Does South Carolina charge sales tax on digital textbooks (eTextbooks) that students buy or rent for their college courses?

Plain-English summary

A company that runs college and university bookstores sells and rents digital textbooks ("eTextbooks") — downloadable digital versions of printed course textbooks, delivered by an access code and readable online or offline through an app. It asked the Department whether those charges are exempt from sales and use tax as "textbooks" under § 12-36-2120(3)(a). The Department said yes — both sales and rentals are exempt.

The reasoning has two steps:

1. Is it a taxable "communication service"? The textbook exemption covers textbooks and "access to on-line information systems used in a course of study," and expressly says the items "may be in any form" — but it carves out anything taxed as a communication service under §§ 12-36-910(B)(3) / 12-36-1310(B)(3) (charges for access to or use of a communications system, e.g. online database/information services). So the Department had to decide whether an eTextbook charge is really for access to a communication system. Applying the true-object test (as in Revenue Ruling #12-1), it found it is not: the student gets an access code that unlocks only the one purchased/rented eTextbook (not a library of materials), and can read it offline through the app. The true object is the textbook, not access to a communication system — so the communication-service carve-out doesn't apply.

2. Does a digital textbook count as a "textbook"? Yes. The exemption applies to textbooks "in any form," with no format limit, and South Carolina has long read it to reach new technological developments used the same way as a printed textbook (citing RR #94-11 and TAM #90-6, where even instructional software was a "textbook" because it "contains the information which is being taught"). An eTextbook is a digital, downloadable version of the printed textbook with the same content, bought by students for their prescribed courses of study — an acceptable alternate form. Whether delivered as a fixed-layout PDF or a reflowable EPUB doesn't change the content or the result.

Because the charge isn't a communication service and the eTextbook is a "textbook," both sales and rentals of eTextbooks used in a course of study at institutions of higher learning are exempt under § 12-36-2120(3)(a). Rental doesn't change the answer even though the access code expires at semester's end.

What this means for you

Campus bookstores and eTextbook sellers

If you sell or rent digital textbooks for students' prescribed courses of study, you can treat them as exempt textbooks, the same as printed ones — format (PDF or EPUB), delivery by access code, and rental-vs-purchase don't defeat the exemption. The line to watch is the communication-service carve-out: keep the offering structured so the true object is the book itself (access limited to the purchased title, offline reading available), not a subscription to a broad online database or information system, which would be taxable. Digital products that give access to a library of materials or function as an online information service could fall on the taxable side.

Colleges, universities, and edtech providers

The exemption reaches beyond bound books to alternate forms that carry the same instructional content for a course of study. But a PLR binds only the requesting taxpayer — if your product bundles an eTextbook with database access, homework platforms, or other online services, the true-object analysis may split the transaction, so get specific guidance.

Accountants and tax professionals

Two independent hurdles both had to clear: (1) not a § 12-36-910(B)(3)/1310(B)(3) communication service (true-object test per RR #12-1), and (2) a "textbook in any form" under § 12-36-2120(3)(a) and Reg 117-316 (new-technology reading per RR #94-11 / TAM #90-6). Preserve documentation that the digital item mirrors a printed textbook's content and is for a prescribed course of study, and that access is limited to that title rather than to a communications system.

Common questions

Q: Are digital textbooks taxed in South Carolina?
A: No. The sale and rental of eTextbooks used in a course of study at colleges and universities are exempt from sales and use tax under § 12-36-2120(3)(a), just like printed textbooks.

Q: Does renting (rather than buying) the eTextbook change anything?
A: No. Rentals are exempt too, even though the access code expires at the end of the semester.

Q: What would make a digital product taxable instead?
A: If the charge is really for a taxable communication service — access to or use of a communications system, like an online information/database service — it falls outside the textbook exemption. Here the true object was the textbook itself, so it stayed exempt.

Q: Does the file format matter (PDF vs. EPUB)?
A: No. Both fixed-layout PDF and reflowable EPUB contain the same content as the printed textbook, so both qualify.

Citations and references

Statutes:

• S.C. Code Ann. § 12-36-2120(3)(a) — exemption for textbooks, books, periodicals, and online information systems used in a course of study (items "in any form"; excludes communication-service transactions)
• S.C. Code Ann. § 12-36-910(A) — 6% sales tax on retail sales
• S.C. Code Ann. § 12-36-910(B)(3)(a) and § 12-36-1310(B)(3) — tax on communication services
• S.C. Code Ann. § 12-36-60 — tangible personal property (including certain services/intangibles)

Regulations:

• S.C. Regulation 117-316 — defines "textbook" for the exemption (includes tapes, recordings, filmstrips, etc. used in a prescribed course of study)
• S.C. Regulation 117-329 — communication services and examples

Discussed in prose (not linked): RR #12-1 (true-object test for electronically delivered software); RR #94-11 and Smith v. Pan Air Corp., 684 F.2d 1102 (5th Cir. 1982) (statutes extend to new technological developments); Technical Advice Memorandum #90-6 (instructional software as a "textbook").

