What does Missouri LR 8181 conclude about Wine Club Digital Memberships are Subject to Sales Tax?

Plain-English summary

The Missouri Department of Revenue ruled that a wine retailer's Digital Club membership fees are subject to Missouri state and local sales tax. The Applicant sells wine, beer, and spirits at retail, hosts tastings, and also runs several paid membership clubs (Flagship, Cellar, Luxe, Tasting, Case, Spirits, and Digital). Members of any paid club get free access to the "Digital Plus Club," which by itself offers a library of electronic content — wine and cooking articles, travel tips, business/personal development resources, and discounts from affiliate partners — for a standalone monthly fee.

The Department did not treat this as a simple "digital content isn't taxable" question. Instead, it looked at what the Digital Club fee actually buys: along with digital materials, Digital Club members also receive wine, liquor, discounts on bottles and cases, admission to special events, free tastings, and food discounts, plus special offers and affiliate discounts. Because the single monthly charge covers both taxable retail items/services and nontaxable digital content without separating the two, the Department concluded the entire charge is swept into "gross receipts" under Section 144.010.1(4), RSMo, and taxed accordingly.

In short, this is a bundling ruling, not a ruling that digital memberships are inherently taxable. The Department's logic rests specifically on the fact that Applicant charges one undifferentiated fee for a mix of taxable and non-taxable benefits.

What this means for you

Business owners running membership/subscription clubs

If your membership fee bundles a mix of taxable perks (physical goods, discounted merchandise, event admission) with nontaxable elements (digital content, informational access), Missouri will tax the whole membership fee unless you separately state the taxable and nontaxable charges. A club that includes any taxable component, even as one of several benefits, risks having its entire fee treated as taxable gross receipts.

Accountants and tax professionals

The key takeaway is Missouri's treatment of bundled transactions: under Section 144.010.1(4), RSMo, "gross receipts" captures the total sale price of a retail sale, and the ruling shows the Department will not carve out a nontaxable digital-content component from a membership fee when taxable and nontaxable elements are sold together for a single, unseparated charge. Advise clients to itemize or separately price digital-only benefits if they want to support a nontaxable treatment for that portion.

Retailers offering "free" add-on memberships

Note that the ruling addresses the standalone Digital Club fee. Applicant's other clubs (Flagship, Cellar, etc.) already include Digital Club access for free as part of their own paid membership — this ruling doesn't separately analyze the taxability of those other club fees, only the Digital Club itself.

Common questions

Q: Does this mean all digital subscriptions are taxable in Missouri?
A: No. The ruling doesn't hold that digital content or digital memberships are inherently taxable. It holds that this Digital Club fee is taxable because it bundles taxable retail perks (wine, discounts, event admission) with digital content in one undifferentiated charge.

Q: Could Applicant have avoiding tax on the digital-only portion?
A: The ruling doesn't say directly, but its reasoning implies that separately stating and charging for a purely digital-content fee (separated from taxable retail benefits) could support different treatment. As presented, Applicant charged one bundled fee, so the whole amount was taxed.

Q: Who does this ruling bind, and for how long?
A: Under Section 536.021.10, RSMo and 12 CSR 10-1.020, it binds the Department only as to the requesting Applicant, only for three years from the ruling's January 28, 2022 date, and only so long as the facts and law don't change.

Q: What law did the Department rely on?
A: Section 144.020.1, RSMo (imposing sales tax on tangible personal property and enumerated services), Section 144.021.1, RSMo (statement of purpose), and Section 144.010.1(4), RSMo (defining "gross receipts" to include the total sale price of a retail sale).

Citations and references

Statutes and regulations:

• Section 144.020.1, RSMo (imposition of sales tax on tangible personal property and services)
• Section 144.021.1, RSMo (purpose of the sales tax)
• Section 144.010.1(4), RSMo (definition of "gross receipts")
• Section 536.021.10, RSMo (letter ruling authority)
• 12 CSR 10-1.020 (letter ruling procedure)

Source

• Landing page: Missouri DOR Rulings Search
• Ruling: LR 8181

Original ruling text

Dear Applicant:

This is a letter ruling issued by the Director of Revenue under Section 536.021.10, RSMo, and Missouri Code of State Regulations 12 CSR 10-1.020, in response to your letter dated December 13, 2021.

