Are subscription fees to access an online library of instructional video courses subject to New York sales tax?
Plain-English summary
An online learning company sells subscriptions to a video library of skills courses (business, software, technology, creative). Three tiers: Basic gives a month of unlimited streaming; Premium-monthly adds downloadable "project files" (worksheets, practice problems, examples, but no working software); Premium-annual adds the ability to download the videos for offline viewing. Users watch through a browser or a free app; the videos are non-interactive, with no testing or live instruction. The company asked whether the subscriptions are taxable.
The Office of Counsel concluded none of the tiers are subject to sales tax. Streaming access is neither tangible personal property nor a taxable information service, because its purpose is to impart knowledge by providing instructional course material (TSB-A-13(6)S). The downloadable project files are delivered electronically (not in tangible form) and merely supplement the courses, so they are not taxable either. And downloaded videos delivered over the Internet are receipts from the sale of intangibles, not taxable prewritten software, so the annual tier is also exempt.
What this means for you
Online education and e-learning providers
Selling access to instructional videos to teach skills is generally non-taxable in New York, including when you let learners download supplementary files or the videos themselves. Tax turns on the purpose (educating) and the delivery (electronic, not tangible).
Subscribers / learners
Subscriptions to learn skills through streamed or downloaded video courses shouldn't carry New York sales tax.
Accountants and tax professionals
Two doctrines combine here: the "impart knowledge" exclusion from information-service tax (TSB-A-13(6)S), and the rule that videos and files delivered electronically are non-taxable intangibles, not prewritten software (TSB-A-08(41)S, TSB-A-08(22)S, TSB-A-15(26)S). Contrast taxable prewritten software the customer can use/control.
Common questions
Q: Why isn't a downloaded video taxable like downloaded software?
A: Electronically delivered videos are intangibles, not prewritten computer software, so they fall outside the tax on tangible personal property.
Q: Are the project-file downloads taxable?
A: No. They are delivered electronically and supplement the courses, so they are not tangible property or a separate taxable item.
Q: Would interactive software or a working program included with a course change the answer?
A: It could. Here the videos were non-interactive and no operative software was provided; bundling taxable prewritten software can change the analysis.
Q: Can I rely on this opinion?
A: It binds the Department only as to the petitioner. Use it as guidance and confirm your own facts.
Citations and references
Statutes and guidance:
- Tax Law § 1105(a); § 1105(c)(1); § 1101(b)(6)
- TSB-A-13(6)S; TSB-A-15(26)S; TSB-A-08(41)S; TSB-A-08(22)S
Source
- Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales-ao-2020.htm
- Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a20-18s.pdf
Original ruling text
New York State Department of Taxation and Finance
Office of Counsel
TSB-A-20(18)S
Sales Tax
June 16, 2020
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION
The Department of Taxation and Finance received a Petition for Advisory Opinion from
[ REDACTED ] (Petitioner). Petitioner asks whether its subscription fees to access its online
course library are subject to State and local sales tax. We conclude that Petitioner’s receipts
from the sale of its subscriptions are not subject to tax.
Facts
Petitioner is an online learning company that helps people learn new skills on various
topics to achieve personal and professional goals. Such skills include business, software,
technology, and creative skills. Through individual and group subscriptions, members are
granted a right to access Petitioner's video library of courses taught by industry experts.
Petitioner sells three tiers of membership. The purchase of a Basic subscription gives the
user unlimited access to Petitioner’s video library for one month. The purchase of a Premiummonthly subscription also provides one month of unlimited access, and further allows the user to
download “project files,” which are documents used by the course instructor and include
worksheets, practice problems, and examples. Project files do not include applications of
functioning software. The purchase of a Premium-annual subscription provides one year of
unlimited access to Petitioner’s video library, as well as the downloadable project files, and
further enables the user to download the courses for offline viewing. The downloaded video
courses are non-interactive files formatted for viewing on a mobile device.
Users access and play video content from either a computer using their existing web
browser or from their mobile device using Petitioner’s free software application (hereinafter
“app”). This app is obtained free of charge from app stores owned and operated by unrelated
third parties. When using a web browser, users can search the online library, bookmark videos,
build custom playlists, and start, stop, and restart videos. Users also may search course
transcripts for immediate answers to their questions. The learning experience through the app is
largely similar to the experience when viewing videos through a computer's web browser
although the user’s degree of control through the app is generally limited to the ability to view
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June 16, 2020
videos and course content, and to search for, start, stop, restart, and bookmark videos. The app
does not allow interactive questioning, learner assessment, or testing capabilities.
For most of the courses, users earn a Certificate of Completion for each course they view.
For certain video courses, users may contact the video’s authors to ask questions and receive
additional support at no additional cost. However, responses are not returned in real time.
The video courses are not interactive and do not require the member to actively engage in
the learning process. The video courses do not provide immediate and supportive feedback and
do not have embedded questions to engage the user. For the best learning experience, users are
encouraged to follow along with their own installation of the software application during the
training video. For example, if a user is viewing a video course about features of Microsoft
Excel, the user is encouraged to follow along with their own version of Microsoft Excel, but an
operative copy or version of Microsoft Excel is not included as part of Petitioner's service
offering.
Analysis
The receipts from the sale of tangible personal property and enumerated services,
including information services, are subject to tax. See Tax Law § 1105(a), (c). Petitioner’s Basic
subscription allows a customer to access and view its digital video courses online. The courses
are designed to assist the customer in learning and developing new skills. Subscriptions to
access and view Petitioner’s online video course library do not constitute tangible personal
property. These subscriptions also do not constitute the provision of an information service
subject to sales tax under Tax Law § 1105(c)(1), because their purpose is to impart knowledge
by providing access to instructional course material. See TSB-A-13(6)S. Accordingly, sales of
Petitioner’s Basic subscription are not subject to sales tax.
Petitioner’s Premium-monthly subscription provides the customer with the additional
ability to download project files. The electronic download of these project files to a customer’s
computer or other device does not constitute the sale of tangible personal property because the
project files are not delivered to the customer in a tangible format. See TSB-A-15(26)S. Also, the
provision of the project files is not an information service because the project files are provided
to supplement the video courses and enhance the customer’s learning experience. Therefore,
sales of Premium-monthly subscriptions are not subject to sales tax.
Petitioner’s Premium-annual subscription further allows the customer to download its
digital video courses for offline viewing. While receipts from the sale of prewritten computer
software, which constitutes tangible personal property as defined in Tax Law § 1101(b)(6), are
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subject to sales tax pursuant to Tax Law § 1105(a), receipts from the sale of videos delivered to
customers electronically over the Internet and downloaded to a customer's computer or other
device are receipts from the sale of intangibles and are not subject to sales tax under Tax Law §
1105(a). See TSB-A-08(41)S; TSB-A-08(22)S. Therefore, sales of Premium-annual
subscriptions are likewise not subject to sales tax.
DATED: June 16, 2020
/S/
DEBORAH R. LIEBMAN
Deputy Counsel
NOTE: 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. The information provided in this document does not
cover every situation and is not intended to replace the law or change its meaning.