Source

• Landing page: SC Advisory Opinion Search
• Original PDF: PLR24-2.pdf

Original ruling text

STATE OF SOUTH CAROLINA

DEPARTMENT OF REVENUE
300A Outlet Pointe Blvd., Columbia, South Carolina 29210
P.O. Box 125, Columbia, South Carolina 29214-0575

SC PRIVATE LETTER RULING #24-2
SUBJECT:

Sale and Rental of Digital Textbooks
(Sales and Use Tax)

REFERENCES:

S.C. Code Ann. Section 12-36-910(A) (2014)
S.C. Code Ann. Section 12-36-910(B)(3)(a) (2014)
S.C. Code Ann. Section 12-36-2120(3)(a) (2014)
S.C. Code Regs. Ann. 117-316 (2012)

AUTHORITY:

S.C. Code Ann. Section 12-4-320 (2014)
S.C. Code Ann. Section 1-23-10(4) (2005)
SC Revenue Procedure #09-3

SCOPE:

A Private Letter Ruling is an advisory opinion issued to a specific taxpayer
by the Department to apply principles of law to a specific set of facts or a
particular tax situation. It is the Department’s opinion limited to the specific
facts set forth, and is binding on agency personnel only with respect to the
person to whom it was issued and only until superseded or modified by a
change in statute, regulation, court decision, or another Departmental
advisory opinion, providing the representations made in the request reflect
an accurate statement of the material facts and the transaction was carried
out as proposed.

QUESTION:
Are the sales and rentals of digital textbooks exempt from the sales and use tax as “textbooks”
under Code Section 12-36-2120(3)(a)?
CONCLUSION:
The sale and rental of digital textbooks are exempt from the sales and use tax under Code Section
12-36-2120(3)(a), as there is no distinction that would exclude digital textbooks from the
exemption.
FACTS:
Company B, LLC, (“CoB”) is a subsidiary of Company A, Inc. (“CoA”), which is one of the largest
contract operators of physical and virtual bookstores for college and university campuses and K12 institutions across the country. 1
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Company A, Inc., 2023 10-K, p. 5.
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CoB offers digital textbooks, also known as eTextbooks or eText, (“eTextbooks”) for college and
university students to either buy or rent for their courses of study. These eTextbooks are digital,
downloadable versions of a printed textbook. The eTextbooks can be read online or offline through
any supported device (PC, Mac, Smartphone, or Tablet running iOS or Android, Kindle Fire, and
Chromebook) and provide interactive features including highlights, notes, flashcards, and read
aloud.
The sales and rentals of eTextbooks can occur either in CoB’s physical stores or online. If a student
rents or purchases an eTextbook online, CoB either mails a physical card to the student with an
access code or emails an access code to the student. If the sale or rental occurs in-store, then the
student immediately receives a card with an access code. The access code is the means by which
students access the eTextbooks they have purchased or rented from CoB. Regardless of the method
of purchase, the eTextbooks are available to the student immediately following the purchase.
Students access their eTextbooks via a browser using ABC Online or through the ABC app.
Students do not have to have an internet connection to access their eTextbook if they are accessing
it through the ABC app. Students only have access to the eTextbooks they purchased or rented. If
a student purchases an eTextbook, then the access code is valid indefinitely. If a student rents the
eTextbook, the access code expires at the end of the semester for which the student rented the
eTextbook.
The eTextbooks are available in two formats: a Fixed Layout Textbook and a Reflowable
Textbook. A Fixed Layout Textbook is a PDF version of the corresponding printed textbook. The
PDF maintains the appearance of a bound book, but in a digital format. A Reflowable Textbook,
also known as an EPUB, provides additional features for the student including responsive text that
can be adjusted to the student’s preference. Both formats support a wide range of features,
including notes, highlights, text to speech, printing, and syncing across devices. According to the
request, students only receive a digital version of the corresponding printed textbook for the
prescribed course of study when downloading either format. There is also nothing in the request
suggesting that students can change the content of the eTextbook under either of these formats.
LAW AND ANALYSIS:
Code Section 12-36-910(A) states:
A sales tax, equal to [six] 2 percent of the gross proceeds of sales, is imposed upon
every person engaged or continuing within this State in the business of selling
tangible personal property at retail.
Code Section 12-36-1310(A) reads:
A use tax is imposed on the storage, use, or other consumption in this State of
tangible personal property purchased at retail for storage, use, or other consumption