The facts as presented in your letter ruling request and a review of your website are summarized as follows:

Applicant sells wine and other liquor at retail.  Applicant also sells foods that can be eaten with the purchased wine, beer and other liquors.  Applicant hosts wine tasting events for individuals to taste the various wines Applicant sells.  Individuals may purchase wine, spirits, and beer by the glass, bottle, or by the case.

Along with its wine sales, Applicant offers various clubs (Club) individuals may enroll in, which allows them to receive various benefits.  The clubs are Flagship, Cellar, Luxe, Tasting, Case, Spirits, and Digital.  Individuals pay a monthly fee and after joining, a Club member can receive bottles of wine, discounted wine tastings, discounts on cases of wine, discounted appetizers, a complimentary tasting on the member's birthday, invitations to Applicant's Oktoberfest, discounted admissions to other Applicant events, and membership in Applicant's Digital Plus Club (Digital Club).

Applicant offers a Digital Club which individuals may join for a monthly fee.  Joining the Digital Club provides members a library of electronic materials on wine, cooking, reviews, travel tips, special offers, business and personal development resources, and discounts from Applicant's affiliate partners.  If an individual joins one of Applicant's other clubs, access to the Digital Club is free and included in the other club memberships.

ISSUE :

Are Applicant's digital memberships subject to Missouri state and local sales tax?

RESPONSE :

Yes.  Applicant's digital memberships are subject to Missouri state and local sales tax.

Section 144.020.1, RSMo, imposes a sales tax on sales of tangible personal property and certain enumerated services.  Section 144.021.1, RSMo, provides "[t]he purpose and intent of sections 144.010 to 144.510 is to impose a tax upon the privilege of engaging in the business, in this state, of selling tangible personal property and those services listed in section 144.020[.]"  Section 144.010.1(4), RSMo defines "Gross Receipts" as:

The total amount of the sale price of the sales at retail including any services other than charges incident to the extension of credit that are a part of such sales made by the businesses herein referred to, capable of being valued in money, whether received in money or otherwise; except that, the term gross receipts shall not include the sale price of property returned by customers when the full sale price thereof is refunded either in cash or by credit.

Applicant offers various memberships through Applicant's website, where individuals can receive wine, liquor, discounts on bottles and cases, admission to special events, free tastings, food discounts, as well as access to Applicant's Digital Club.  Individuals who join Applicant's Digital Club also receive member special offers, discounts from affiliate partners, as well as access to online wine and liquor references.  A free membership to the Digital Club is also provided if they join one of Applicant's other clubs.

Applicant charges its Digital Club fees on a monthly basis.  The monthly Digital Club fee charge includes sales at retail as well as access to Applicant's digital material.  The charge for the Digital Club includes both taxable and non-taxable items without separating them. Therefore, Applicant's digital memberships are subject to Missouri state and local sales tax.

This letter ruling is binding upon the Department of Revenue with respect to the Applicant for three (3) years from the date of this letter and is subject only to statutory changes by the General Assembly and to changes in the interpretation of law by the courts or administrative tribunals.  If a change occurs, the taxpayer who relies upon an outdated interpretation may be subject to additional taxes, interest and penalties, which may be imposed prospectively from the date of the change.  For this reason, the interpretation set forth above should be reviewed on a regular basis.  Please note that any change in or deviation from the facts as presented will render this ruling inapplicable.

Should additional information be needed, please contact Senior Counsel Thomas A. Houdek, General Counsel's Office, Post Office Box 475, Jefferson City, Missouri 65105-0475 (phone 573-751-0961), or me.

Sincerely,

Wayne Wallingford