Are sales of e-books delivered electronically over the Internet subject to NY sales and use tax?
Plain-English summary
The petitioner, a California company, sells electronic books ("e-books") through an online bookstore. Customers buy and download the e-books over the Internet and store them on their own devices (tablets, smartphones); the files generally can't be printed or moved to a computer. The content is largely copyrighted material licensed to (but not owned by) the company, and an e-book's informational content doesn't materially differ from the printed version. The company asked whether its e-book sales are taxable, and represented that its products meet the Department's definition of an "e-book."
The Office of Counsel concluded the sales are not taxable:
- Not tangible personal property. Sales tax reaches tangible personal property, including prewritten software (Tax Law 1101(b)(6)). The e-books are not tangible and contain no prewritten software, so they aren't tangible personal property.
- Not a taxable information service. Under the Department's policy memo TSB-M-11(5)S, an electronic publication that meets the memo's definition of an e-book does not constitute a taxable information service. That definition requires, among other things, that:
- buying it doesn't entitle the customer to additional goods/services, and any revisions are only to correct errors;
- it's provided as a single download;
- it's marketed as an e-book (or similar term);
- any updates/new editions are issued no more than annually; and
- it's not designed to work with other software beyond what's needed to read it on a device.
- Based on the company's representation that all its products meet this definition, the e-book sales aren't taxable.
What this means for you
Sellers of e-books and digital publications
A genuine e-book delivered electronically generally isn't subject to New York sales tax -- it's neither tangible property nor a taxable information service. But the TSB-M-11(5)S definition matters: if your product bundles extra goods/services, updates more than annually, is marketed as something other than an e-book, or is designed to work with other software, it may fall outside the safe definition and the analysis could change. Keep your product and marketing within the definition, and be ready to support that characterization.
Buyers
Downloaded e-books that fit the Department's definition shouldn't carry New York sales tax.
Common questions
Q: Do I charge NY sales tax on e-books I sell as downloads?
A: Generally no -- e-books aren't tangible personal property and aren't taxable information services if they meet the Department's TSB-M-11(5)S definition.
Q: What could make my digital product taxable?
A: Falling outside that definition -- e.g., bundling extra goods/services, frequent updates, or designing it to work with other software.
Q: Does it matter that the content is the same as the printed book?
A: No. The electronic e-book is nontaxable even though a printed copy of the same title would be taxable tangible property.
Citations and references
- Tax Law section 1105(a) (sales tax on tangible personal property)
- Tax Law section 1105(c) (enumerated services, including information services)
- Tax Law section 1101(b)(6) (tangible personal property; prewritten software)
Source
- Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2011.htm
- Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a11_20s.pdf
Original ruling text
New York State Department of Taxation and Finance
TSB-A-11(20)S
Sales Tax
July 8, 2011
Office of Counsel
Advisory Opinion Unit
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION
PETITION NO. S101118A
The Department of Taxation and Finance received a Petition for Advisory Opinion from name
redacted. Petitioner asks whether its sales of e-books are subject to sales and use tax. We conclude that
they are not.
Facts
Petitioner, a California company, stores a digitized catalog of electronic books ("e-books")
available for sale to customers inside and outside New York through its on-line bookstore. E-books
purchased through Petitioner’s electronic bookstore are delivered electronically via the Internet to
customers and are stored on the customer's personal electronic devices, including tablets and
smart-phones. Customers are then able to view and read the e-books on certain electronic devices. The
e-books purchased through Petitioner’s electronic bookstore are not generally available for printing and
are not transferable for viewing on a computer.
The catalog of e-books available for download will primarily consist of copyrighted content,
licensed for distribution to Petitioner, but not owned by Petitioner. Moreover, the informational content
of an e-book sold through Petitioner’s bookstore will not materially differ from the tangible version of the
same publication. Formatting and layout of text in the e-book may be different, but the informational
content of an e-book will not differ in any substantive respect from that of a tangible, printed copy of the
same book. Petitioner’s e-books, like their printed counterparts, may be updated (for instance, to correct
typographical errors) in subsequent printings, but are otherwise static. Also like their printed
counterparts, Petitioner’s e-books may be re-published in future editions or printings, but the purchase of
updated copies is generally a separate transaction unrelated to prior purchases of earlier editions. To pay
for the e-books, Petitioner’s customers may use a credit card serviced by a third party financial institution,
or other methods.
Petitioner represents that its e-books meet the definition of an e-book for purposes of the policy
that the Department of Taxation and Finance recently announced (Department’s Policy Regarding
Whether E-Books Constitute Information Services Subject to Sales and Use Taxes, TSB-M-11[5]S).
Analysis
The Tax Law imposes sales and use tax on tangible personal property, including prewritten
software, and certain enumerated services, including information services (Tax Law § 1105[a], [c]).
Petitioner’s e-books are not tangible and do not include any prewritten computer software.
Accordingly, they do not constitute tangible personal property. As to whether the e-books constitute
taxable information services, TSB-M-11(5)S provides that the Tax Department's current position is that
electronic publications that meet the memorandum’s definition of an e-book do not constitute information
services. The TSB-M sets forth the following definition of an e-book:
-2-
TSB-A-11(20)S
Sales Tax
July 8, 2011
•
the purchase of the product does not entitle the customer to additional goods and services and
any revisions done to the e-book are for the limited purpose of correcting errors;
•
the product is provided as a single download;
•
the product is advertised or marketed as an e-book or a similar term;
•
if the intended or customary use of the product requires that the product be updated or that a
new or revised edition of the product be issued from time to time (e.g., an almanac), the
updates or the new or revised editions are not issued more frequently than annually; and
•
the product is not designed to work with software other than the software necessary to make
the e-book legible on a reading device (e.g., Kindle, Nook, iPad, iPhone or personal
computer).
Petitioner represents that all of its e-books meet the above definition. Based on that
representation, Petitioner’s e-books are not taxable as information services under the Department's current
policy.
DATED: July 8, 2011
NOTE:
/S/
DEBORAH LIEBMAN
Deputy Counsel
An Advisory Opinion is issued at the request of a person or entity. It is limited to the facts set
forth therein and is binding on the Department only with respect to the person or entity to
whom it is issued and only if the person or entity fully and accurately describes all relevant
facts. An Advisory Opinion is based on the law, regulations, and Department policies in effect
as of the date the Opinion is issued or for the specific time period at issue in the Opinion.