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Code Section 12-36-1110 increased the sales and use tax rate by 1% beginning June 1, 2007.
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in this State, at the rate of [six] 3 percent of the sales price of the property, regardless
of whether the retailer is or is not engaged in business in this State.
Code Section 12-36-60 defines the term “tangible personal property” to mean:
…personal property which may be seen, weighed, measured, felt, touched, or which
is in any other manner perceptible to the senses. It also includes services and
intangibles, including communications, laundry and related services, furnishing of
accommodations and sales of electricity, the sale or use of which is subject to tax
under this chapter and does not include stocks, notes, bonds, mortgages, or other
evidences of debt . . . . (Emphasis added).
Therefore, the term tangible personal property includes the sale or use of services and intangibles,
including communications, that are subject to South Carolina sales or use taxes under Chapter 36
of Title 12.
Communication services are subject to sales and use taxes under Chapter 36 of Title 12 pursuant
to Code Sections 12-36-910(B)(3) and 12-36-1310(B)(3), which impose the tax on the:
gross proceeds accruing or proceeding from the charges for the ways or means for
the transmission of the voice or messages, including the charges for use of
equipment furnished by the seller or supplier of the ways or means for the
transmission of the voice or messages . . . .
“‘Charges for the ways or means for the transmission of the voice or messages’ is defined to
include, but is not limited to, charges for access to, or use of, a communications system (the
manner, method or instruments for sending or receiving a signal of the voice or of messages),
whether this charge is based on a fee per a specific time period or per transmission or any other
method.” S.C. Code Ann. Regs. 117-329.1.
Regulation 117-329.4 provides a list of examples of communication services which are subject to
the sales and use tax, including “[d]atabase access transmission services or on-line information
services, including, but not limited to, legal research services, credit reporting/research services,
and charges to access an individual website (including Application Service Providers).”
Accordingly, charges for the access or use of a communications system, as well as charges for the
use of database access transmission services or on-line information services, such as charges to
access an individual website, are subject to the sales and use tax under Code Sections 12-36910(B)(3) and 12-36-1310(B)(3).
The South Carolina Code provides several exemptions from the sales and use tax. Relevant to this
discussion is the exemption found in Code Section 12-36-2120(3)(a), which exempts from sales
and use tax the gross proceeds of sales and sales price of:

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See footnote 1.
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Textbooks, books, magazines, periodicals, newspapers, and access to on-line
information systems used in a course of study in primary and secondary schools
and institutions of higher learning or for students’ use in the school library of these
schools and institutions;

Items in this category may be in any form, including microfilm, microfiche, and
CD ROM; however, transactions subject to tax under Sections 12-36-910(B)(3) and
12-36-1310(B)(3) do not fall within this exemption . . . . (Emphasis added).
Regulation 117-316 further explains this exemption for textbooks used in public and private
schools, colleges, and universities:
The term “textbook” is construed to include only books purchased for and used in
elementary schools, high schools and institutions of higher learning. Included
within the definition of textbooks are school library books, encyclopedias and
dictionaries. Also deemed textbooks when part of a prescribed course of study are
workbooks, band and sheet music, plays, filmstrips, transparencies, motion picture
films, audio tapes and records, recorded music and periodicals.
Therefore, unless they are “the ways or means for the transmission of the voice or messages,”
“textbooks” and “online information systems used in a course of study” purchased for and used in
institutions of higher learning as part of a prescribed course of study are exempt from the sales and
use tax, regardless of the format.
Thus, the remaining question is whether the charges for the eTextbooks are “communication
services” subject to tax under Code Sections 12-36-910(B)(3) and 12-36-1310(B)(3). If the
eTextbooks are communication services, they do not qualify for the sales and use tax exemption
in Code Section 12-36-2120(3)(a). In short, to fully answer CoB’s question, the Department must
determine whether the purchaser of the eTextbook is paying for access or use of a communication
system. See S.C. Revenue Ruling #12-1.
In S.C. Revenue Ruling #12-1, the Department applied the “true object test” to determine whether
the purchaser of software paid to access or use a communication system when the software was
sold and delivered by electronic means via the Internet, a wireless network, or any other wireless
connection at the purchaser’s location. In those instances where the buyer purchases, receives and
downloads software by electronic means, the Department determined that the “true object” of that
transaction was the sale of the intangible software and not for access or use of a communication
system.
In this case, students who purchase an eTextbook are given an access code, which students then
use to access their eTextbook via a browser on ABC Online or through the ABC app. Students
are not required to have an internet connection to access their eTextbook if accessing it through
the ABC app. Further, the access code does not provide students with access to a library of course
materials and educational information, but only provides students with access to the purchased or

