Digital goods

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Digital goods or e-goods are intangible goods that exist in digital form.[1] In electronic commerce, digital goods is a term used to describe any goods that are stored, delivered, and used in electronic format. Digital goods can be obtained through e-mail or downloaded online.[2] Examples include digital media, such as e-books, downloadable music, internet television and streaming media; fonts and graphics; digital subscriptions; online ads (as purchased by the advertiser); internet coupons; electronic tickets; online casino tokens; electronically traded financial instruments; downloadable software and mobile apps; cloud-based applications and online games; and virtual goods used within the virtual economies of online games and communities. Digital goods has promoted a more greener way of living. Using e-books instead of conventional paper books may help to reduce the amount of paper used on a global scale.[3]

Special legal concerns regarding digital goods include copyright infringement and taxation.

Types of Goods[edit]

Some of the most common types of digital goods include Apps, eBooks, Software, Music, and Videos.[4] It saves the time and effort of having to go to a retail shop, and it makes the goods available almost instantaneously.[3] Digital Goods cover a wide variety of material and can be found and stored in many places.


Applications, or Apps, are becoming one of the most prominent digital goods in the market. They are a faster and easier way of producing software for companies, programs, etc. Mobile apps can extend the productivity and ease of business functions.[5] They can be purchased in digital marketplaces such as the Android's Google Play and Apple's App Store.


eBooks are full length books available in digital form, consisting of texts, images, or both, readable on computers or other electronic devices.[6] There are eBook readers like the Kindle and Amazon Fire. Most handheld devices are capable of holding eBooks, though. Readers have the ability to adjust the text size and size of the spaces between the words at their ease. They swipe or press the next button in order to turn the page.


Music is another form of digital goods that is traded daily. With the iTunes Store and other marketplaces as accessible as it is, people buy music very frequently and easily.


In many cases a consumer has to make an online payment and download the good. However, this comes with some disadvantages. "The major disadvantage is that this type of digital commerce makes one more prone to online fraud." [3]

According to JP Morgan "The majority of fraud loss is due to merchants issuing a credit to reverse a charge in response to a consumer’s claim of fraudulent account use, or because of subsequent information from additional orders that indicate likelihood of fraud on the recently placed order. For digital goods with instant fulfillment, credits could be issued afterwards, once fraud has been detected." When a person reveals their billing information online, whether it be through paypal or other online payment methods.[7]


If you live in one of the nearly 25 states that charge sales tax on digital goods or services you likely pay more for everything from downloaded music, e-books and ringtones to streaming TV shows and video. A growing number of states are finding ways to tax our digital diversions. While some states rely on existing sales tax laws, more than a dozen have enacted sales tax laws specifically targeting digital goods. What exactly is taxed varies widely by state. Washington state, for example, taxes digital content regardless of how it is delivered; while other states tax music and videos that are downloaded, but not when streamed through a service like Netflix or Spotify.

  • iTunes: Downloaded music is one of the most commonly taxed digital goods. For example, a $12.99 album downloaded from iTunes carries a state sales tax of 52 cents in Wyoming, 78 cents in Vermont and 91 cents in Mississippi.
  • E-books: States that tax iTunes also tax downloaded e-books. Take New Jersey, which levies a 70-cent tax on a $9.99 purchase, or Utah which imposes a tax of 47 cents.
  • Mobile phone apps: Apps are a unique case. Some states that don't tax "digital goods" still tax apps, the same way they tax software downloaded to a computer. For example in New York, a $2.99 Angry Birds download from the iTunes store will carry a 12-cent tax. But if a New Yorker downloads music or a movie from iTunes they won't get taxed because the state doesn't tax digital goods.
  • Netflix streaming video: Taxes on streaming content are less common. Washington state, for instance, levies 52 cents in sales tax on a $7.99 monthly Netflix streaming subscription. Florida meanwhile, which does not have a sales tax on digital goods, imposes a roughly 54-cent state tax on the same Netflix subscription under its communications services tax.

Currently, online sellers are only required to collect taxes in states where they have a physical presence, such as a store or a warehouse. Under the proposed law, online sellers that have sales of at least $1 million outside of states where they have physical operations could also be required to collect sales tax. Most states tax a purchaser based on where their billing address is located, but there are no firm national guidelines.[8]

The tax code in this kind of commerce is murky. Right now it’s possible you could be taxed by several different jurisdictions for the same digital purchase. For example, if your phone has one area code, but you buy something with your wireless device when you’re in another one, from a company in yet another part of the country, it’s possible today that you can be taxed by all three jurisdictions! With state and local governments desperate for new revenue sources, that scenario is quite possible. That’s why it’s important to make sure wireless consumers are treated fairly and that we have a reasonable and sensible tax structure for such purchases.[9]

For more, see Taxation of Digital Goods


PayPal provides a common platform for selling digital goods. Users sell digital content through PayPal by monetizing any digital experience offered through their websites: songs, games, articles, videos, etc. PayPal then allows the consumer to pay for their digital product and immediately enjoy their purchased goods. How do companies benefit from selling Digital Goods through PayPal? PayPal allows the seller to, “increase conversion rates, maximize profitability, reduce fraud and access international markets”.[10]

Bitcoin uses technology that allows people to operate peer-to-peer without the need to be involved with a central authority or a bank. The network carries out the transactions through the issuing of bitcoins. A transaction is a transfer of value between Bitcoin wallets, which keep a secret piece of data that is used to sign transactions - providing mathematical proof that they have come from the owner of the wallet.[11] Bitcoin is not owned or controlled by anyone – everyone can take part in it. The technology is open-source and publicly designed.[12]

See also[edit]


  1. ^ "Digital Goods". Webopedia. Retrieved 23 March 2013. 
  2. ^ "Digital Goods". webopedia. Retrieved 14 March 2014. 
  3. ^ a b c Pass, Virgo. "Digital Goods". Jet Multi Media. A Digital Virgo Company. Retrieved 14 March 2014. 
  4. ^ Smith, Jason. "23 Types of Digital Goods". Retrieved 10 March 2014. 
  5. ^ Campbell, Anita. "What the Heck is an "App"?". Small Biz Trends. Retrieved March 19, 2014. 
  6. ^ Gardener, Eileen (2010). The Electronic Book. Suarez: Oxford Printing Press. p. 164. 
  7. ^ Morgan, JP. "2012 Online Fraud Report". CyberSource Corporation. Retrieved 14 March 2014. 
  8. ^ Hicken, Melanie. "Are You Paying the iTunes Tax?". CNN Money. Retrieved 2014-03-14. 
  9. ^ "Digital Goods". Retrieved 2014-03-14. 
  10. ^ "The Cost-Effective Way to Sell Digital Goods". PayPal. Retrieved 14 March 2014. 
  11. ^ "How it Works". Bitcoin Project 2009-2014. Retrieved 14 March 2014. 
  12. ^ "Bitcoin". Bitcoin Project 2009-2014. Retrieved 14 March 2014.