Are charges for a paid online course that includes streamed pre-recorded university lectures, course materials, and a completion certificate taxable in Texas?

Plain-English summary

A company running an online education platform asked the Comptroller whether it had to charge Texas sales tax on its paid "Signature Track" courses. The platform streams pre-recorded lectures from accredited-university professors, and most courses are free, but the Signature Track tier charges a fee and issues a completion certificate that can count toward a student's degree at a partnering university.

The Comptroller ruled the charges are not taxable. Texas only taxes specifically enumerated services, and the ruling walked through the two categories that might have applied — cable television services and information services — and rejected both. The streaming-lecture format technically meets part of the definition of a cable television service, but the Comptroller has exclusive authority to decide taxability under such overlaps and determined that because the courses are "primarily instructional in nature," they escape that category. The courses also aren't an information service, because the company doesn't gather, maintain, or compile information for customers (the kind of thing newsletters, mailing lists, or news-clipping services do) — it teaches students and verifies their competence in the subject.

What this means for you

Online course and ed-tech businesses

If your paid product is fundamentally instruction — lectures, materials, assessments, and a credential — Texas treats it as a nontaxable educational service even when delivered by video streaming, which otherwise looks like a taxable cable television service. The instructional character of the offering, not merely its video-delivery mechanics, is what carried the day here.

Businesses blending content delivery with something else

Watch the line this ruling draws: a service becomes a taxable "information service" once it starts gathering, compiling, or curating information for paying customers (think research reports, mailing lists, news feeds). Purely instructional content — teaching and testing — falls outside that category. If your online offering adds features like curated data feeds, research databases, or compiled reports alongside the course content, get that piece separately reviewed.

Accountants and tax professionals

The ruling is a clean example of the Comptroller resolving an overlap between two taxable-service categories (cable TV service and information service) in the taxpayer's favor by looking at the primary character of what's being sold, using its exclusive Section 151.0101(b) interpretive authority. It's also a companion to other 2018-2019 online-training rulings already in this corpus that cite similar analysis for webinar and continuing-education content.

Common questions

Q: Does this mean all online courses are exempt from Texas sales tax?
A: Not automatically — this ruling applies to this taxpayer's specific facts (streamed university lectures, materials, quizzes, and a degree-linked completion certificate). But it shows the Comptroller's general approach: primarily instructional online content is treated as a nontaxable educational service rather than a taxable cable television or information service.

Q: Why did the Comptroller even consider taxing this as a "cable television service"?
A: Because streaming video programming over the internet literally fits part of the statutory definition of cable television service. The Comptroller has to look past the delivery mechanism to the primary purpose of the offering — here, instruction — to decide it doesn't apply.

Q: Can I rely on this ruling for my own online course business?
A: No. A private letter ruling binds the Comptroller only for the taxpayer and facts in the request, and only prospectively — it can't be relied on by any other taxpayer. If your online offering differs (e.g., it includes curated data or research content), you should request your own ruling.

Citations and references

Statutes and rules:

• Tex. Tax Code § 151.051 (Sales Tax Imposed)
• Tex. Tax Code § 151.010 ("Taxable Item")
• Tex. Tax Code § 151.0101(a) ("Taxable Services")
• Tex. Tax Code § 151.0033 ("Cable Television Services"); 34 Tex. Admin. Code Rule 3.313(a)(4)
• Tex. Tax Code § 151.0038 ("Information Services"); 34 Tex. Admin. Code Rule 3.342(a)(6)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/201809009L

Original ruling text

September 11, 2018

RE: Private Letter Ruling No. 2017010115

Dear ***:

We issue this private letter ruling in accordance with Rule 3.1, Private Letter Rulings and General Information Letters.[1] We are responding to your request Feb. 16, 2016. Detrimental reliance relief is provided in accordance with Rule 3.10, Taxpayer Bill of Rights.

You requested guidance on the taxability of online education services.

Facts Presented

The relevant facts are based on information provided in your private letter ruling request and subsequent email correspondence.

*** (Taxpayer) offers an online education platform that provides instruction by streaming pre-recorded lectures taught by professors from accredited universities. Although the lectures are pre-recorded, the courses Taxpayer offers include course materials such as syllabi, modules, and quizzes, and access to an online forum through which enrolled students can discuss the course.

Most of taxpayer’s courses are offered free of charge. Taxpayer does charge for enrollment in the Signature Track courses. The Signature Track courses include certificates for course completion that can count towards a student's degree at a partnering university.

Question, Ruling, and Analysis

Our restatement of your question is shown below, followed by our response and analysis.

Question: Are charges for Taxpayer’s online Signature Track courses charges for nontaxable educational services?

Ruling: Taxpayer’s online Signature Track courses are educational services and not subject to Texas sales and use tax.

Analysis: Texas imposes a sales tax on each sale of a taxable item in this state. Section 151.051 (Sales Tax Imposed). The term “taxable item” includes tangible personal property and taxable services. Section 151.010 (“Taxable Item”). Only specifically enumerated services are taxable in Texas. Taxable services include cable television services and information services. Section 151.0101(a) (“Taxable Services”).

Section 151.0033 (“Cable Television Services”) defines cable television service as “the distribution of video programming with or without use of wires to subscribing or paying customers.” Rule 3.313(a)(4) (Cable Television Service and Bundle Cable Service), in relevant part, further describes it as, “streaming video programming provided via the Internet or other technology, regardless of the type of device used by the purchaser to receive the service; video on demand services or subscription services that allow purchasers to choose from a library of available content; and any other video programing provided in exchange for consideration.”

Taxpayer’s online educational courses involve streaming pre-recorded lectures taught by professors from accredited universities. The service includes elements that meet the definition of a cable television service. However, the Comptroller has exclusive jurisdiction to interpret whether services are taxable under Section 151.0101(b). The Comptroller has determined that because Taxpayer’s online educational courses are primarily instructional in nature, they will not be subject to Texas sales and use tax as cable television services.

Section 151.0038 (“Information Services”) defines an information service as “furnishing general or specialized news or other current information” or “electronic data retrieval or research.”

Rule 3.342(a)(6) (Information Services) states that information “gathered, maintained, or compiled and made available by the provider of the information service to the public or to a specific segment of industry for a consideration is subject to sales tax.” The rule provides examples of such services, which include newsletters, scouting reports and surveys, mailing lists and bad check lists, real estate listings, financial reports, and news clipping services and wire services. See Rule 3.342(a)(6).

Taxpayer’s online educational courses do not resemble the types of services described in Rule 3.342(a)(6). Taxpayer does not gather, maintain, or compile information for its customers. Taxpayer provides student instruction and verifies student competence in the subject matter taught. Based on the examples in Rule 3.342 Taxpayer’s online educational courses are not general or specialized news or other current information. The courses do not fall within the definition of an information service as set out in Section 151.0038 and Rule 3.342.

The Texas Tax Code and the Texas Administrative Code are accessible at www.comptroller.texas.gov/taxes/.

If you have questions about this private letter ruling, please email us through our website at https://comptroller.texas.gov/web-forms/tax-help/ and reference Private Letter Ruling No. 2017010115.

Sincerely,

Tax Policy Division – Indirect Taxes

Texas Comptroller of Public Accounts

ENDNOTE:

[1] Unless otherwise indicated, all references to “Section” are to the Texas Tax Code, and all references to “Rule” are to Title 34 of the Texas Administrative Code.