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rented eTextbook. Accordingly, students who purchase eTextbooks from CoB are not paying for
access or use of a communication system; rather, the “true object” of the transaction is for a
textbook, albeit in the digital format. Therefore, CoB’s charges for eTextbooks are not charges
for communications services subject to tax under Code Sections 12-36-910(B)(3) and 12-361310(B)(3).
Even though CoB’s eTextbooks are not subject to tax as communication services under Code
Sections 12-36-910(B)(3) and 12-36-1310(B)(3), we should consider whether this alternate form
of traditional textbooks qualify as “textbooks” for purposes of the sales and use tax exemption in
Code Section 12-36-2120(3)(a). The exemption statute states that “items in this category may be
in any form.” (Emphasis added). Aside from the exclusion of any transactions subject to tax under
Code Sections 12-36-910(B)(3) and 12-36-1310(B)(3), there is no limitation within the exemption
as to what form a textbook must take in order to qualify for the exemption.
Further, “[t]he general rule is that statutes are not confined in application to contemporary
instances and their principles are to be extended to embrace new factual situations and new
technological developments, so long as such extension is in accord with the legislative intent of
the statute.” See S.C. Rev. Rul. #94-11 (citing Smith v. Pan Air Corp., 684 F.2d 1102 (5th Cir.
1982)). In S.C. Rev. Rul. #94-11, the Department determined that alternative forms of the
traditional printed textbooks, namely the alternate forms enumerated in Code Section 12-362120(3)(a), are “new technological developments for the same use” as traditional printed
textbooks.
South Carolina has long instructed that this exemption goes beyond traditional printed and bound
textbooks. In S.C. Technical Advice Memorandum #90-6, the Department queried whether
software which was used to teach students basic skills, such as math and English, was considered
a “textbook” for purposes of the sales and use tax exemption in Code Section 12-36-2120(3)(a).
In concluding that such software was considered a “textbook” for purposes of Code Section 1236-2120(3)(a), the Department made the following findings:
The term “textbook” has been expanded in the above regulation to
not only include printed matter but also tapes, recordings, and
filmstrips when used as “part of a prescribed course of study.” The
items deemed to be textbooks and subject to the sales tax exemption
are those which contain and, in fact, are themselves, educational
sources of information. In other words, these items contain the
information which is being taught, just as a textbook does.
Accordingly, a “textbook,” for purposes of the exemption in Code Section 12-36-2120(3)(a), can
include additional alternate forms of the traditional printed textbooks beyond those specifically
enumerated by statute and regulation, so long as the alternate form is purchased for the same use,
and contains the same information which is being taught, as a traditional printed textbook and are
used as a part of a prescribed course of study.

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In this case, the eTextbooks purchased by students are digital, downloadable versions of a printed
textbook. Whether students choose to download the eTextbook in PDF or EPUB format does not
change the content of the eTextbook. Once a student downloads the eTextbook, he or she is able
to receive the same educational information that is published in the corresponding printed
textbook. Furthermore, these eTextbooks are offered to and purchased by college and university
students for their prescribed courses of study. Accordingly, CoB’s eTextbooks are acceptable
alternate forms of printed textbooks for purposes of Code Section 12-36-2120(3)(a).
Based on the above and the facts represented by CoB to the Department, it is the Department’s
position that the eTextbooks sold by CoB to college and university students are textbooks used in
a course of study in institutions of higher learning and are thus exempt from sales and use taxes
under Code Section 12-36-2120(3)(a).
SOUTH CAROLINA DEPARTMENT OF REVENUE

s/W. Hartley Powell
W. Hartley Powell, Director
March 18
, 2024
Columbia, South Carolina

CAVEAT: This advisory opinion is issued to the taxpayer requesting it on the assumption
that the taxpayer’s facts and circumstances, as stated, are correct. If the facts and
circumstances given are not correct, or if they change, then the taxpayer requesting the
advisory opinion may not rely on it. If the taxpayer relies on this advisory opinion, and the
Department discovers, upon examination, that the facts and circumstances are different in
any material respect from the facts and circumstances given in this advisory opinion, then
the advisory opinion will not afford the taxpayer any protection. It should be noted that
subsequent to the publication of this advisory opinion, changes in a statute, a regulation, or
case law could void the advisory opinion.

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