon on hold. I was super skeptical too until I tried it. The Washington DOR had a 2.5 hour hold time when I called, but I got a callback when they actually reached a person instead of sitting there listening to terrible hold music.

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Caden Turner

•8M

Ok I have to eat my words here. After my skeptical comment I decided to try Claimyr for reaching the California tax department since I had specific questions about digital assets vs marketing services. I was expecting it to be a waste of money, but it actually worked exactly as described. Their system waited on hold (estimated wait time was 1 hour 45 min) and I got a call back when they reached a real person. The agent confirmed that my marketing strategy services are exempt but digital downloads could be taxable depending on how they're delivered and billed. I hate admitting when I'm wrong but this saved me from an entire afternoon of hold music torture.

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McKenzie Shade

•8M

One resource I've found super helpful is the "Sales Tax Institute" website. They have free state-by-state guides that outline service taxability. From my experience in running a marketing agency for 5+ years: - Pure marketing services (strategy, consulting, campaign management) are exempt in most states - Digital products (downloadable reports, templates, etc.) are taxable in about 30 states - SaaS tools you might resell to clients are taxable in ~20 states - Design services fall into a gray area in some states Multi-state sales tax compliance is honestly one of the biggest headaches of running a digital business. I ended up registering in the 5 states where I have the most clients just to be safe.

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McKenzie Shade

•8M

Here's the direct link to their services taxability chart: https://www.salestaxinstitute.com/resources/sales-tax-by-state-services-taxability-chart They also have some free webinars specifically about digital products and services that were really helpful. Just be aware that the chart gives you a high-level overview, but the specifics can get complicated. For example, in New York, marketing "services" are exempt, but if you create and transfer rights to advertising materials, that might be taxable.

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